Looking for capital to invest in Colorado real estate? Consider crowdfunding.
If you’re unaware of the term, crowdfunding is a means of raising money for a project by seeking contributions from a large number of people. It’s been popularized online with websites like Kickstarter.
That’s not to say that crowdfunding a real estate investment in Colorado is for everybody. The minimum capital required, as of this writing, starts at $5,000. For some properties, it can go much higher.
Still, with crowdfunding, the real estate investor risks less money. Of course, that lower risk also results in a diminished return.
Broadmark Capital oversees funds that are used to lend money to real estate investors. One of those funds has a focus on metro Denver.
The company recently used RealCrowd, an online crowdfunding platform similar to Kickstarter, to connect investors with capital.
Adam Fountain is a managing director at Broadmark. He said that, using RealCrowd, the company raised $3 million for one fund in just 3 months. That’s money from brand new investors that the company would not have been able to raise otherwise.
Broadmark also raised $5 million for a second fund and has turned to crowdfunding to reach its goal of $50 million.
As of this writing, Broadmark loans are supporting more than a dozen projects in the Mountain West, including homes in North Denver and Milliken. It should be noted that these are “hard money” loans and are offered with a heftier price tag – a 12.5% interest rate. That’s significantly higher than a bank loan given the current yield on the 30 Year Treasury.
Broadmark typically requires investors in its fund to pony up at least $100,000. However, with the use of RealCrowd, the company was able to lower that limit to $25,000.
Joshua Dorkin is the CEO of the online real estate community BiggerPockets. He said small-scale operators are interested in crowdfunding, but that interest is limited because of the headaches associated with dealing with multiple investors on a small project.
It’s also possible that unsophisticated investors, lured by the possibility of a positive return with minimal investment, might lose money on bad deals, he said.
Purchasing investment property in Colorado can be complex, consider working with a Colorado real estate agent with Housing Helpers. Our realtors know the investment market as well as the rental market to help you understand all of your options both before and after the purchase.