Invest in commercial real estate for as little as $5000
What we do: RealCrowd makes the elite world of commercial real estate investments available to everyone. We provide the Real Estate Operators with tools to manage their fundraising process and investors get to participate directly into their offerings. What's more, our structural efficiency allows us to offer lower fees and higher rates of return than traditional real estate investment vehicles.
Founders have +/-$3B of institutional real estate experience
Why investors us
$1,235,100 since our founding
RealCrowd is like Wefunder... but for commercial real estate! Their founder says it best: "This is an asset class that’s historically only been accessible to the ultra, ultra, high net worth individuals and institutions, and we’re breaking that barrier down and providing access to the everyman investor. There’s no reason that these deals should be reserved for only institutions and ultra high net worth individuals; they should be available for everybody."
When RealCrowd CEO Adam Hooper met his future business partner Roman Rosario, the mood was tense. The two were working for competing real estate brokerage firms at the time, and both were trying to close the same deal.
“It wasn’t the rosiest of starts,” Hooper says with a laugh.
“Hey,” Rosario says. “I think I was very cordial.”
Fast-forward a few years, and the former rivals became co-workers when Hooper joined the ranks alongside Rosario at Palmer Capital.
When they left to start RealCrowd in early 2013, they took 20 years and $3-billion worth of underwriting and transaction experience with them. Now, along with CTO JD Conley and CSA Andy Norborg, they’re using their expertise to make high-performing, high-level real estate investing available to everyone.
“We’ve sat on the sidelines and made people — these institutions we worked for — hundreds of millions of dollars by working on these deals, but we could never invest personally,” Hooper says. “To have the opportunity to invest personally in these deals, and give that same opportunity to accredited investors across the country, that’s a pretty cool thing.”
How RealCrowd Works
Users can browse potential properties on the RealCrowd site and, when they see something they like, click "invest" and decide how much they’d like to chip in. Investments start at $5,000.
The entire process is transparent, and users can review a range of documents — including due diligence items, financial information, draft operating agreements, etc. — before making any decisions.
Once enough people pledge their support to fund an asset, RealCrowd coordinates the necessary documentation, investors send their payments directly to the real estate operator, and the deal is done.
Meanwhile, investors manage their portfolios using the RealCrowd dashboard, which tracks tenancy, appreciation, and net cash-flow distributions (made quarterly), among other things.
From D’Oh! to Aha!
RealCrowd was born in a conference room on a particularly frustrating afternoon as Hooper and Rosario were working on a deal that was big enough to be good, but too small for institutional investors to care.
“The building had all around good metrics, quality tenants, long term leases, those type of things — but we were having a hard time selling it,” Rosario recalls. “There are good deals out there that are too small for institutional investors to be interested in, and are too big for most individuals to invest in.”
It’s in this middle market — the $2-to-$15-million market — that RealCrowd can really shine. “We’re in this sweet spot where we don’t get a lot of competition from the institutions,” Hooper says.
He and Rosario knew several people who would have loved to invest relatively small amounts — $10,000 here, $50,000 there, maybe $100,000 — in the opportunity that was on the conference room table that fateful day, but they had no way of doing it. There was just no way to bring all those people together in an efficient way.
Then it dawned on them: Technology could do just that, and bring everyone together to form a sophisticated, efficient real estate syndicate.
“Real estate is one of the last financial markets to be fundamentally disrupted through technology,” Hooper says. “We can take an industry standard method that really hasn’t been changed in 30 or 40 years, apply a massive amount of technology to it, and, in making it efficient enough, open it up to all of these investors that would love to do it, but don’t have access.”
The recent elimination of the decades-long ban on advertising and soliciting real estate investments was a game-changer in the world of real estate investing.
“The lift on the ban of general solicitation is a reallocation of opportunity,” Rosario says. “It was one of the primary reasons, we felt, that the rich were getting richer.”
With the ban lifted, real estate investment deals no longer have to go through pre-established relationships — so-called “internal country club networks” — and RealCrowd can make its investment opportunities available for everyone to see.
Investors still need to be accredited — that is, make $200,000 (single) or $300,000 (joint), or have a net worth of $1 million excluding their primary residence — but that could soon change, too, to accommodate a broader range of investors.
“This is an asset class that’s historically only been accessible to the ultra, ultra, high net worth individuals and institutions, and we’re breaking that barrier down and providing access to the everyman investor,” Hooper says. “There’s no reason that these deals should be reserved for only institutions and ultra high net worth individuals; they should be available for everybody. I think that’s ultimately at the root of what we’re up to.”
What's new about what you're making? How is it different?
We are enabling individual investors to directly own a stake in institutional quality commercial real estate assets. To directly own a multi million dollar retail/office/residential building in a major metropolitan area before RealCrowd you had to both be ultra rich and know the people that were making the offering. We are doing traditional real estate syndication, but using the efficiency and scale of the internet. By keeping the minimum investment threshold low we are able to attract investors that have both never had access to this asset class and would like to diversify their real estate portfolios.
At the same time we are enabling our real estate partners to do their jobs more efficiently, as we are managing the investors. Real Estate operators we have talked to often spend 40% or more of their time communicating with investors, and we make that process much, much easier. It's analogous to the startup world. Real Estate operators see fundraising as a distraction to doing their business, and would rather focus on creating value.
Our strong focus on education and transparency are unparalleled in a traditionally opaque industry.
Why did you pick this idea to work on?
We've been in the industry for the last 10 years and have experienced both the painful inefficiency that is fundraising for real estate assets and the lack of access for your average investor. We saw that investing online and especially "crowd investing" was becoming mainstream for other asset classes, but commercial real estate investment was stuck in the 1970's.
How big is the market?
Accredited investors in the US control $11T of net worth. Commercial real estate in the US is an $250B per year transaction market. The ultra high net worth and institutional investors such as endowments and pension funds have significant allocations in commercial real estate The Yale Endowment, for instance, keeps at least 20% in commercial real estate and its Chief Investment Officer recommends every investor do the same.
We are positioned to collect both transactional and annual management fees for both assets that we raise money for and assets under management by real estate operators today that want access to our investor management tools.
Who are your competitors? How are you different?
We have a few startup competitors with varying levels of overlap. These include Realty Mogul, Fundrise, iFunding.
The RealCrowd founders have existing relationships with institutional quality real estate organizations across the US. We are providing an unmatched level of deal flow with exclusive transactions in major metropolitan areas that are usually unavailable to the individual investor.
What do you understand about your business that others just don't get?
It is a relationship oriented business that has a very high barrier to entry. Not only do you have to be respected in the network, there are sometimes hundreds of moving parts that have to line up for each transaction. We understand these pitfalls and are uniquely positioned to overcome them.
What's your biggest risk? What keeps you up at night?
Our biggest risk is not being able to fund deals, sending our real estate partners looking for other capital partners.
How do you acquire customers?
We are a two sided marketplace, so we acquire our two sets of customers in different ways.
We acquire investors through PR, inbound marketing with blog posts, internet advertising, print advertising (testing soon), and word of mouth.
We acquire our real estate operator partnerships through industry events and networking and by introductions from our already large network of contacts from a combined 20 years of industry experience. We have also been successful with cold calling these partners. These relationships are very high touch, often requiring multiple in-person meetings, much like enterprise sales. Leveraging our existing network is a huge advantage here.
How many investors are on your platform?
2500+ that have marked themselves as being accredited. We have grown this base at an average of 32% week over week.
How much capital do investors commit on an average deal?
So far we have seen an average of $26,000 across 45 investors for our first fundraise that is in progress.
How many real estate deals have you facilitated on RealCrowd?
Our first two are in process right now.
RealCrowd is conducting a Regulation D offering via Wefunder Advisors LLC. CRD Number: #167803.
Wefunder supports three different federal laws that allow startups to raise money legally. To comply with the law, Wefunder Advisors LLC and Wefunder Portal LLC (both owned by Wefunder Inc) also list startups depending on the regulation used.
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Some fine print: 1) These numbers include startups currently live on Wefunder if they pass their minimum target. 2) Some startups use two different laws at the same time (i.e., Regulation D and Regulation Crowdfunding).
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