Investor Interview: Owning Brick & Mortar vs Crowdfunded Investments

Jun 8, 2017

The ArborCrowd Team recently had the opportunity to sit down with David Capobianco, a pharmaceutical sales professional who recently invested in the Southern States Multifamily Portfolio.

While Capobianco is no stranger to rental real estate, this was his first crowdfunding investment. The interview below details his investment experience, and how crowdfunding stacks up to owning brick and mortar.

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Thanks for speaking with us today, Dave. To start, can you tell us a little bit about your professional background. Do you have any prior experience with investing in real estate?

Capobianco: Professionally, I work in pharmaceutical sales, and have been doing that for about 15 years. I do have some experience in real estate, having acquired four small rental properties near Central Connecticut State University with a partner about 10 years ago. That was back in 2007, right when the real estate market was probably at the pinnacle of its success. That is when I decided to jump into the game. It was student housing, with 26 bedrooms for rent between four properties.

Had you heard about crowdfunding before investing with ArborCrowd? What led you to commit?

Capobianco: No, my business partner introduced me to ArborCrowd and that was actually my first time hearing about real estate crowdfunding. In terms of getting comfortable with investing in real estate online, that took a bit of time. There are a lot of unknowns in real estate. But the deal details and presentations provided by ArborCrowd allowed me to get pretty comfortable with the sponsor and how they planned to use an investor’s money. I was also able to get on the phone with ArborCrowd executives. That experience helped me get comfortable with the process, the deal – and ultimately gave me the security to pull the trigger and invest.

How did the online crowdfunding investment experience compare to going out and acquiring properties directly?

Capobianco: I felt a lot more comfortable with the crowdfunding experience. Again, Arbor’s decades of experience and track record for success were selling factors. I also had comfort in the sponsor because they were a local expert in the Alabama and Mississippi areas.

If I had the ability to take back the experience of buying those student housing rental properties 10 years ago — and invest alongside experts instead — I’d do it in a heartbeat. Buying outright on your own is difficult,  stressful and full of hidden pitfalls. I’d rather invest through crowdfunding and work with a company I trust so I can let the experts do the work. Granted, you do give up some control — but you are giving up control in something you don’t have local knowledge and expertise in. I’d rather defer to the experts – the security is there.

If it came down to buying a property tomorrow or investing through crowdfunding, 99 percent of the time I’d go with the crowd.

Do you think that multifamily currently presents a better potential for risk-adjusted returns than some of the other commercial real estate asset classes like office or retail?

Capobianco: Housing is a much better investment option than the other commercial asset classes. Based on population growth and the housing choices of certain demographic groups, the rental housing market has strong demand.

In terms of retail, the tried and true models are rapidly proving to be outdated based on the internet and e-commerce. Office space presents a similar problem. There is no way of knowing if an office tenant will even be around in a year or two, especially for many startups. I suppose that is why you are seeing more co-working solutions.

On the other hand, people are always going to need a place to live, so the residential market is always going to be a safer bet.

We have a lot of different types of investors. Some focus on just one investment, while others want to continually invest — whether through ArborCrowd or other platforms. What is your personal perspective?

Capobianco: I plan to take whatever profits I have on this initial investment, and put the whole thing back into the next deal and keep rolling with it. I’m very confident that ArborCrowd will continue to bring attractive investment opportunities, because I trust the greater Arbor family of companies, who have been doing multifamily deals for more than 30 years.

What surprised you the most about your experience investing through the crowdfunding model?

Capobianco: The personal touch made all the difference. Unfortunately, there are a lot of scams in real estate, and the bad ones have soured us to the good ones. Being able to speak directly to one of the ArborCrowd founders made an impactful difference. Those conversations with a real person I trusted, combined with an in-depth and incredibly well-researched business plan, showed me the legitimacy of not just the company, but that crowdfunding was a smart way to invest.