Crowdfunding or crowd financing real estate investments both debt and equity are a fascinating reality these days. What used to be a small insiders only niche “who you know” investment vehicle is now open to the masses via online portals.
Well not exactly the masses of accredited investors are allowed in however the “little guy” investor who does not meet the net worth requirements is still left out with the exception of a few states like Georgia that have put new laws in place to allow non-accredited investors to make small investments through platforms like GroundFloor .
Investors in Florida however are still left waiting for the federal rules to be finalized since efforts to pass state crowdfunding laws have not made it through yet.
For over thirty years C & C Financial Services Inc has always made whole notes starting at $15,000 up to several hundred thousand available to note investors and self directed IRA account holders they have met at real estate investing clubs or via word of mouth. This has worked very well for individuals in the know about private lending and who have sought them out over the years.
This old fashioned way of matching up borrowers with individual private lenders will never die but it does have it’s limitations. Old school private lenders are usually much more conservative than “the crowd”. They only want to fund notes in certain neighborhoods. There is quite a bit of matchmaking to find the right fit.
Ever since I first learned of P2P lending on the unsecured personal loan marketplaces like Prosper and Lendingclub I have thought how much the private secured lending business could expand with thousands of little investments from “the cloud”. Regulations stand in the way. Although there are several real estate debt and equity investing platforms that have popped up for commercial lending purposes.
There is still a huge underserved gap of secured lending possibilities that could be made available to the “crowd” in the “cloud”.
From an investors point of view a great way to reduce risk would be to take $100,000 and invest it in 20 fractional notes alongside other investors vs one or two whole notes. The odds of 20 defaults are much less likely than just one. The downside is the note investor is giving up control of the servicing and the ability to own the collateral since it would have to be liquidated in a fractional investment. Although this would likely be an upside to many non real estate investors. Not having to service the notes and deal with borrowers and foreclosures.
What do you think? Would you rather invest in a small share of many notes or own and service just one or two?
