Real Estate Crowdfunding

[Wyfitms]

Real estate crowdfunding - will singaporeans bite?

 

 

 

The next big thing in real estate investment

 

Flip through any newspaper over the weekend and you will see a buffet of investment options in the real estate market. Typically, there are investment options from Melbourne, Sydney, London, Ho Chi Minh City, Tokyo, Bangkok, and the list goes on.

By Tan Kok Keong -

April 29

 

Flip through any newspaper over the weekend and you will see a buffet of investment options in the real estate market. Typically, there are investment options from Melbourne, Sydney, London, Ho Chi Minh City, Tokyo, Bangkok, and the list goes on.

 

However, as many investors have found out, owning a property overseas can entail a lot of pain: The pain of finding a good absentee manager, the pain of sourcing tenants, the pain of paying the high cost of ownership, the pain to ensure compliance with taxation laws, and the pain in selling off the investment.

 

Perhaps it is time for a rethink. Investors in Singapore might want to rethink their allocation of resources and look at real estate crowdfunding as a viable alternative.

 

Real estate crowdfunding: Can it take off in Singapore?

 

Crowdfunding is a way to collect small individual amounts from many people to fund opportunities or causes.

 

In the United States, several real estate crowdfunding platforms such as Prodigy Network, Fundrise, Realty Mogul and RealtyShares have collectively raised millions for real estate projects. One of the most prominent, and perhaps the largest, crowdfunding project in the world was started in Bogota, Colombia, where Prodigy Network pulled together funds from more than 4,000 people, raising a total of US$190 million (S$255 million) to fund BD Bacata.

 

BD Bacata will be the tallest skyscraper in Bogota and the second tallest in South America, with 67 floors destined to be used as a hotel, apartments and a shopping centre.

 

Growth of similar platforms is observed in Australia, the United Kingdom and China, among others. Massolution, a leading research house on real estate crowdfunding, estimated that real estate crowdfunding value will increase by 150 per cent to US$2.57 billion in 2015, making it one of the fastest-growing industry segments of crowd capitalism. In our opinion, investing in real estate in Singapore will follow the same trend as in New York and other developed markets.

Just look at how crowdfunding has already started to change the small- and medium-sized enterprises (SME) loan market in Singapore.

 

What special deals can crowdfunding platforms offer?

 

Studying the evolution of the crowdfunding market in the US, we evaluated the offerings of one of the earliest crowdfunding platforms, Prodigy Network. Prodigy Network lets investors into commercial real estate markets in New York City.

 

Imagine owning part of a commercial building in New York’s renowned Wall Street or Park Avenue! Investing in real estate in major cities such as New York is attractive for two main reasons: It is a tangible asset and, considering that the demand for real estate in New York is far higher than the supply, the value of the properties has a high probability of appreciating over time. Now when it comes to what type of real estate to invest in, the choices normally come down to two: Residential versus commercial.

 

From an investing perspective, commercial tends to be the most sought-after strategy, given that it has lower risk and that its cash-flow generating operation increases the value of the property through time.

 

Historically, access to these kinds of investments was restricted to the very wealthy or financial institutions, given that most commercial real estate properties in Manhattan are valued in between US$100-US$250 million.

 

But now, due to the JOBS Act, which is the regulation that permitted crowdfunding in the US, and due to the power of technology, which allows millions of individuals to be connected through their mobile devices, platforms such as Prodigy Network are pooling together investments starting at US$50,000 from around the world in order to fund these projects. In other words, real estate crowdfunding is democratising some of the most attractive and profitable opportunities in the real estate sector. We think that, over time, developers in Singapore will start to explore fundraising efforts in the same way they have evolved in the US.

 

Technology enables, but do not forget real estate fundamentals

 

Even the best technology will not salvage a bad deal. Investors should be aware that while technology enables, they should not lose sight of analysis of the risks involved and whether they are equipped to accept the risk.

 

Understand legal structure of the investment

 

Investors should always remember that in a bad market there could be good investments that are well structured, and in a good market there could be badly structured investments. In a typical crowdfunding structure, investors typically buy into shares of a special purpose company (SPC) or units in a trust. This SPC or trust will then invest in the property. Such investments could be in the form of shares of a development company, a secondary loan to developers or joint ownership of a completed property. Investors need to understand the liabilities and the rights to returns or dividends when investing in such structures.

 

Assess the risk versus the rewards

 

Investors need to start to assess the risk of each investment and whether the returns are sufficient to compensate them for the risk. Do not be taken in by “guaranteed returns” as 100 per cent fail-safe investments. Even governments can default on sovereign debt.

 

Investors also need to start to recognise returns are either fixed or variable. In the case of fixed returns, they should ask where the fundraiser got the money to “guarantee” their returns and what the chances are of the fundraiser not being able to find money to pay those “guaranteed returns”.

 

Share expertise and join the community

 

The other important feature for crowdfunding platforms versus traditional investment models is that investors should be more willing to engage in discussions among themselves or with the fundraisers on the crowdfunding platform or social media. This concept of crowd-policing of investments might be the best way to ensure that dubious investment schemes and individuals are kept out of the investment market.

 

Ask the right questions before investing

 

Investors should look at crowdfunding platforms as an enabler of the process of collective investment. Responsible platforms are more likely to conduct due diligence on projects before these are allowed for fundraising. The new trend in real estate investment markets is rapidly changing and investors might want to start to understand more about investment structures, questions they need to ask and what is involved before getting into any deals.

 

ABOUT THE AUTHOR: Tan Kok Keong is chief operating officer and co-founder of Fundplaces, a real estate crowdfunding platform.

 

The_Next_big_thing_in_real_estate_investment.pdf

Edited April 29, 2016 by Wyfitms

[Showster]

Hehe, like... if I cannot afford a 3 BR apartment, I get a tri Key through sharing with 2 more buddies? Starting to sound like Uber.

[Wyfitms]

Hehe, like... if I cannot afford a 3 BR apartment, I get a tri Key through sharing with 2 more buddies? Starting to sound like Uber.

 

 

like that might as well get a studio by yourself lah LOL

 

This crowd funding can get interesting. Alternative to REIT, for those with higher risk appetite. 

 

For eg fund places had this mezzanine opportunity in australia paying 17.5% annual coupon. Term is 20 mths.

 

But have to be accredited investor to take part.

[Darryn]

yes - rules placed on the facilitator are tight. 

 

is a good thing though

 

I have something underway in this regard - am working with one of the organisers...

Cannot say more till have spoken to him, but if got some questions I can try to answer...

 

[Showster]

You know who to approach. Left pocket right pocket all a few hundred K looking for gains.

[Ktglfc]

Real estate crowdfunding - will singaporeans bite?

 

 

 

The next big thing in real estate investment

 

Flip through any newspaper over the weekend and you will see a buffet of investment options in the real estate market. Typically, there are investment options from Melbourne, Sydney, London, Ho Chi Minh City, Tokyo, Bangkok, and the list goes on.

By Tan Kok Keong -

April 29

 

Flip through any newspaper over the weekend and you will see a buffet of investment options in the real estate market. Typically, there are investment options from Melbourne, Sydney, London, Ho Chi Minh City, Tokyo, Bangkok, and the list goes on.

 

However, as many investors have found out, owning a property overseas can entail a lot of pain: The pain of finding a good absentee manager, the pain of sourcing tenants, the pain of paying the high cost of ownership, the pain to ensure compliance with taxation laws, and the pain in selling off the investment.

 

Perhaps it is time for a rethink. Investors in Singapore might want to rethink their allocation of resources and look at real estate crowdfunding as a viable alternative.

 

Real estate crowdfunding: Can it take off in Singapore?

 

Crowdfunding is a way to collect small individual amounts from many people to fund opportunities or causes.

 

In the United States, several real estate crowdfunding platforms such as Prodigy Network, Fundrise, Realty Mogul and RealtyShares have collectively raised millions for real estate projects. One of the most prominent, and perhaps the largest, crowdfunding project in the world was started in Bogota, Colombia, where Prodigy Network pulled together funds from more than 4,000 people, raising a total of US$190 million (S$255 million) to fund BD Bacata.

 

BD Bacata will be the tallest skyscraper in Bogota and the second tallest in South America, with 67 floors destined to be used as a hotel, apartments and a shopping centre.

 

Growth of similar platforms is observed in Australia, the United Kingdom and China, among others. Massolution, a leading research house on real estate crowdfunding, estimated that real estate crowdfunding value will increase by 150 per cent to US$2.57 billion in 2015, making it one of the fastest-growing industry segments of crowd capitalism. In our opinion, investing in real estate in Singapore will follow the same trend as in New York and other developed markets.

Just look at how crowdfunding has already started to change the small- and medium-sized enterprises (SME) loan market in Singapore.

 

What special deals can crowdfunding platforms offer?

 

Studying the evolution of the crowdfunding market in the US, we evaluated the offerings of one of the earliest crowdfunding platforms, Prodigy Network. Prodigy Network lets investors into commercial real estate markets in New York City.

 

Imagine owning part of a commercial building in New York’s renowned Wall Street or Park Avenue! Investing in real estate in major cities such as New York is attractive for two main reasons: It is a tangible asset and, considering that the demand for real estate in New York is far higher than the supply, the value of the properties has a high probability of appreciating over time. Now when it comes to what type of real estate to invest in, the choices normally come down to two: Residential versus commercial.

 

From an investing perspective, commercial tends to be the most sought-after strategy, given that it has lower risk and that its cash-flow generating operation increases the value of the property through time.

 

Historically, access to these kinds of investments was restricted to the very wealthy or financial institutions, given that most commercial real estate properties in Manhattan are valued in between US$100-US$250 million.

 

But now, due to the JOBS Act, which is the regulation that permitted crowdfunding in the US, and due to the power of technology, which allows millions of individuals to be connected through their mobile devices, platforms such as Prodigy Network are pooling together investments starting at US$50,000 from around the world in order to fund these projects. In other words, real estate crowdfunding is democratising some of the most attractive and profitable opportunities in the real estate sector. We think that, over time, developers in Singapore will start to explore fundraising efforts in the same way they have evolved in the US.

 

Technology enables, but do not forget real estate fundamentals

 

Even the best technology will not salvage a bad deal. Investors should be aware that while technology enables, they should not lose sight of analysis of the risks involved and whether they are equipped to accept the risk.

 

Understand legal structure of the investment

 

Investors should always remember that in a bad market there could be good investments that are well structured, and in a good market there could be badly structured investments. In a typical crowdfunding structure, investors typically buy into shares of a special purpose company (SPC) or units in a trust. This SPC or trust will then invest in the property. Such investments could be in the form of shares of a development company, a secondary loan to developers or joint ownership of a completed property. Investors need to understand the liabilities and the rights to returns or dividends when investing in such structures.

 

Assess the risk versus the rewards

 

Investors need to start to assess the risk of each investment and whether the returns are sufficient to compensate them for the risk. Do not be taken in by “guaranteed returns” as 100 per cent fail-safe investments. Even governments can default on sovereign debt.

 

Investors also need to start to recognise returns are either fixed or variable. In the case of fixed returns, they should ask where the fundraiser got the money to “guarantee” their returns and what the chances are of the fundraiser not being able to find money to pay those “guaranteed returns”.

 

Share expertise and join the community

 

The other important feature for crowdfunding platforms versus traditional investment models is that investors should be more willing to engage in discussions among themselves or with the fundraisers on the crowdfunding platform or social media. This concept of crowd-policing of investments might be the best way to ensure that dubious investment schemes and individuals are kept out of the investment market.

 

Ask the right questions before investing

 

Investors should look at crowdfunding platforms as an enabler of the process of collective investment. Responsible platforms are more likely to conduct due diligence on projects before these are allowed for fundraising. The new trend in real estate investment markets is rapidly changing and investors might want to start to understand more about investment structures, questions they need to ask and what is involved before getting into any deals.

 

ABOUT THE AUTHOR: Tan Kok Keong is chief operating officer and co-founder of Fundplaces, a real estate crowdfunding platform.

 

The_Next_big_thing_in_real_estate_investment.pdf

 

Unless we know the entire risks involved, else it is just too risky to invest in crowdfunding...

Be prepared to lose capitals if the investment doesn't go off ...

 

And they always highlighted the successful cases, but what abt the fail ones?

For a successful crowdfunding, there could be tens of failures... and how many investors have burnt their hands?

 

Always do your own homework and invest only the money that you can afford to lose in a worst case scenario ...

[Angcheek]

just a Q... bank loan  cheaper  than paying of coupons ?

[Staff69]

can I start a nitclub crowd funding.

 

 

you all deposit monies to my account.

 

 

I go niteclub then post pictures for you all to see

[Nav14]

like that might as well get a studio by yourself lah LOL

 

This crowd funding can get interesting. Alternative to REIT, for those with higher risk appetite.

 

For eg fund places had this mezzanine opportunity in australia paying 17.5% annual coupon. Term is 20 mths.

 

But have to be accredited investor to take part.

I would invest in property investment crowdfunding only if launched by an established public listed company , otherwise stay far away, and as you said rather buy a studio on your own than a whole development via crowdfunding . Edited April 30, 2016 by Nav14

[Wyfitms]

Unless we know the entire risks involved, else it is just too risky to invest in crowdfunding...

Be prepared to lose capitals if the investment doesn't go off ...

 

And they always highlighted the successful cases, but what abt the fail ones?

For a successful crowdfunding, there could be tens of failures... and how many investors have burnt their hands?

 

Always do your own homework and invest only the money that you can afford to lose in a worst case scenario ...

 

yes homework is impt, just like any other investments.

 

i noticed that they only accept accredited investor for fund places.

 

Also interesting to note that part such platform's role is to perform due diligence. That is quite an interesting job... i'd be keen for sure!

[Wyfitms]

just a Q... bank loan  cheaper  than paying of coupons ?

 

bank loan cheaper, question is how much u can get

 

sometimes bank only lend u 60%. Mezzanine can take the risk to lend u the next 20-30%, at higher cost to borrower

[Wyfitms]

I would invest in property investment crowdfunding only if launched by an established public listed company , otherwise stay far away, and as you said rather buy a studio on your own than a whole development via crowdfunding .

 

i think being listed or not is not so impt. after all, it is similar to any asset mgt firm, which many are not listed anyway

[Porker]

REIT

[Duckduck]

like that might as well get a studio by yourself lah LOL

 

This crowd funding can get interesting. Alternative to REIT, for those with higher risk appetite. 

 

For eg fund places had this mezzanine opportunity in australia paying 17.5% annual coupon. Term is 20 mths.

 

But have to be accredited investor to take part.

 

any risk higher than wat d S-REITs are paying is high risk IMO. The way its structured sounds like crowd funders are subordinated below the fund itself, so when sh!t hits d fan, d fund gets to claw ownership of d property before any of d crowdfunders right? Since its overseas assets, legal terms here may not apply to overseas n vice versa.

 

Anytime u invest in overseas property, u better b dam careful coz rules can change overnight n investors will get caught like d brazil prop saga. Even JB investors got caught offguard past few yrs.

 

U want v high yield n good quality property asset with liquidity so u can get out anytime? Go buy US MLPs stocks which r trading above 10% now.

Edited May 4, 2016 by Duckduck

[Wyfitms]

any risk higher than wat d S-REITs are paying is high risk IMO. The way its structured sounds like crowd funders are subordinated below the fund itself, so when sh!t hits d fan, d fund gets to claw ownership of d property before any of d crowdfunders right? Since its overseas assets, legal terms here may not apply to overseas n vice versa.

 

Anytime u invest in overseas property, u better b dam careful coz rules can change overnight n investors will get caught like d brazil prop saga. Even JB investors got caught offguard past few yrs.

 

U want v high yield n good quality property asset with liquidity so u can get out anytime? Go buy US MLPs stocks which r trading above 10% now.

 

certainly higher risk than REIT which is basically income yield from stabilized property.

 

i would assess each property on its own risk and merits. Crowdfunding usually works for development projects at shorter investment period and hence the higher return than REITs.  Could fit the profile for some people.

 

of course, what u have pointed out in terms of country/ market risks applies 

[Jamesc]

I want to buy a nice big condo behind orchard rd and

 

I would rather pay the interest to the man in the street

 

rather than to the big greedy banks. So if anyone wants

 

to crowd fund me just send me any amount you want to

 

invest. Better to give money to MCF members than fat cat

 

bankers right? PM quick before my inbox gets too full with

 

the flower bath promo for syt ladies MCF members.

 

[ElisaGrace]

The passing of the Jobs Act  has been seen as a miracle in the crowdfunding sector and today small investors are taking much interest in  investing in real estate projects.  They knew that returns are best, although they have to wait for some time till the project gets its speed. When I retired from my job, I do not want to invest my amount in banks because of  low-interest rates. I was surveying online to see the best place for investment and I came in contact with this site http://crowdfund.co/real-estate/  , where investment in real estate sector was preferred. I  also consulted my friends and they were also in favour of investment in real estate sector. So as per their advice, I invested small amounts in three projects. Two of the projects had done very well and I have also received the dividends from these two projects. One thing ,Patience is the only key to making the investment in this sector. 

[Angcheek]

On 5/3/2016 at 9:26 AM, Wyfitms said:

 

i think being listed or not is not so impt. after all, it is similar to any asset mgt firm, which many are not listed anyway

U change new nick to revive ur old post ? 

😄😁😆🍻✌