Myth 2: Crowdfunding brings together thousands of investors.

When you think of crowds, the assumption is you’re dealing with a lot of people. Add in the word “funding” and it’s easy to assume there’s a large crowd of investors funding projects in increments of $50, $100, and $200. That happened when 91,585 backers contributed $5.7 million to turn the Veronica Mars television show into a movie. But that’s generally not the case for real estate.

“The myth is that you will have someone put $100 or $500 in,” says Jake Seid of “I don’t think that is how this evolves.”

Specifically, the overhead would be too burdensome on a structure with many, many smaller investors. “This is something that’s more in the sweet spot of bigger sources of capital and high–net worth individuals versus somebody who is putting in $100 and owning one one-thousandth of that apartment building,” Seid says.

Jilliene ­Helman, CEO of Realty Mogul says large numbers of investors also spook the operators of the real estate. “People think you’re going to have a billion investors in a transaction,” she says. “None of these sponsors want to have that many investors.”

Myth 1:
Crowdfunding is an entirely different way to finance real estate.

Myth 2:
Crowdfunding brings together thousands of investors.

Myth 3:
Most traditional multifamily operators accept crowdfunding as a viable source of debt or equity.

Myth 4:
Crowdfunding will provide an immediate jolt across all asset types of apartments.

Myth 5:
You can only crowdfund through established online providers.

Myth 6:
The crowdfunding mechanism matters more than the underlying fundamentals.