Public REITs and other sponsors of real estate funds and projects have traditionally enjoyed the benefit of a broad range of choices to raise capital. Public REITs can obtain financing on a project-by-project basis or at the corporate level by means of public offerings or private placements, and REITs can also access capital as sponsors of their own opportunity funds or through strategic joint ventures. Similarly, private real estate sponsors have historically relied on a variety of nonpublic capital raising mechanisms at the property, joint venture or fund level. Each of these means offers unique advantages and disadvantages, and each figures prominently in the real estate investment landscape. However, that landscape is poised to be considerably disrupted by the advent of real estate crowdfunding, which can lower the cost of raising capital while offering a broader range of investment options.

1. Advantages of Real Estate Crowdfunding -

Broadly speaking, by real estate crowdfunding, we mean raising capital through any platform that allows investors to make real estate investments by means of the internet. Despite its novelty, real estate crowdfunding has enjoyed rapid growth,1 partly because it offers several logistical advantages over traditional methods of raising capital for real estate investments. Those advantages, which are discussed in further detail in “The Future of Real Estate Crowdfunding” by Christopher Mayer and David Sherman, are highlighted below...