Real estate crowdfunding platforms typically let investors buy slices of properties or make mini loans that, combined with other mini loans, finance the purchase of properties (or stakes in properties).
But at least one is also letting individuals contribute to full-blown funds that finance the continual purchase and sales of many properties, not just one. That’s opening up what has traditionally been a hidden real estate asset class to more investors, and expanding real estate crowdfunding’s reach to more home flippers and other real estate investors.
A fund recently launched by Habitribe, a Miami-based real estate investor, on SBREfunds.com sheds light on the practice.
The fund aims to raise $50 million from high-net-worth individuals using a “fix and flip strategy” to deliver annual returns of 12 to 15 percent, according to the fund’s page on SBREfunds.com.
SBREfunds.com is operated by Fairway America, a real estate lender, fund manager and advisory firm. Fairway America helped Habitribe structure and create the fund.
“The Fund will acquire, improve, and sell primarily single family residential properties and occasionally, multifamily and commercial properties, and do so in a relatively short time period, e.g., 3-12 months,” reads the fund’s page, which would not have been legal to display to the public before September 2013, when a provision of the JOBS Act kicked in.
At $50,000, the fund’s minimum investment is much larger than the minimum investment required by most deals posted on fast-growing real estate crowdfunding platforms Fundrise, RealtyMogul and Patch of Land — even though, like SBREfunds.com, those companies also usually require investors to be “accredited investors.”
But by taking full advantage of the JOBS Act, SBREfunds.com is making information on the deal available to a range of potential investors who never would have learned of it in the past. The website is also equipping Habitribe with tools and resources to help it set up and manage a real estate fund.
It’s not difficult to see how the flowering of such platforms could jolt real estate investing in the years ahead.
“I believe strongly that small balance real estate (SBRE) funds like Habitribe and many others we have helped to launch highlight a new option for both the operator (which we call the SBRE entrepreneur) and the high-net-worth investor who is looking for alternative investors not especially correlated to the broader equity markets,” said Fairway America CEO Matt Burk.
Burke calls the funds a “hidden asset class” because they are unknown to most high-net-worth investors since it was illegal for such funds to advertise or solicit money before the JOBS Act.