Financing Commercial Real Estate Investments With Crowdfunding

From National Real Estate Investor


 Crowdfunding Fills Construction Lending Gap Left by Banks 

 “Construction financing is getting much more challenging,” says Doug Opalka, senior managing director with HFF, a financial intermediary. Some lender are offering smaller loans for new construction projects. Others are less likely to lend at all.
Regulations created after the global financial crisis force banks to kept cash in reserve to offset the risk of investments like construction loans. 
The rules are now finally being enforced, after years of uncertainty over how they would be put into action, notes Opalka. Many banks have already lent as much as they can without putting more cash on reserve.  
“Multifamily real estate is a very common property type for crowdfunding… Real estate continues to represent somewhere north of 90 percent of crowdfunding,” say Roderick. Apartment properties provide steady cash flow and stability.  
Also, rental housing is a type of real estate many crowdfunding investors are already familiar with. Apartment development still seems like a relatively safe bet, compared to other investment options. Even though developers are opening hundreds of thousands of new apartments, strong demand seems likely to fill the new units in most markets.  
The percentage of vacant apartments nationwide is still far below 5.0 percent, even if that percentage is growing slightly. Rents continue to grow at a healthy rate in most markets, according to data firms including Reis Inc., and MPF Research.  
Most crowdfunding websites still provide loans for new apartment projects. The products range from permanent loans to smaller, mezzanine loans, or preferred equity.