Commercial real estate transactions can become more user-friendly for casual investors through new technology, and one does not have to be a CRE insider to have a fruitful return experience.
Crowdfunding, which was once thought of as an outlier way to invest, is now becoming more common, according to a recent National Real Estate Investor webinar.
“What the Internet does in any industry is directly connect buyers and sellers,” said Mark Roderick, crowdfunding attorney with Flaster Greenberg PC. “We didn’t have that before in capital markets. The Internet eliminates middlemen.”
Much of this has to do with the 2012 JOBS Act. One of its provisions was to make it easier for those interested in the industry to have a lesser barrier to entry into putting money into the market. That means a different class of investors, who don’t need to invest hundreds of thousands, but as little as $5,000, can enter the fray and enjoy positive returns.
Deanna Farnell, the chief financial officer of Gelt, a commercial real estate crowdfunding platform that primarily does multifamily investing, illustrated the results of her firm’s success. Since being founded in 2008, she said, Gelt has put $1.2 billion into the market, mostly in apartments. But now it is steering investors into manufactured homes and higher-end RV parks. So far the 7,500 units the company has steered into purchase had yields to investors ranging between 17 percent and 35 percent. Gelt looks at markets in the West, and its primary targets are assets built in the 1970s to 1990s.
But Adam Hooper, a CEO of RealCrowd, said that deals are harder to come by nowadays due to increased industry demand. In many cases, investors are being steered by sponsors to look at more secondary markets.
“The deals that we saw in 2012, 2013 and 2014 aren’t necessarily what we’re going to see in 2018, 2019 and 2020 going forward,” Hooper said. “It’s getting a little bit harder to find deals to pencil, but they’re out there.”
However, Roderick contended, that even with the increased competition, there is more opportunity to make a commercial real estate investment and get sizable returns, if one finds the right sponsoring partner that can make a smart deal. The old way of doing business, which involves reams of paperwork is coming to an end, and more will be able to real commercial real estate’s benefits.
“We, as an industry, need to improve a lot for investors,” Roderick said. “It looks like a really early stage industry. We don’t necessarily make it as easy for investors as we should. We’re far from a well-oiled machine as an industry. There’s a lot of room for improvement.”
There has certainly been a lot of money chasing commercial real estate over the last few years, but improvement and more funds looking to put money into the effort certainly don’t hurt CRE’s prospects in the near future.
About GRS Group:
GRS Group is a leading provider of commercial real estate (“CRE”) services worldwide. With offices across the United States, Europe, and affiliates around the globe, GRS Group provides local market knowledge with a global perspective for institutional real estate investors, occupiers and lenders worldwide. The GRS Group team has evaluated and advised on over $1 trillion in CRE transactions.
Through the company’s proprietary management process, Global Services Connection, GRS Group delivers an integrated suite of services including Financial Advisory, Transaction Management, Assessment and Title Insurance. We provide a single point of contact, capable of leveraging the GRS Group portfolio of companies and delivering customized solutions to assist our clients in achieving their investment goals.