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A guide to thriving during the coming real estate crash for real estate syndicators and their investors.
Raising Real Estate Development Capital Online: Crowdfunding Basics
By Adam Gower Ph.D.
If your goal is to raise more money from your existing network or by reaching out to a new cadre of high-net-worth investors, social-media driven crowdfunding platforms are an excellent option.
Before starting a crowdfunding campaign, it is critical that you understand the basics of the process and how it can be used in conjunction with social media to drive investor engagement and excitement in your real estate development projects.
What is Real Estate Crowdfunding?
Real estate crowdfunding refers to the act of pooling investor capital to acquire real estate assets, either to develop or add value to a new commercial property, to rent to tenants for steady cash flow, or to hold on to for appreciation purposes. Online platforms began to crowdfund real estate capital from accredited investors after the process was authorized by Congress under the 2012 JOBS Act and the laws were promulgated a couple of years later.
The sector has expanded rapidly in the ensuing years, with over 150 different platforms emerging worldwide.Â
Why Use Real Estate Crowdfunding?
In the past, real estate developers were limited to soliciting capital only from people within their personal or professional circle. With the change in law, the newly permitted practice of crowdfunding now allows developers to expand that circle by using digital marketing and social media, and to reach investors who share their vision for a project.
For example, if a developer wants to make a green, eco-friendly mixed-use development, they don't have to sell their idea only to people in their immediate circle- they can appeal directly to green investors everywhere, openly online, who want to do good while doing well.
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From Zero to Hero
Getting started in the crowdfunding space may seem like an insurmountable challenge to many developers who are unacquainted with the process. When just starting out, there are a few things you should keep in mind:
Document Your Journey
People love a good story, including real estate investors. When starting a crowdfunding campaign, use social media platforms to document your journey. Include information about the development, your past successes, and show off some of your personal and professional experiences, both good and bad. This will help you forge connections with potential investors before you've even spoken on the phone or met in person.
Create videos, use written content, infographics, even memes to connect with your audience. Build a following by regularly posting content, as well as interacting with consumers of that content. If you tell a compelling story, your audience will become invested in your story, which will help build a relationship with them and predispose them to investingin your project.
Leverage Social Media to the Max
Creating content and engaging with your audience is not enough. There are thousands of other developers out there, all vying for the same investor dollars. Social media campaigns are an ongoing process, and ideally, the person or people responsible for managing the campaign will be nimble, and able to adapt to changing conditions.
Social media marketing efforts generate a massive amount of data, from the amount of time spent on a certain page or post, to comments and likes, to click-through-rates and other metrics that can help determine the current success of a campaign and ways in which it can be improved or made more efficient.
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Real estate developers who are not leveraging crowdfunding platforms are putting themselves at a competitive disadvantage. The ability to raise capital from a pool of hundreds of thousands or even millions of like-minded investors is invaluable. An effective social media campaign is an essential part of generating interest and capital investments for real estate development and one that is never too soon to get started on.
If you have only just started in real estate development, have completed no deals, have no email list, but know you want the freedom and wealth being a real estate developer brings, then I suggest your first step is to start evaluating deals so you can recognize a good one when you see it.
Here’s where you should start. You’ll learn everything you need to know – the different types of real estate, different development strategies, how real estate cycles influence the market, and all about due diligence.
If you want to find deals and raise money for them so you can start your real estate development business, then learning how to conduct due diligence so you can pitch your deals better to investors is a great place to start.
If you’ve already purchased one or more real estate project and are seeing more opportunities than you can finance, then now is the time to start building your investor network so you can finance all your next deals quicker.
You’ve already got some momentum; now start finding and educating prospects about what you’re doing so you can build an email list of people to pitch to when you’re ready to raise money for your next deal.
This is what we build for private clients all the time – it’s called the Investor Acquisition System and you can access the entire program right here so you can find prospects, and convert them into being deep pocketed, repeat investors in your deals.
If you are a seasoned pro with multi-cycle experience, a substantial portfolio, a decent deal pipeline, and find yourself spending too much time raising equity capital because you’re still doing it in-person, then it’s time you put technology to work for you.
The wonderful thing about doing this is that you’re not going to be doing anything different than you’re already doing and, guess what, you’ll never have to sit through investor meetings again.
Sounds crazy I know, but I lay the whole thing out for you in this white board workshop where I personally show you exactly what it takes for you to transform your equity raising into a fully automated, capital raising machine so you can find new investors while increasing commitments from your existing network.
