For crowdfunded real estate to go mainstream, it’s all about security
WASHINGTON, D.C. – The man driving the new real estate division of the Crowdfunding Professional Association (CfPA) believes appropriate protections will increase the popularity of a concept that brings real estate investing to the masses for the first time.
Jordan Fishfeld is the CEO of PeerRealty, a real estate crowdfunding platform concentrating on the U.S. Midwest.
Mr. Fishfeld said his team saw plenty of opportunity in the Midwest because the comparative lack of focus relative to both coasts produced good deal flow.
“We look for great deals in rowing markets that tend to get less attention,” Mr. Fishfeld explained.
He added that PeerRealty is not opposed to opportunities outside the Midwest, but the strong supply of local markets coupled with a much more crowded coastal landscape make the Midwest the better play right now.
“The capitalization rates might be two or three in popular areas and close to zero in San Francisco. In the Midwest they can be as high as eight,” Mr. Fishfeld added.
One of the reasons for that difference is the tendency for international capital to concentrate on the coasts while eschewing the middle of the country. That pattern brings the added bonus of partially insulating the Midwest during down periods like the recession, Mr. Fishfeld explained. Most of the money that gets invested there tends to come from close by. That brings more patience and loyalty.
The regional outlook is solid, Mr. Fishfeld said. The Midwest, led by Chicago, is becoming a more attractive job market. Tech cities like Austin are keep attracting young, skilled labor.
“On the manufacturing side, companies are growing. They need new office space and retail naturally flows from there.”
Mr. Fishfeld said real estate investors will welcome secondary markets, which are necessary to solve individual pain points. Some may need a quick exit for unique reasons. Others want to leave once a property is built while some are looking for the steady cash flow generated by an occupied property.
Crowdfunding is not just about raising capital either, Mr. Fishfeld said. It is about putting that capital to work in the most efficient way possible. People can pick which types of properties they wish to invest in based on their individual needs, or on other factors such as geographic or industry familiarity.
Mr. Fishfeld said he is excited to lead the development of a real estate crowdfunding division for the CfPA. A main reason is because of the sector’s potential to make real estate available to a wider range of investors.
“Large investors in projects are often the friends and family of the companies involved,” Mr. Fishfeld explained.
Enabling real estate crowdfunding available is the first step. The next is increasing public awareness of its existence. The CfPA will have to diligently promote all aspects of crowdfunding in order to increase its use.
To maximize that use, the CfPA will have to look at ways to create some type of endorsement platforms earn if they meet transparency, security and other thresholds, Mr. Fishfeld believes. Equity crowdfunding sites are encouraged to post their FINRA compliance, for example. More visible steps will help build public confidence while also comforting legislators.
Compared to venture capital and the startup space, real estate crowdfunding is different because of its greater focus on creating a diverse investor base, Mr. Fishfeld explained.
Mr. Fishfeld also welcomes this week’s CfPA summit because it will help the crowdfunding industry further develop a unified voice, something which is crucial when working with regulators and politicians in Washington. The current CfPA leadership is well-suited to the task, he added.
“Our leadership is well known on the hill. They are active in growing the industry and commenting on regulatory issues.”