Do property crowdfunding firms deliver on targeted returns?

Do property crowdfunding firms deliver on targeted returns?

Property crowdfunding firms have been gaining real traction in their online fundraising ventures. But the growing popularity of this new investment model has raised the question whether its providers are also delivering results on targeted returns.

According to the US National Real Estate Investor (NREI) trade magazine, the current leader in the property crowdfunding sector is Los Angeles-based Realty Mogul. Since closing its first deal in April 2013, this company has raised more than $50 million and returned about $6.6 million to investors, including both principal and cash-flow returns.
Darren Powderly, co-founder and vice president of real estate at Portland-based CrowdStreet, was quoted by NREI as saying that investors had been using crowdfunding platforms for over a year and that there was a track record being established in terms of performance. Since CrowdStreet launched its first deal in May 2014, it has raised just under $4 million in capital from individual accredited investors. The company projects returns for equity investors of between 14 and 19 percent on a total internal rate of return (IRR) basis, depending on the asset.

As equity deals have a five- to 10-year investment horizon, it is still too early to make any conclusions as to whether or not returns on those investments will reach targeted goals. Despite the absence to this point of data on actual returns or of a full investment cycle through to exit, the ease with which property buyers can access and analyse information both before and after they purchase may go some way towards making crowdfunding an attractive option for retail investors in the future. At any rate, the number of property investment companies using this business model is growing. Earlier this month, London-based Property Partner joined the trend, launching a platform, which enables people to invest in individual and residential properties in the same way that they can invest in company stocks (New property investment crowdfunding platform launches.).

By Tsveta van Son
Tsveta van Son is part of Invezz’s journalist team. She has a BA degree in European Studies and a MA degree in Nordic Studies from Sofia University and has also attended the University of Iceland. While she covers a variety of investment news, she is particularly interested in developments in the field of renewable energy.
Invezz uses cookies to provide you with a great user experience. By using Invezz, you accept our privacy policy.