For this roundup of the latest investment news, we chose to focus on investment funding. Here we present three articles, each covering an important innovation in real estate funding—and each an important step in making it possible for more people than ever to invest in commercial real estate. From crowdfunding to a new spin on the tradition REIT to small balance deals here is what you need to know as an investor.
How to Use Crowdfunding to Invest in Real Estate
One of the top international financial stories of the last few years has been the emergence of crowdfunding. Still new enough to generate an annoying red underline in your word processor, crowdfunding is making a big splash as an investment funding tool in real estate. But the experts urge caution.
Writing in The Wall Street Journal, Jennifer Openshaw acknowledges that crowdfunding is all the rage, but that it’s new territory with lots of unknowns. “Indeed,” she points out:
"the average investor may have excess cash to invest, but that doesn’t mean he or she has the sophistication to monitor these properties and understand aspects ranging from the financial statements, default rates, and tax implications to developer compensation models and how to unload the property if needed.” “Be sure you do your homework."
A New Trading Platform for Owning Office Property?
CoStar reports that a forthcoming IPO from ETRE REIT will have a very unusual twist. The firm is being formed to offer public investment opportunities in individual commercial properties, with the corporation holding each property as a separate REIT with its shares traded on NASDAQ.
Writer Mark Heschmeyer notes that the firm has already selected its first property and that:
"...soon..., individual investors will be able to buy and trade ownership stock in a single commercial real estate property, just like they would shares of common stock in a single company."
The Small Balance Real Estate Dilemma Part III
Investment funding through SBRE funds has become a hot topic in real estate circles. The popularity of them has brought many less-experienced fund managers into the market. Author Matt Burk continues his series by pointing out that:
"the very first thing that successful fund managers must do is recognize and accept that ongoing capital raising is a critical part of success and an unavoidable responsibility of the fund manager. It is a vital function and role that must be incorporated into the fabric of the business operations.” He laments that even though SBRE funds have a number of advantages with respect to funding, many SBRE fund managers “...do not understand the dynamics of raising capital in such a vehicle. The vast majority of them do not have a clear, written strategy or plan as they launch. They typically have no clear idea at all as to how they are going to raise capital – no specific, distinct target audience to attack, no overarching strategy, no defined tactics, no clear marketing message, no tools or materials to use, and no sales process to follow."
In a world with innovation all around, new ways to fund investments arrive daily. Trust the investment professionals at KerNors Capital Group to give you the information you need to make the best deal for you. Since 1924, we’ve believed that smart investors are successful investors. Call us today.