Is Real Estate Crowdfunding Right for You

Real Estate CrowdfundingIntroduction

There are few guarantees in this life, aside for death a taxes.  One other irrevocable truth is that it takes money to buy Real Estate, which makes Real Estate Investing a cash-intensive sport indeed.  Now, if you know anything at all about me, you know that I am of the opinion that while buying investment property may require cash, this cash does not have to necessarily be yours – thus is the premise of Creative Finance of which I am an expert.

Yes, I buy investment property; I have been doing it since 2006.  And while each transaction is different from the others, one thing remains the same – it’s never my money that’s getting the deal done!  In fact, the most of my money I’ve ever spent to close on any deal is $5,300 (I detailed this transaction here).  I designed the Cash Flow Freedom University specifically for the purpose of teaching you exactly how to buy investment property without cash.

It’s All About OPM

Other People’s Money – just because you don’t have any money, doesn’t mean there is no money to be had.  Simply put, if you can’t get your hands on a few bucks to do deals with, living in a 15 trillion dollar economy in the US, then you are just not looking for the right things in the right place…brutal, but true!

How to Find Money

Here’s what my experience has taught me:

 You can’t find money – Money finds you!

That’s right – not only is it illegal for you in many cases to advertise asking for money, but it plain doesn’t work.  Which is OK, since money is out there every day trying to find home, and all you need to do is be visible and attractive to it, and money will come to you.

What Does it Take to Attract Money?

Simple – the money will come to you if:

1. You can provide a good opportunity

2. Money believes that you will manage this opportunity well

Thus, all you really need is a good deal, and a reputation for being someone who does what he says.

And yet…

I am privy to so many investors being hard up for cash to do their deals.  I won’t need to spell out any further why I think this is, but you can extrapolate.  What I will say is this – real estate crowdfunding was created for them, which is enough to make you think…

Indeed, real estate crowdfunding seems like such a good idea.  The premise – to create a platform to pull investor money together to allow them access to the real estate investment marketplace, while providing working capital for investors who need it.  Simingly, everyone wins.

But, why is it that a savvy lender/equity partner would not have direct access to an investor with whom to do deals?  Why is it that a savvy lender/equity partner would not have access to a syndicator with whom to do deals?  And why is it that a good, knowledgeable, trustworthy investor/syndicator would not have access to lenders/partners?  have you ever pondered this…?

There is no reason, which sort of makes the concept of crowd funding irrelevant.  Now – the folks running these platforms will tell you that their worth is in the fact that they ‘screen” their deals and only bring you the ones that they deem “safe”.  The problem here, however, is that they are implying that you should put your money into a platform simply because you trust their underwriting process and without the ability to evaluate the deal for yourself.  Sorry – that’s backwards!  The essence of what it means to be a intelligent investor is that you must be able to know what you are doing; otherwise the best thing for you is to stay out…

And to the syndicator, most of the crowd funding platforms insist that the sponsor put-in a very substantial amount of his/her own capital into the deal.  I, for one, fail to see the rationale in this.  What it takes to make things go in business are two things: an idea, and capital to bring the idea to life.  Very seldom does one individual have both.   Some people have knowledge and time to look for and structure deals, while others have funds to get those deals done – it takes a synthesis.  A large equity position on part of the sponsor seems like a good idea, but it kills many worthy deals…

So – Is Real Estate Crowdfunding Right for You?

I don’t know – is it?  I mean, I’ve never felt the need for it.  The money is always there in plentiful amounts as long as the deal is good enough; the money is never the problem.  If you have deals, but no money – call me.  I will look at what you’ve got, and if it’s really a good deal we can figure out how to get it done.  The more likely reason you have deals but no money is because that which you think is a good deal, is in actuality a not so good deal.  Money knows this, and decides to pass, so you are left with what you think is a deal but no money.

Does this help?

Photo Credit: MickWatson via Compfight cc

10 Comments

  • Sean Cronan Reply

    Great article! Just picked up your eBooks and am getting into investing. Thank you for putting in the time to help!

    I’m never a stickler for these, but it made this sentence a bit hard to read. “What it takes to make things go in business are two things: and idea, and capital to bring the idea to live.”
    And -> an
    Live -> life
    Just in case anyone new to your site reads the article. Thanks again!!

    • Ben Reply

      Hey, Sean!

      Thanks for visiting and thanks indeed for picking up the eBooks – hope you like them 🙂
      Thank you also for pointing out the edits – done. That’s what happens late at night… Feel free to reach out, Sean.

      Ben

  • Lou Reply

    I never had looked at it in the way you described about there being money for the deals. The money would only appear when it felt that the deal was right for it and not based on any feelings I may have felt about the deal being the right one. So no matter how much I would wish for the deal to be right the money would only appear when it the money felt that the deal was right for it to come to me. Thanks.

    • Ben Reply

      Exactly, Lou! Investors, specifically new investors, love to live inside their head, which is a recipe for nothing. In this business, you need to see yourself and your proposals as others do…

      Thanks indeed!

  • Page Reply

    Hi Ben,

    Most crowdfunding sites will not permit investors to ask for money. One that will allow it is crowdfunder.com. The other thing to remember is that they all charge percentage fees for the amount you are raising, as well as other add-ons, so it pays to read the fine print before signing on.

    • Ben Reply

      Hello Page,

      Yes, there are a multitude of fees involved and one needs to be rather careful. Thanks so much for your comment!

  • Trevor Hartsock Reply

    Ben,

    Great article! The last paragraph is spot on. I know the focus is on Crowdfunding, but as I read through this a second time instead of just using the word “money”. I used “smart money”, as I had no problem buying my first three real estate investments with OPM and they were all terrible purchases! Keep up the good work sir!

    • Ben Reply

      Exactly, Trevor!

      Thank you so much.

  • Rob Shepherd Reply

    In today’s day and age, people are crowdfunding, kickstarting anything and everything! It’s a little overwhelming.. ok a lot. But you’re right, there is money, the goal is not to ask but to be offered.. that’s the key and the challenge.

    • Ben Reply

      Exactly, Rob! Money is no different from deals; it either flows, or it don’t 🙂

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