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KW: Commercial Real Estate in Silicon Valley
Can Commercial Real Estate in Silicon Valley Benefit from Crowdfunding?
Real estate crowdfunding is the newest type of property investment. It has increasingly gained popularity over recent years, becoming the most preferred option for investors with massive projects to access various sources of venture capital. Whether your project comprises of single-home flips or several new commercial properties, real estate crowdfunding could be the solution you’re looking for.
If you’ve invested in commercial real estate in Silicon Valley, you’re probably wondering if you can really reap the benefit of crowdfunding. The answer is, “YES.” Although it may seem more like a tech fad to many, it’s actually legit and comes with numerous benefits to borrowers.
Here is everything you need to know.
Benefits of Crowdfunding Over Traditional Lending
Speed
For a long time, bureaucracy and paperwork were two things that had always plagued the loan acquisition process. Getting money to put into real estate meant waiting for months before your application finalizes. Luckily, that’s not the case with real estate crowdfunding. All transactions are carried out online, thus reducing the waiting time significantly.
Efficiency
The best thing is that you don’t have to do the legwork with property crowdfunding. Organizations that host real estate crowdfunding have people who do due diligence and handle the paperwork on your behalf. That, however, doesn’t mean that you should not conduct further research on your own.
Easier Borrowing Process
As mentioned above, real estate crowdfunding is facilitated by a third party. As a loan seeker, you’ll have a representative who guides you through every step of the way. This helps you to enjoy a streamlined borrowing process. After all, the sponsor doesn’t want the project to fail. That’s why he or she will commit to guiding you and other borrowers in the best way possible, as well as ensure that more investors come on board.
Requirements as a Borrower
Much like traditional borrowing, loan seekers need to provide information to prove that they qualify for a crowdfunded loan. These include, but not limited to:
- Detailed documentation and records of your investment plans
- Your estimated timeframe and construction budget
- Credit report Inspection report of property
- Proof of funds (for closing costs, down payment, and others)
- List of assets you own
- Purchase contract
- Your biography as a borrower (used in the crowdfunding website)
- Proof of insurance policies (if applicable)
Besides having all the above items, you may be required to meet the threshold of an accredited investor for you to participate in real estate crowdfunding. That means you must have a minimum annual income of $200,000 for the past two years or have accumulated assets worth over $1 million. For joint income, $300,000 is the minimum requirement. Nonprofits, trusts, corporations, and banks with at least $5 million in assets fall in the category of accredited investors.
In sum, real estate crowdfunding is here to stay. And, it will continuously benefit virtually every form of real estate investment, including the commercial real estate in Silicon Valley. Whether you’re a novice or a seasoned investor, however, one must qualify to become an accredited investor.