What should real estate crowdfunding investors consider when selecting the platforms, markets and deals they are investing in? The platforms that will stand out are not just creating marketplaces where any deal can just get listed.
To run a crowdfunding business, the people behind the platforms not only have to be transparent, trustworthy and credible, but they need to combine and understand all of the following elements and systems:
- Legal and regulatory framework
- Checks and balances on deal flow/operators
- Customer acquisition and education
- Social media
- And all the basic finance, accounting, marketing, PR, etc.
And for real estate crowdfunding platforms, you should also add these to the above list:
- Real estate development
- Real estate investment
- Real estate due diligence
- Contracting and Structure
So, as you can see, the technology component is just one part of the larger business. Good technology is paramount to the smooth flow of the platform, clear management, recording and tracking of all transactions that are taking place on the platform.
It is vital to have the right technology that can handle all of the logistics and also abide by the permitted rules and regulations of the particular type of crowdfunding platform business model in question. Each jurisdiction ultimately has different rules on fundraising and investment of those funds. How you find new investors for your platform, how you speak to them, “solicit” them, on board those same investors, market and communicate with them on an ongoing basis and provide opportunities for them, are all based on what is and what is not legally allowed in that country.
So technology is not only important to provide a great user experience, is is also useful for ensuring that you are operating within the legal boundaries, and the platforms you are registered with have all of this locked down and sorted.
At InvestaCrowd, a global real estate crowdfunding platform headquartered in Singapore, we get hundreds of requests each month for deals we would never list. There are many more bad deals out there than good deals. There are many loopholes and ways that a real estate developer might dishonor their agreement with investors. That’s why we only work in markets with transparent and established legal systems and with real estate developers who have proven track records. As an investor, you want to ensure the people behind the platforms are legitimate and have the right experience in real estate investing.
As you consider real estate crowdfunding platforms, look for crowdfunding platforms with great technology but also look take the time to review the deals, and make sure you think the people behind the platforms are great, too.
But that’s just my opinion… what do you think?