The real estate crowdfunding space has been an interesting one to watch. Just a few short years ago, in 2015 and 2016, there were many companies that seemed to be doing well with funds flowing into some large financing rounds. Today, there are just a handful that have stood the test of time. The rest? Some have gone out of business and others have gone quiet. The most notable companies which have shuttered in recent years include RealtyShares, which raised $60 million and iFunding.
The Wall Street Journal recently published a piece highlighting some of the success stories and what has differentiated some of these companies from the pack. Fundrise was founded back in 2012 and is probably the most unique when it comes to the investors they serve and how the investments are structured. The different investment offerings spanning more diversified eREITS to eFunds which focus on a specific city. For instance the Washington DC eFund aims to capitalize on how Amazon’s HQ2 will effect local real estate.
AlphaFlow and PeerStreet are well known names in the crowdfunding space. PeerStreet is a marketplace for individual accredited investors to access short duration real estate loans. AlphaFlow partners with online platforms along with offline real estate lenders to offer investors access to real estate backed loans. Up until recently Alphaflow, was also open to individual investors but have since shifted their strategy to focus on institutional money.
One of the factors that perhaps stalled the growth of pure play real estate crowdfunding is simply the massive amount of capital entering real estate in recent years. The rebound of the economy has meant that real estate developers have had many options when it comes to financing. This doesn’t mean that these companies haven’t been successful though. Besides those previously mentioned, and not included in the WSJ article, LendingHome and Sharestates are two that have achieved significant scale in the market today. Sharestates crossed $1 billion in loans in 2018 and LendingHome recently shared that they have crossed $5 billion. Besides their short duration loans, LendingHome is also getting into the single family rental mortgage space. New York based Cadre is also a quiet achiever, requiring a $50,000 minimum investment.
Many companies as evidenced above who originally focused on accredited investors have since shifted to institutional money, a much more efficient way to grow a lending business. The exception being Fundrise and Groundfloor which have stayed true to focusing on retail investors. Overall, while many of these companies were born at a time when many thought real estate crowdfunding was the future, they continue to resemble less and less platforms to democratize real estate investing.