CrowdFunding in The Real Estate Market
I actually really like the idea of crowdsource funding for real estate. The real estate market is too frequently weighed down with the plodding work of the institutional investors and REITs. Anything that steps slightly outside of the box is tossed before renderings are even drawn. While industries like consumer electronics and automobiles race to deliver the next and greatest new thing to customers, the real estate industry seems to be forever stuck in doing the same crap over and over as long as it makes the predicted return. If done well, crowdsourcing could potentially offer up some real innovation in real estate and shake up the ‘monkey see, monkey do’ work of the established actors in the industry. And if people lose their shirts, they will only have themselves to blame and cannot hide behind some big name REIT or investment bank.” [Old School, commenting on Headlines: ’380 Agreements’ for the East End; Real Estate’s Crowdfunded Future] Illustration: Lulu
That’s mainly because real estate business is very conservative by nature, it’s a product that is meant to exist for many decades and cannot be moved. If you get amateurs to put money up for wild projects, it cannot be called investment, it’s donations.
To echo what commonsense said, if there were enough wild-eyed amateur investors and they were doing something outside of the parameters of any large equity partner — or so much more importantly — a bank, then they’ll have to go it alone without external financing. But an unleveraged project can’t achieve the sort of risk-adjusted returns that would justify their investment in the first place.
If there is any impact from crowdsourcing on the “real estate landscape”, it’ll be on the fringes and made by people that probably wouldn’t know their ass from a hole in the ground as far as business is concerned.