Crowdfunding models
Crowdfunding Models
There are two primary real estate crowdfunding models investors should be aware of. The first is the Regulation A+ model, where companies can raise up to $50 million in funds from anyone. The downside to this model is that because investors are providing capital before the platform finds and invests in the underlying transactions, they relinquish the upfront transparency that allows them to assess the full scope of the benefits and risks associated with a potential investment.
The other model, 506(c), e.g. ArborCrowd, allows accredited investors to access investment opportunities in specific assets. We believe this offers a heightened level of transparency to our investors, because they have the opportunity to review the underwriting, the sponsor’s business plan and the corresponding market fundamentals prior to committing their capital. This affords investors added peace of mind, as they’ll know exactly how their money will be deployed. However, to invest in a 506(c), investors must be accredited, meaning they must have an annual income of $200,000, or $300,000 for joint income. Also, this type of deal typically carries a minimum investment level.
While most crowdfunding platforms are primarily tech companies, in real estate crowdfunding, it is of the utmost importance for investors to entrust their hard-earned money to real estate professionals who understand the nuances of the real estate market above all else. Investors must do their research in order to choose the platforms, sponsors and deals that are transparent and backed by strong experience operating in various real estate cycles.
source: Forbes
Crowdfunding Models
There are two primary real estate crowdfunding models investors should be aware of. The first is the Regulation A+ model, where companies can raise up to $50 million in funds from anyone. The downside to this model is that because investors are providing capital before the platform finds and invests in the underlying transactions, they relinquish the upfront transparency that allows them to assess the full scope of the benefits and risks associated with a potential investment.
The other model, 506(c), e.g. ArborCrowd, allows accredited investors to access investment opportunities in specific assets. We believe this offers a heightened level of transparency to our investors, because they have the opportunity to review the underwriting, the sponsor’s business plan and the corresponding market fundamentals prior to committing their capital. This affords investors added peace of mind, as they’ll know exactly how their money will be deployed. However, to invest in a 506(c), investors must be accredited, meaning they must have an annual income of $200,000, or $300,000 for joint income. Also, this type of deal typically carries a minimum investment level.
While most crowdfunding platforms are primarily tech companies, in real estate crowdfunding, it is of the utmost importance for investors to entrust their hard-earned money to real estate professionals who understand the nuances of the real estate market above all else. Investors must do their research in order to choose the platforms, sponsors and deals that are transparent and backed by strong experience operating in various real estate cycles.
source: Forbes
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