Is Real Estate Crowdfunding The Fix That Urban Housing In America Really Needs?

Housing in largest cities have become so expensive that millennials are using crowdfunding platforms to buy their houses.

By Nagidmy Marquez July 18, 2017
Credit: Fundrise via Business Insider

Saving money for a down payment? One can only hope. Most millennial in their twenties or thirties are mortified that they might never be able to buy a house. And if that dream is to do it in a large city, chances become even more slimmer. In a recent survey published by Apartment List, 80% of millennials say they want to buy a home—but most have less than $1,000 saved payment.

Fear no more because one company has a suggestion for all those preoccupied millennials.The solution: crowdfunding. Yes crowdfunding! While you’re saving for a down payment, maybe everybody should help crowdfund the construction of homes in your neighborhood while also advocating for changes in zoning so we can all together make that construction possible.

Related: Millennials Are Fueling The Current Sizzling Real Estate Market

So this is how it works. Fundrise is a housing management company based in DC. They developed a new investment platform called the eFund. The goal is to help and alleviate housing costs for young people. Fundrise eFunds are a new tax-efficient alternative investment that gives everyday investors direct access to a professionally managed, diversified portfolio of for-sale housing in core US cities. It is also a the first low-cost private market investment advisor.

The model consist of public investors who buy shares. The minimum investment is 100 shares which it is equal to $1000 (currently one share is $10). Up to $50 million in shares are available for investors. The collected funds are used to build homes in urban locations. The locations are walkable and transit-friendly. Build on spaces where traditional developer traditionally ignore by the average developer. Condos and detached houses are offered as well.

Ben Miller, co-founder and CEO of Fundrise commented, “There’s a generation of people that can’t afford the houses that they want,” he says regarding the difficulties millennials encounter to buy a house. He emphasizes, “The houses that they want aren’t being built… the traditionally-funded system is building the wrong houses, in the wrong place, and the young generation, people that are first-time homebuyers, aren’t buying those homes. They don’t want to live in the suburbs. They don’t want to spend an hour and a half each way in the car every day.”

Related: House Flipping Hits A Ten-Year High As Lenders Splash The Cash

LA was the first city to get a $50 million eFund in early July 2017. eFund will be launching another project in Washington, DC – August this year – other major US cities by the end of the year. The numbers seem very positive since within the first week of launching, nearly 6,000 people have invested at least $1,000 each in the LA eFund – investors are 35 or younger.

So what does the money go and how is it used? The money raised through the new eFunds goes towards land, renovation, and construction. Fundrise’s program works with local homebuilders and, over the next five years, the program could plan building between 250 and 750 new homes.

Nagidmy Marquez

ABOUT THE AUTHOR Nagidmy Marquez

ABOUT THE AUTHOR Nagidmy Marquez

Nagidmy is a global communications strategist with more than 13 years of experience in the creation, curation and implementation of strategic content and integrated communications practices. She has worked across different regions and cultures of the world including: United States, Latin America, Europe and the Middle East. She is a Mafalda and Don Quixote lover.

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