Singing cow-poke celebrities like Gene Autry made giant returns on their investments in real estate. Even in the 21st century, real estate continues to be the very best investment, especially for the long term. In the early days of television, Autry bought the KTLA TV station for $12 million. He sold it years later for over $240 million! Autry, or his sharp money manager, could see that at the very least, no investment in land can ever lose all its value. This is the only type of investment that this can still be said of. Every other type of stocks, bonds, and certainly technology investment is completely speculative in nature, compared to the value of land.
The problem for many investors nowadays, is the cost of real estate is so high as to preclude many from even one investment in a single dwelling. They just do not have the income to swing the mortgages on the kinds of real estate that the big-time pro real estate investors have access to. Until quite recently, investments in private companies or commercial real estate was only possible for an accredited investor – meaning the investor had over $1,000,000 in net worth.
This problem has been met with new ways of doing business, plugging into the “crowd sourced” online markets through crowdfunding the purchase of commercial businesses and real estate. The law that made the change that allows for this is called the Jumpstart Our Business Startups Act. In an economic environment where most investments return no more than a couple of percent, at most, commercial real estate returns often top an annual gain of 10 percent.
EquityMultiple is a crowdfunded investment platform for real estate. It is located in New York City and CEO Charles Clinton had this to say, “At a time when the stock market has been particularly volatile and where yield is hard to find because of low interest rates, the real estate is a sector where you can find relative stability and strong performance.”
Than Merrill, of FortuneBuilders – owner of a real estate investment education company – believes that crowdfunding real estate is a game changer, especially for banks as they “may face the largest threat from crowdfunding campaigns. Crowdfunding means they are no longer the all-powerful gatekeepers of the gold or returns for the average individual and family. Now everyone can essentially take advantage of the best returns and wealth building.”
Because this crowdfunding innovation to real estate is growing so fast, the new term ‘mini IPO’ has popped up. Clinton of EquityMultiple explains how a single real estate deal could be seen as a mini IPO: “The mini IPO terminology gets thrown around a lot because IPOs are something that most investors are familiar with… In a broad sense, any equity offering for an individual deal is analogous to a mini IPO… The company that owns the property must go through a registration process with the Securities and Exchange Commission… It’s less involved than a full IPO, so the SEC caps how much companies can raise this way at $50 million.”