ArborCrowd’s community of investors is growing quickly. But there are still many questions we get asked daily from those who have yet to take the plunge with us. The questions run the gambit – everything from “who is ArborCrowd” to “how is it possible to crowdfund a real estate deal?”
This FAQ will answer a few questions. If you have others, please reach out to @ArborCrowd on Twitter, LinkedIn and Facebook.
1. Why is crowdfunding a better way to invest than traditional real estate investment models?
When it comes to real estate, crowdfunding isn’t about being better, but about access. Historically, quality real estate opportunities were only available to institutions and very high net worth individuals. Crowdfunding provides a new opportunity to a new class of investors.
And, people have been taking advantage of this newfound opportunity. Real estate is the most popular form of investment crowdfunding with nearly $2.5 billion raised by the crowd in 2015 – that’s two-and-a-half times the volumes raised in 2014.
In comparison to non-real estate investing, crowdfunding gives you a more profitable way to invest than traditional paths such as a savings account, 401K funds or the stock market. In fact, multifamily real estate has outperformed the stock market 3 to 1 over the past 15 years (S&P 500 vs. FTSE NAREIT US Real Estate Index Multifamily REITs).
2. Why would a Sponsor raise equity through the crowd? What level of “skin in the game” do they really have?
The benefit for Sponsors is simple: they now have a new vehicle to quickly and effectively raise equity.
However, raising equity through the crowd isn’t as easy as it sounds. Investing in real estate is a completely different beast when done through crowdfundng – not everyone has the same degree of institutional knowledge, network and credibility to ensure the interests of all parties involved are looked after.
Having Arbor as a strategic partner is invaluable with their 30 years of experience, which has helped them thrive during multiple market cycles. ArborCrowd leverages that experience, and we only bring on other established sponsors that we have relationships with. This means our crowd investors can trust that the deals we offer them are going to be backed by the best in the industry.
3. What is the relationship between ArborCrowd, Arbor Realty Trust and AMAC?
ArborCrowd, Arbor Realty Trust and AMAC are all separate companies. The connecting thread is the founder and CEO of Arbor Realty Trust, Ivan Kaufman, who has established himself as an indelible leader and influencer in the commercial real estate industry. Based on this experience, Ivan co-founded ArborCrowd and AMAC.
Although each company operates independently, each share the same foundational tenet that knowledge, experience and trust builds success are the foundational tenets. Furthermore, the established relationships and breadth of industry knowledge provide natural synergies between the companies.
4. Real estate crowdfunding sounds too good to be true. What’s the catch?
The “catch” only comes if you invest with the wrong partner and the wrong deal. Commercial real estate crowdfunding is a relatively new industry. But it’s quickly become a crowded market with more than 100 startups vying for your hard-earned money. This makes it tough to discern what is a good deal and who are the trusted deal-makers.
Although crowdfunding has opened new opportunities for new investors, it’s important to realize that the real estate industry is based on more than just a platform, portal or marketplace.
You’re trusting the evaluation and expertise of a person. When putting your money on the line with a partner, you want someone who has weathered the storms – and has come out on top. ArborCrowd’s leadership has survived and thrived in multiple market cycles.
5. What makes ArborCrowd different from other crowdfunding platforms?
Four critical factors differentiate ArborCrowd:
1. Access to the best deal-makers in commercial real estate. Arbor’s well-known reputation means our network includes successful Sponsors. We pair these Sponsors with, you, the crowd. We all work alongside you – everyone has skin in the game.
2. ArborCrowd does the heavy lifting. We take away the frustrations of managing and owning property so you can focus on your day job. And, we don’t stop after a deal is funded – making sure the property or portfolio is being managed successfully and ensuring that the business plan is on track until the sale of the property is an ongoing task.
3. We provide a new level of transparent communication with our investors. In other words, we give you full insight into what your money is going into – you pick and evaluate the property you want to invest in.
4. This one we keep repeating because it’s worth repeating – experience. ArborCrowd’s leadership has weathered more than 30 years of tumultuous market cycles – and have always come out on top.