Chances are you’ve heard the word “crowdfunding” tossed around once or twice in your local CRE social circle. It’s a noble concept – taking potentially lucrative real estate investment opportunities (once only made accessible to accredited, aka extremely wealthy, individuals) and making them available to a broader audience. AssetAvenue, a new real estate crowdfunding platform, has set out to do things a little bit differently than the rest of the competition. As opposed to investing in the equity portion of a property, AssetAvenue users invest in the debt, which actually encompasses most of its value (which is typically 70 percent debt and 30 percent equity). The AssetAvenue team breaks it down rather simply on its website using two points of emphasis, as debt and equity in real estate represent different levels of risk and return.
- In the real estate capital structure, senior debt investors take the least risk, are the first to be repaid and have the highest claim on the collateral.
- On the other hand, equity investors generally take on the most risk, are the last to be repaid and have the lowest return on their collateral.
AssetAvenue investors have the ability to invest across all real estate property types under very secure and flexible terms. Users can invest as little as $5,000 during a timeline that spans from six months to up to five years. Investments offer projected 7 to 12 percent annual returns via direct deposit. It touts the following reasons its investments are more palatable than the rest of the competition.
- The investments are institutionally vetted
- The investments are secured senior loans
- The investments offer high, stable returns
The crowdfunding space in general is still very green, and still has a lot of work to do with regards to educating the general public. Once awareness is raised, and if companies such as AssetAvenue can indeed back the claims it has made about the stability of its investments in comparison to the current alternatives, there should be a lot of room for growth.