One of the top growing trends in the tech world has been crowdfunding. Crowdfunding is the method of funding a project or venture by raising a high volume of small amounts of money from a large number of people. This revolutionizing investment trend has touched many different industries and businesses that would otherwise not have the opportunity to easily raise investment. Crowdfunding has most recently emerged with one of the oldest and traditional industries around- real estate.
With the rising cost of real estate around the world, it’s becoming harder and harder for new entrants to get involved with real estate investments. With Crowdfunding, you no longer have to be a millionaire to invest in multi-million dollar projects. Once Title III was passed through the JOBS Act it opened doors for real estate equity crowdfunding. Equity crowdfunding is an investment at an early-stage unlisted company (a company that is not listed on a stock market) in exchange for shares in that company. This has been a game changer for many especially in the real estate market.
I sat down with Affif Siddique, CMO of Diversyfund, one of the top real estate crowdfunding platforms, to get an inside look on the crowdfunding world of real estate.
Why did the team at DiversyFund decide on a crowdfunding platform versus traditional fundraising strategies in the real estate world?
Craig Cecilio, Diversyfund founder and CEO, spent most of his career in traditional real estate. Craig was always finding ways to make real estate investing accessible for all. When JOBS Act came into effect, it paved the way to allow crowdfunding in the real estate industry possible. This has completely disrupted traditional methods of real estate investing. Typically, in the real estate world only the wealthy, had the opportunity to capitalize on investments due the necessity of large amounts of liquid capital. The beauty of utilizing a crowdfunding platform for real estate is giving everyone the chance to invest. This allows a higher percentage of people to build a real estate investment portfolio with minimal capital requirements at a low risk with a higher chance of increased returns.
What advantages has this approach allotted for Diversyfund?
Diversyfund provides exclusive opportunities to invest into properties on the platform. Using the crowdfunding approach has allowed our investment opportunities to be fulfilled at a faster rate due to several qualified investors opting into the project rather than a few wealthy investors.
One certain strength Diversyfund has is a seasoned team. How did the aggregation of the team come about?
Craig Cecilio, founder and CEO of DiversyFund, made sure to build the team that shared his vision to “democratize and disrupt real estate investment” by making it available for all to invest with as little as $5000. He brought on industry expert, Alan Lewis ,as Chief Investment Officer who has expertise in crowdfunding investment and equity market investment. Marketing expert ,Affif Siddique, was brought on as Chief Marketing Officer to grow and market a DiversyFund into a top notch industry, leading crowdfunding real estate investment platform.
How have the crowdfunding laws affected Diversyfund?
JOBS Act (Jumpstart Our Business Startups) Act passed by President Obama in 2012 paved the way for these kinds of platforms, but it was not until May 16, 2016 when the Title III specific to equity crowdfunding went into effect. There were other provisions into the law that made it possible to raise funds from public one in particular used by many platforms is 506 (c) and 506 (d) they both have different guidelines about accredited investors. Currently most of our deals are offered under rule 506 (c)
What differentiates DiversyFund from the other major crowdfunding platforms? How does a membership with DiversyFund works?
DiversyFund is one of the very few platforms out there that still allows investors to cherry pick and select the opportunities they want to invest in. Most of other leading platforms are going away from this approach and offering E-REIT or a Fund, where an investor has no control over where their funds will be invested. This approach may increase risk in case the market goes south. The another differentiator about DiversyFund is that it is the lead developer in most of its investment opportunities while having a full-time construction director on staff to oversee all of the projects. This approach allows our investors to receive constant updates from the project site, which is a rare benefit that other platforms do not offer. Having our team on site with our projects allows us to meet and manage expectations better. A Membership on the DiversyFund platform is free and the process to invest is made simple for anyone to take advantage of.
Why invest in a platform like Diversyfund rather than the stock market?
Investing in real estate is known for building long term wealth accumulation. There are many reasons one should invest in crowdfunding real estate platform like DiversyFund such as diversification, lower risk and higher returns than S&P or other traded funds and a low entry investment requirement of $5,000.
Whom do you find is most interactive with the platform?
All investors that are looking to invest into pre-vetted real estate opportunities, people looking for higher returns and lower risk investment opportunities, first time investors looking to test the waters with low minimum investment requirements, institutional investors, trusts, and organizations that are looking to add new investment opportunities to their portfolio, realtors, brokers, dealers and financial advisors who may have different reasons but to know about the market opportunities and offer them to their clients as alternative investment opportunities and international investors looking for opportunities to invest into US real estate market.
What do you look for when finding a project to undertake and offer to Diversyfund members?
In most cases the opportunities we offer come from our trusted and proven sources. The team has over two decades of experience in vetting and scrutinizing deals in the market. We select only the best that fits our criteria as we lead most of our deals ourselves and in most cases have our own skin in the game, so naturally the projects we offer to our investors through our crowdfunding platform will be the best of the best. In most cases we select the deals that are local to us where we have first hand knowledge of our market and have boots on the ground. We also use 3rd party data to run our analysis and use local and regional experts to make our final selection.
What trends do you foresee in the real estate industry specifically with everything moving into the digital space?
Crowdfunding real estate investing is in its very early stages and it will continue to grow as more and more investors start to realize the true potential of the opportunity it presents. This will also gain momentum as our baby boomers start to retire and new class of investors emerges. Millennials may not be as interested as the previous generations to have full control over finding real estate investing opportunities ,hunting and vetting them out personally and waste hours and hours in talking with different people before investing. Instead the millennial investor class may rely upon trusted online sources peer reviews, user experience and the ability to track their investments online anytime from anywhere. We hope to see our user base expand from 35-45 year old men with six figure incomes to more millennials eager to build their investment portfolio at a low risk
What can we expect from DiversyFund in 2017?
DiversyFund is developing a modern user experience for our online investors. We will be launching a complete backend and investor dashboard soon that will allow our investors to keep track of their investments and project updates in real time on any device. Definitely more new exciting and exclusive investment opportunities and some exclusive partnerships that will really put us into the leading high-end investment opportunities category. We are also working on some cool new products to provide our investor new alternative investment opportunities and flexibility.