Below is an article by GlobeSt.com entitled “Putting Firms in Front of Investors”.
Putting Firms in Front of Investors
By: Carrie Rossenfeld, GlobeSt.com
Nov 27, 2014
IRVINE, CA—The ins and outs of using crowdfunding to raise capital for real estate transactions are still a mystery for many in the industry. Locally based real estate firm MondayOne recently raised $6 million using EquityNet’s crowdfunding platform. GlobeSt.com spoke with the MondayOne’s CEO Kenny Dewan and EquityNet’s CEO Judd Hollas about the project and how crowdfunding worked for them.
GlobeSt.com: What were some of the financing challenges faced by real estate companies before crowdfunding came on the scene?
Dewan: Reaching out to investors—specifically accredited investors, has always been a challenge. It’s like finding a needle in a haystack, especially since they are traditionally protected by CPAs, attorneys, etc., who do not allow them to see the deals directly. By the time they get to see the deal, it’s been looked at by either a CPA or attorney, and if the CPA or attorney doesn’t like the deal, then the investor will never get to see it.
Hollas: Before crowdfunding came on the scene, limited funding options were a challenge for real estate companies and others as well. Companies were limited to funding sources such as venture capitalists and banks. This limited access to capital and greatly reduced the success rate and speed at which they could obtain funding.
GlobeSt.com: Tell us more about the type of real estate project that you crowdfunded using EquityNet.
Dewan: This one was a multifamily townhome in Watford City, ND. Site prep is currently underway, and the townhomes are to be delivered in early 2015. MondayOne only focuses on ground-up, new construction. We focus on two areas: multifamily, apartments or townhomes that are built and then rented out, and franchised retail developments.
GlobeSt.com: Why did you choose EquityNet to crowdfund your project over other platforms, and what benefits did you gain from the site?
Dewan: EquityNet makes it easy for companies to display their deals, and it also makes it easy for investors to sort and research deals. The accredited investor needs to be able to look at more options and be able to divide their eggs into more than just one basked, and I think that EquityNet does give them that option. It allows companies like us to showcase our deals and provide enough information for busy accredited investors to make an investment decision quickly.
GlobeSt.com: Why did you choose crowdfunding instead of just sticking with traditional means of accessing capital?
Dewan: It’s a challenging environment out there, and it’s hard to get in front of investors. Crowdfunding creates the option to get directly in front of investors, and I think that’s the most important part. Crowdfunding removes barriers so you don’t have to go through a CPA or financial advisor.
GlobeSt.com: What are the benefits to investors who invest in real estate projects online?
Dewan: Diversification. They’re looking at multiple deals and can make up their own mind about what deals make sense for them. Traditionally, it takes a large amount of time and energy to review deals, but crowdfunding simplifies that process.
Hollas: Most real estate investments pay an ongoing yield that is backed by tangible assets. Real estate projects are hence typically perceived as lower-risk investments with the combination of both near-term yield and long-term equity upside. After a 30% decline in recent years, the real estate market is also in a long-term uptrend that is attracting a great amount of investor interest.
Stay tuned for more of our interview with Dewan and Hollas, where they offer advice to real estate firms looking to crowdfund their next investment.