crowdfunding Archives

May 18, 2017May 17, 2017

Inside Yielders, the UK’s first regulatory compliant Islamic crowdfunding platform

With over 20 banks offering Islamic financial services and six wholly Shariah-compliant banks permitted by the U.K. regulators, the growth of a financial technology sector to serve the needs of the country’s 3 million Muslims seems like a natural fit. Yielders, an equity-based crowdfunding platform based in London, said it was the first Shariah-compliant financial technology company to get approval from the U.K. Financial Conduct Authority last month.

Islamic finance differs from conventional banking services because the transactions adhere to the principles of the Shariah, or Islamic rulings. Among its central tenets are the prohibition of interest when lending or accepting money and investments must also steer clear of gambling, alcoholic beverages or pork products.

“It’s not as simple as not having interest — it goes a lot deeper than that,” said co-founder Zeeshan Uppal. “It’s about financial inclusion and financial literacy.”

The platform works through initial cash purchases of properties by high-net-worth individuals. Investors then buy portions for as little as 100 pounds ($130). Yielders manages the properties, and since they are rented on lease, monthly rental payments go to the investors. When the asset is sold, investors get their proportion of the property’s value, based on an analysis of market conditions.

“It’s an equity-based platform, with no leverage or interest rates associated with the investment,” said Uppal, who explained that to achieve Shariah compliance, the platform needed to be vetted for other requirements, including the ethical element (for example, no investments in buildings used to sell alcohol). The investor agreement must also offer each of them equal rights, regardless of how much they’ve invested, he said.

Yielders said its revenue is based on a fee structure that’s charged to investors, which includes an initial fee (2.5 percent), a management fee (10 percent of gross income) and a profit share at the end of the investment term (15 percent of the net capital appreciation). The platform uses an API to connect to users’ bank accounts and payments are made through a digital wallet, much like PayPal.

Around 400 people have signed up, and 100 are active investors, of whom 35 percent are non-Muslim, said Uppal. For investor Jaid Longmore, a non-Muslim, the low minimum level of investment, predictability of rental income and the ethical dimension were big selling points.

“I like the principles around it, especially after the financial crisis, which was from mortgage-backed loans,” she said. “The properties are fully funded and paid for and it’s less risky.”

The route to regulatory approval was a two-year audit from the Financial Conduct Authority; prior to that, the company needed Shariah compliance approval from the country’s Islamic Finance Council, Uppal said.

The U.K. is poised to continue to develop as an Islamic finance hub, as shown by last month’s Bank of England announcement that it will develop a Shariah-compliant liquidity tool for use by Islamic banks. While the company doesn’t yet have any formal partnerships with banks, they are watching the evolution of the platform with interest, said Uppal.

“A lot of the banks in the United Arab Emirates, Gulf Cooperation Council countries, Malaysia and Indonesia are very aware of what we’re doing,” he said. “Right now we’re trying to penetrate this [U.K.] market — we’re having discussions with them because they’ve got a retail presence in the U.K. but they don’t offer investment opportunities and it’s possibility of where we’re heading.”

November 23, 2016March 16, 2017

When fintech met Thanksgiving

Although it might not have been what the pilgrims or Native Americans initially had in mind, the most obvious intersection between Thanksgiving weekend and fintech is payments and ecommerce. This year, nearly 75% of Americans — who can at least agree that they love shopping — plan on hitting the stores on Black Friday. If last year is any indication, online sales will be huge. In 2015, consumers spent a whopping $4.45 billion on Black Friday and Thanksgiving.

That means that, in addition to the increasing number of unfortunate humans scheduled to work on those days, payment technologies like Walmart Pay or Visa Checkout will be working overtime to respectively process all of these in-store and online payments.

While Black Friday and its payment technology accomplices may have managed to invert the holiday’s symbol of the Cornucopia, Thanksgiving weekend isn’t just about consumerism. Here are three ways that Thanksgiving weekend and fintech come together to promote giving.

Crowdfunding

Crowdfunding platforms enable consumers to give on the go. So even if they can’t get to a food bank to donate or serve on the holiday, consumers can to use crowdfunding platforms like Indiegogo to finance the holiday meal of someone in need.

Financial Advice

Some fintechs use the holidays to help bring their customers up to speed about best practices. For instance, SMB lender Kabbage advises small businesses to offer Thanksgiving cards and to use the holiday to do employee team building. Kabbage suggests the Turkey Trot. Another online lender for SMBs, BFS Capital, took the holiday as an opportunity to publish these 8 Thanksgiving promotions.

Social Media

Black Friday is followed by Cyber Monday, which is in turn replaced by #GivingTuesday, a global day of giving. And while brands can get a lot out of promoting giving, the fact is that #GivingTuesday campaigns in the U.S. raised nearly $117 million in online donations in 2015. Among the banks and fintechs that have been involved with #GivingTuesday are Bank of America, JPM Chase, TD Bank Group, PayPal, Stripe, and Prosper.

So even though payments and ecommerce might be standing in Thanksgiving’s fintech spotlight, behind the scenes fintech really is spreading some holiday spirit.

November 16, 2016March 16, 2017

Fintech is defining digital communities, and vice versa

The rise of digital communities has become a catalyst for change in financial regulations. One of the types of financial institutions that’s feeling the aftershocks of these communities most keenly is credit unions. In the past, credit unions were empowered to grow their member base from specific communities that shared a common bond, such as a common geographic location or employer. However, the proliferation of digital communities has not only led financial regulators to take question the boundaries of the common bond — it’s led them to take action.

On October 27, 2016, the National Credit Union Administration approved a plan that relaxes the membership restrictions imposed upon credit unions. Part of the plan includes softening the geographic limitations on credit union membership. A driving force behind the NCUA reform, it would seem, are digital communities.

“The internet has changed everything for lenders, this only modernizes some arcane requirements,” Ryan Donovan, lobbyist with the Credit Union National Association, told Reuters.

It hardly seems likely that the NCUA will ever consider all internet users as one big community, thus freeing credit unions entirely from their membership restrictions. Special interest groups like the American Bankers Association and the Independent Community Bankers of America have already taken umbrage with the NCUA’s relaxed membership rules. “If credit unions want to eliminate the common bond requirement and operate like banks, they should be taxed like them and required to meet the same set of regulatory standards. They can’t have it both ways,” ICBA President and CEO Camden R. Fine said in a press release on the topic.

In spite of these roadblocks, digital communities could still lead to bigger regulation breaks for credit unions. “If lobbyists and advocacy groups can work to localize critical issues and messages to the targeted stakeholders that digital communities represent and cultivate, the NCUA could be strongly influenced to move to drastically relax membership,” argued Michael Barrio, managing partner & vice president of public affairs at Leverage Point.

And while digital communities may be shaping finance, fintech is concurrently shaping these digital communities. Crowdfunding in particular is providing people with a way to form meaningful groups based on, well, common bonds.

“I think an argument can be made that crowdfunding is seen within the community not just as a business tool to support innovation and creativity,” said Giancarlo Frosio, senior researcher and lecturer at the Center for International Intellectual Property Studies. Rather, crowdfunding is also “a revolution in social interactions promoting a new order based on disenfranchisement from centralized control of means and ideas.”

Crowdfunding, then, provides a platform through which people can build and join online communities united around a common goal or passion. It will be interesting to see in the coming years whether finance will have a bigger impact on digital communities, or vice versa.

November 8, 2016November 8, 2016

Hi 5! The five fintech stories we’re following this week

Time to get slowly, cautiously, enthusiastic about blockchain

Tradestreaming would be the first to acknowledge that a lot of blockchain news is more buzz than substance. Heck, we even have a monthly Blockchain Hype Meter to show just that. However, we’d also be just as soon to admit that not all blockchain developments can be written off as speculative fiction. On this week’s episode of the Tradestreaming Podcast, we explore why financial professionals should start paying attention to the blockchain.

Oh, and also why making transactions completely anonymous isn’t going to go mainstream.

Robos continue to gain footing in finance

Robos are beginning to take on more prominent roles in banking. Though CEO slots are safe (for now), as far as customer service goes, banking chatbots are the up and coming thing. Bank of America’s solid — though overly simplified — understanding of what makes banking customers tick in the current market has them focused on chatbots and roboadvisors alongside digital payments.

Meanwhile, the Department of Labor has taken a large step forward in helping to define technology’s role in asset management. This week, the DoL published a Q&A about its new fiduciary rule, and it’s beginning to make more sense.

Women in fintech support one another

It’s either a monumental or severely disappointing week for women worldwide, depending on the outcome of the 2016 presidential elections. While they may not have the nuclear codes, powerful women are using a combination of traditional and techie means to in an attempt to bankroll other women, seeding them with capital and support mechanisms to help them be successful.

Some of these initiatives are being made possible by the 2012 JOBS Act. To be honest, though, the crowdfunding revolution the ruling was supposed inspire hasn’t really taken off. Of course, women are also shaping fintech by simply working in the field. Tradestreaming got an inside view into a workday in the life of Crystal Eastman, head of marketing at online SMB supply chain financing firm, Behalf.

Closer than ever: ecommerce and finance

Ecommerce and finance have always been tight, and innovation in fintech has helped blur the lines between these two sectors even further. One example of this is a new collaboration between Provenir and Klarna, which has lowered cart abandonment rates by pre-approving consumer financing before a user even inputs all his or her deets. In other words, the transaction has been separated from the payment.

Another prime example of ecommerce/finance crossovers is Payoneer, which powers international mass payouts on marketplaces like Airbnb and Amazon. The startup is trying to fix the the terrible, horrible, no good, very bad sending and receiving of international payments for stuff.

Just one week left until Tradestreaming Money 2016!

Tradestreaming Money 2016 is the event to end all financial service events (well, until our next one). It’s turning into the premier top-tier digital financial services event of the year, with top digital execs from Citi, Fidelity, NYLife, CSFB, Vanguard, US Bank, MIT, BBVA, Cornerstone Advisors, Two Sigma, and QED Investors.

October 21, 2016March 16, 2017

Building a more diversified online real estate investment platform

The real estate crowdfunding marketplaces have done a good job of starting to connect the fragmented real estate market to investors. But the system isn’t perfect yet. Most platforms deal with a single asset class, so investors trying to build a diverse real estate portfolio may find themselves investing on multiple crowdfunding sites. The pain of keeping track of investments across multiple platforms can be a confusing, time-wasting process.

But some platforms are taking on the task of offering a suite of real estate asset classes investors.

“It came down to offering investors diversification potential,” said Nav Athwal, CEO of RealtyShares. “Many investors, especially individuals, can’t invest in real estate outside of a REIT or don’t have access to diversify real estate investments. Our ultimate goal is to be able to provide a diverse set of opportunities in terms of products, asset types, and capital stacked positions.”

Diversification on the RealtyShares marketplace comes both in property type and ownership status. Most of the platform’s debt investments are centered on fix and flip, single family, short-term loans. A vast majority of equity investments are occupied commercial properties with a 3 to 5 year hold period, but the site occasionally has a development project available for investment. Some projects have a preferred return with little upside, while others have common equity with lower annual returns but higher upside potential.

The San Francisco-based marketplace has surpassed $200 million in financing through the platform and recent completed a $33 million debt financing and venture round. CEO Nav Athwal, who also happens to be a finalist for the Tradestreaming best first name in fintech award, said “more than a few scotch and tequila bottles had to be cleaned from the office after the round was finished.”

Athwal attributes some of the success of his platform to the the familiarity of real estate to the retail investor. As opposed to investing money into businesses through VC or online lending platforms, most people have a basic understanding of real estate

“A retail investor with little sophistication still understands real estate investment because it’s such a part of our daily lives. Big funds and pensions have made money through real estate, and outperformed the S&P. We’re bringing real estate, which is a great way to build wealth, to the retail market,” he said.

Currently, RealtyShares only works accredited investors. With new regulations that have opened up crowdfunding to non-accredited investors, Athwal hopes the platform will one day be made available to the general public, but doesn’t see it happening in the near future. Instead, his firm is going after the white wale of crowdfunding platforms: family offices and institutional investors.

“The level of crowdfunding adoption from the mainstream real estate industry has skyrocketed,” he remarked. “In 2013, online fundraising for real estate was very foreign, but in the last 2 years, the level of interest from institutions has been surprisingly good. Crowdfunding for real estate isn’t mainstream yet, but it’s going to continue to make inroads in the real estate industry,” he concluded.

October 12, 2016March 16, 2017

Top 5 facts about German crowdfunding

Germany has found itself more and more in the global financial spotlight, initially as a result of the possible boons that Brexit could bestow upon Berlin (Talent! Investment! Glory!), and latterly as a result of the U.S. Department of Justice threatening Deutsche Bank’s with a $14 billion dollar fine (Shame! Risk! Possible collapse of economies everywhere!).

However, on a national scale, Germany has some homegrown fintech products that are really coming into their own. Tradestreaming sat down (ok, Skyped down) with Michel Harms, editor-in-chief of crowdfunding.de, to get an eagle eye’s view of Germany’s fast-growing crowdfunding industry. Fair warning: most of the links in this article are in German.

Equity crowdfunding is on the rise in Germany.

Just how fast is equity crowdfunding growing in Germany? Pretty fast. The German business publication For-Gründer reported €37,3 million raised in equity crowdfunding in 2015, up 57% from 2014. In keeping with global trends, real estate crowdfunding platforms have experienced a real surge in Germany, up approximately 80% in 2015 from the previous year, according to For-Gründer, though startup financing is still the clear leader.

Funds raised through equity-based crowdfunding over the last 5 years in Germany. **Source: crowdfunding.de**

Surprise! German equity-based crowdfunding is dominated by … middle-aged men.

While some predicted that crowdfunding would close the gender gap, crowdfunding is still dominated by men — at least in Germany. Research that Harms published in May 2016 found that crowdfunding is very much the domain of the elite: the group that was most aware of crowdfunding were males, under forty, with higher income and higher education than the average.

It’s not just awareness, it’s users as well. In 2015, two leading real estate platforms in Germany told the Frankfurter Allgemeine that their users were, on average, internet-savvy 55-year-old men, who were able to pay an average initial investment sum of €5000 to €6000. Similarly, German startup crowdfunding platform Seedmatch reported in 2014 that nearly 90% of its investors were male, with an average age of 38, and who had 868 Euros to invest in a startup.

The “Kleinanlegerschutzgesetz”, the first law that gives equity-based crowdfunding a legal framework, actually protects consumers.

The law, which went into affect in 2015, has a number of provisions to protect investors, including a clause that when investing more than€1000, the investor needs to show that he holds disposable assets of at least €100,000 or that he invests less than twice of his monthly net income.

In The Current State of Crowdfunding in Germany, Harms notes that the law “provides clear guidelines and serves also as a sign that politician recognize the relevance of crowdfunding.”

Most people in Germany don’t know much about crowdfunding, period.

Getting the word out to people who aren’t rich men over forty with a good higher education continues to remain a major challenge for German crowdfunding. Harms suggests that the misuse of the word crowdfunding has sowed distrust among the crowd and that further regulation could help restore faith in the industry.

Germany has one bank that’s doing crowdfunding, but it’s only for internal bank customers, not for the public.

Germany’s Commerzbank launched its own P2P lending platform in 2016 for its customers. “I assume Commerzbank keeps it internal to have more control,” said Harms. “Also to let only a specific type of customers invest — those who are aware and can handle the risk. I don’t know if Commerzbank wants to open that to public. If you have fallout, it will probably affect the brand.”

October 7, 2016March 16, 2017

Building a stock market for real estate

It’s common knowledge that one of the best ways to develop wealth is by investing in real estate.

One big drawback to real estate investing is liquidity. Investments can’t get much less liquid than a building, and the inability to exit quickly has pushed many new investors away from the asset class. There are REITs available on the public market, but they provide investors with little control.

Property Partner is trying to create liquidity in private real estate investments.

The London-based real estate platform provides a marketplace for investors to buy fractional shares in single and multifamily residences in England. Customers can browse the site and invest as little as £50 in income-producing properties. £36 million has been invested through the platform since January of 2015, with an average annual yield of 3%. Users are issued shares when they fund a property, allowing investors to take those same shares and put them up for sale on the site’s secondary market.

“Property Partner’s ambition is to become a global stock exchange for property investment,” said Mark Weedon, head of institutional investment. “Our unique secondary market gives current investors the security to sell and new investors to jump into an established deal.”

Selling shares early generally means discounted prices, but according to Weedon, most secondary market sales have been at or above current market price.

The platform experienced its biggest test in June of 2016 with the Brexit announcement. Weedon was interested in seeing what the results of the instability would be, and if there would be a selloff in the secondary market.

“The referendum was a good test for the platform,” he said. “Properties sold right after the Brexit were selling at a similar value to before the event. It was encouraging that the marketplace behaved in a similar way to the underlying property market, a stable asset class that’s sticky in terms of price.”

The secondary market feature is great, but just because a marketplace exists doesn’t mean you can sell at the push of a button. Someone still needs to buy the stock. There needs to be interest on both the buy and sell side of the secondary market for it to become a “global stock exchange”. The site is also not open to U.S. investors, which sorta takes the word global out of the description.

The yields are also a little difficult to swallow. With more real estate crowdfunding platforms opening, there are more and more opportunities for investments. Some sites offer similar assets with yields that are between 2-3x those on Property Partner. Properties on the platform also have a 12 percent management fee on gross revenue. The money may go to a third party management company which, according to Weedon, is standard for the English market, but still doesn’t change that that’s a high fee for residential property management.

The lack of liquidity in crowdfunding investments is one of the biggest learning curves unfamiliar investors have to deal with. Investors in crowdfunding platforms don’t always understand that the investor-investment bond is stronger than most marriages; it’s tough to divorce a crowdfunding investment. Other crowdfunding platforms have tried to develop secondary markets, without much success. Marketplace lender Prosper is shutting down its secondary market. EquityZen is working to provide an active marketplace for startup employees to sell their private shares. NASDAQ bought SecondMarket to try and help improve startup share liquidity, but there’s not much traction here.

The secondary market security blanket may help bring investors to the site, and creating an exchange for real estate may be a winning formula that people are waiting for. But like other attempts at secondary markets, it’s unclear if Property Partner will have enough volume to create a sustainable exchange. If investors value liquidity over ROI, a secondary market may offset the lower yields that come with investing in Property Partner.

September 29, 2016March 16, 2017

Crowdfunding ‘bridges’ the gap between real estate lenders and borrowers

Property development is the epitome of a high risk, high reward real estate deals that many investors clamor after. But many interested investors don’t have the infrastructure or funds to get into buying and flipping properties. One strategy to get around the barrier to entry is to invest on the debt side of development projects, because it’s much cheaper to become a lender than a builder.

Bridge loans, also known as construction loans, are the most common version of debt in development. Developers in need of cash to rehab their projects call upon lenders for short-term loans, with annual yields ranging from 7 -12 percent.

Through crowdfunding marketplaces, the fragmented market of construction loans is getting consolidated, providing a one-stop-shop for both borrowers and lenders.

Patch of Land, an LA-based crowdfunding platform, is one of the few platforms focused on bridge loans. Founded in 2013, POL has loaned out over $180 million to developers. Real estate crowdfunding platforms are a dime a dozen, but POL has found a twist to differentiate themselves from the rest of the market through their pre-funding process.

POL underwrites loans, then syndicates them to the general public, taking full ownership of the loan before the property hits the platform.

“If a loan doesn’t get fully funded, it still remains on the site,” said AdaPia d’Errico, chief marketing officer of Patch of Land. “We’re not like traditional crowdfunders where borrowers need to wait for full funding to get their money. We take care of that with the pre-fund because borrowers need cash to get their project off the ground. Investors also benefit because they get to earn interest quickly and see that POL has skin in the game.”

POL also benefits from pre-funding. According to d’Errico, POL always intended to monetize the loan holding period. The firm also makes money off the interest rate, charging from one to three points on the loan, plus a servicing fee with a two percent maximum spread.

Choosing to focus on the debt side of investments is also a unique way to approach real estate crowdfunding. Underwriting a bridge loan isn’t as sexy as providing equity to build a project that includes higher upside. But loan terms are easier to understand, something d’Errico feels is important for investors.

“We made the decision to focus on the debt side because it’s an easier investment to understand. With equity investments, you’re looking at high-level calculations based on IRR over a longer period, involving many projections and assumptions that require more time to learn than most investors have time for,” she said.

Investing in debt may be easier to understand, but it’s still not without its risks. We only need to go back to 2008 to see what can happen to sure thing loans when the whole system goes down the drain. Banks turned into real estate companies when they foreclosed on first position liens. Banks and investors don’t want to sell properties — they just want to get in and out. So while the proposition of having the security of a property as collateral is a nice theory, it’s a mess in practice.

Another issue is the nature of development. Rehabbing is an art, not a science, and all sorts of issues can slow up projects. And if the project slows, the principal stays in longer, which can put the property underwater faster than you can say refinance. So getting your principle out after 12 – 18 months of a development deal isn’t anywhere near to a sure thing.

No one is saying there’s an investment out there that doesn’t have risks, but investors need to be informed of the risks that come with investing in development debt. d’Errico understands the importance of informing customers of what they’re getting into,and the nuances that go into the real estate business.

“Initiating a foreclosure to get a loan current and ensure principal is recovered is something that can cause confusion because the word foreclosure sounds scary. We need crystal clear communication to inform investors about loan management and asset management terminology in real estate lending,” she concluded.

September 16, 2016March 16, 2017

‘Mom, send money for fintech’: Other Venmo signs you might see this weekend on College Gameday

College Gameday is one of ESPN’s most popular shows. The hit show takes place at a different college campus every week, choosing the location based on the most interesting match up. In typical I want to become a TV star fashion, co-eds flock to the set with creative signs and outfits, hoping to get their 15 minutes of fame.

On last week’s show, a student put up a sign with his Venmo account number, imploring his mother for beer money. The sign went viral, and over two thousand users sent him cash for beer. Fintech companies love copying just about anything, and we’ve heard from our inside sources that large and small finance companies are opening up Venmo accounts, looking to piggyback on the finance a stranger for stuff because why the hell not trend.

Below are exclusive photos of prospective fundraisers on their way to Louisville to take part in this weeks College Football GameDay festivities.

Digital Bank

This clever entrepreneur is trying to grow his digital bank. Hiring sales rockstars and making a few bucks in the process is an innovative way to recruit both talent and finances. Maybe I<3AmericanBanking will one day grow into a financial powerhouse, and we’ll see the founder fulfill his dream and walk away with a nice payout after juicing his stats.

Crowdfunding

Why waste your time with Shark Tank when you can invest directly into startups shown on TV with this crowdfunding platform? I’m sure they do sufficient due diligence and educate their investors like all other crowdfunding platforms…right?

Marijuana Banking

Fear not marijuana purchasers in Colorado, there’s another app for you! Companies have utilized the bitcoin isn’t money and doesn’t really exist loophole to provide payment opportunities for dispensaries, but this clever startup somehow exchanges cash to BTC through Venmo. Who cares how it works anyways after you’re knee deep in some Purple Urkle or Skywalker OG!

DAO 2.0

Ah, another brave soul trying to start a DAO. In the wake (bad word usage?) of the DAO’s death, investors now have a bunch of newly-dispersed Ether burning a hole in their digital pockets. This entrepreneur is looking to capitalize on timing. Hopefully this one won’t end with hard forks and the financial equivalent of a do over.

Lending Club?

Oh how the mighty have fallen…

September 14, 2016March 16, 2017

How Roofstock simplifies investing in single family real estate

Buying occupied single family housing has become a favorable investment strategy for many entrepreneurs. The average annual gross return in Q1 2016 was over nine percent with some markets returning over 20 percent gross annually.

Some people want to invest in real estate but find themselves locked out of the market. Investors may not have the liquidity to buy a house outright, or may not be interested in having a leveraged investment. The single family market is also extremely fragmented. If you live in Hong Kong and want to buy single family units in California, you need to build an infrastructure, like deal flow contacts, property managers, and an oversight team, which can be very costly.

One solution for investors is Roofstock, a Khosla Ventures and Bain Capital-backed marketplace of occupied single family homes that generate cash flow from the first day of investing. Investors from all over the world are able to build a diverse portfolio of fractional investments in rented single family properties, or purchase properties outright through a loan issued via the site’s integrated application process.

“Trying to cram everyone into one type of investing style doesn’t make sense,” said Roofstock chairman and co-founder Gregor Watson. “We’re targeting people who want the control of owning the asset outright, whether for generational planning or tax purposes, and those who wants to diversify their portfolio acquire one or two houses.”

Watson started buying, rehabbing, and renting out single family homes after the fallout of the ’08 real estate bubble, amassing $4 billion in investments. Once all the hard work was done and properties rented out, Watson found it difficult to cash out of deals.

“I called brokers about selling a property, and they asked ‘when are you going to move the person out?’” he said. “I started laughing, since the best buyer for this home isn’t local. It’s someone out of state looking for an investment.”

Putting rented single family houses into the right hands isn’t Roofstock’s only function. By digitizing the process of purchasing a property, the marketplace cuts out expensive portions of investment process, like broker fees, and streamlines the financing and title processes.

Roofstock also approaches purchasing properties differently, inverting the due diligence and property security steps. By finding a property, doing due diligence, then offering it to the public at market value, investment terms are clear from day one. There is also less of a worry that a property falls out of escrow, something investors try to avoid when investing in a property.

Investing in single family homes isn’t all sunshine and moonbeams. For those who’ve never invested in single family, things can get pretty sketchy if you can’t find a renter. Prospective residential investors may want diversification that comes with multifamily as opposed to the concentrated risk, or the all or nothingness, of single family.

There are a number of crowdfunding platforms currently available for real estate investors, but Roofstock is the only one focusing specifically on the single family residential market.

Roofstock’s current investor base consists mostly of family offices and institutional investors, who already understand the risks that come with single family investments. Some retail investors have invested on the site, but the site hasn’t targeted these users yet. The company has kept return on investment and total investment dollars on the platform private, but Watson said Roofstock recently signed a deal with an Asian group that wants to invest $250 million on the platform.

“We turned the way real estate investing is done on its head. We’re getting real scale, and now it’s just a time to focus on execution,” he concluded.