The real-estate ‘crowdfunding’ space has rapidly grown in recent years into a billion dollar industry, with a recent report from Massolution predicting this number will increase to a whopping $2.5 billion in 2015. However, as the industry is becoming more and more established, it is important to understand the difference between the growing number of firms in the real-estate investment industry and crowdfunding platforms.
Take Fundrise or RealtyMogul for example. These US-based real-estate firms aim to pair real-estate developers with investors, essentially providing an online brokerage service. This model has gained traction in the USA, but Europe’s more heavily regulated environment has created a real demand for a larger spectrum of investor services. In the European market, sophisticated investors are attracted to platforms that provide full service fund management services, beyond simply desirable real-estate deals.
At BrickVest, we aim to not only bring together investors and opportunities, but also to provide the full range of premier fund management services and deliver them directly to investors via an easy to use online portal. The platform allows users to access features typically reserved for major real-estate investors, including ongoing risk management, global institutional-grade deal sourcing and asset rating committee reports, to name a few. By retaining the quality of a skill-intensive service and gaining access to a direct real-estate investment, investors can benefit from quality investment management without incurring the full range of costs traditionally required.
Opportunity for every type of investor
An exclusive network of financial gatekeepers comprised of advisers, brokers and legal teams dominates the real-estate investment world. For years, this network’s monopoly has restricted access to the everyday investor. However, by merging online platforms with expertise in real-estate investing, there is an opportunity to deliver real-estate investment opportunities to individuals outside of this closed network.
Although disruptive technology has transformed many traditional financial services, the process of real-estate investment has remained largely stagnant. To date, investors in this space have struggled to target and diversify tailored portfolios. In this transition from taking real-estate investment from an ‘offline’ space to a valuable ‘online’ one, BrickVest seeks to retain the quality of services while offering a scalable solution.
The market is ripe for fintech investment
Although there are indeed differences between the demands of the North American brokerage style platform and the full service European one, they remain connected by technology’s role in changing the way the industry operates. It is evident that venture capital in Europe and the USA is gravitating towards financial technology (fintech) firms, hoping to unearth great fintech unicorns. Accenture predicts global fintech investments to hit the mark of $12.2 billion in 2014, which is triple the 2013 level of $4.05 billion.
Within the fintech space, investment has been primarily concentrated in ventures looking to solve inefficiencies in payments and transactions. However, there has been less interest in companies offering investment services.
In the current marketplace, few buy-side platforms accessible to everyday investors exist. This gap in the marketplace is a rare and potentially lucrative opportunity for investors. With transparent online platforms, prospective investors can now gain access to fund management services which were previously associated with very high fees. For example, Nutmeg, an online investment management platform that removes the middle man from the investment equation successfully raised $37m. For real-estate investment, insights offered through a premium investment management service offer a more sophisticated opportunity than the existing brokerage style crowdfunding platforms.
Burgeoning online investment services in the real-estate sector are democratizing the industry through lower fees and barriers to entry, as well as giving investors access to previously restricted opportunities to diversify their portfolios. The advantages of this crowdfunding model are clear, however, not all platforms are created equal.
Thus, before embarking on a venture, investors must consider the added value of a premium fund management service over brokerage style crowdfunding platform.