J. Antonio Marquez, a principal at Comunidad Realty Partners, has never been shy about diversifying the menu of equity he brings to the table. In the past, he’s used money from friends and family, institutions, and “quasi” institutions when closing on the B- and C-level apartment properties that he buys to reposition.
“We’re all about diversifying our capital base,” Marquez says. “In the last cycle, a lot of people got stung because they had all of their eggs in one basket.”
So, when Marquez learned about crowdfunding, where equity (or even debt) is collected through investors over the Internet, he saw its potential.
“It’s efficient,” he says. “That’s why we wanted to try [it] out on one of our deals. There was just one source. We didn’t need to go through 10 different investors.”
So far, so good. Marquez, a San Diego–based apartment owner with 3,000 units in Texas, went through Los Angeles–based Realty Mogul—which bills itself as a marketplace for accredited investors to pool money online and buy shares of pre-vetted investment properties—for approximately $500,000 to finance a property in the Dallas area.
“We went through a due diligence and a vetting process on us as principals that was pretty standard,” Marquez says. “The first deal is always the hardest. But, in a matter of three weeks, we got everything that we needed to get done. They were just on top of it.”
Marquez, who may go to the crowd for his next deal, too, isn’t alone. As crowdfunding gets more exposure in different media outlets, a growing number of apartment owners are checking it out.
“I think crowdfunding is a viable new industry that’s emerging,” says Jake Seid of Auction.com, an online real estate auction based in Irvine, Calif. “No one has the answer about how it will look or how it will evolve, but I think it’s something that allows greater access to capital for operators and allows greater participation of investors in real estate.”
As investors and owners investigate crowdfunding, they’ll find a number of myths about the practice and its impact on the apartment industry. Here are six:
Myth 1:
Crowdfunding is an entirely different way to finance real estate.
Myth 2:
Crowdfunding brings together thousands of investors.
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.
