by Amy Y. Wan
So, you want to start a real estate crowdfunding (RECF) platform. This article is intended to serve as a basic guide.
1) Decide on what you want to do
There are many different types of crowdfunding platforms. You need to first make some business decisions as to what kind of platform you want to form:
· Will this be a personal platform for your own deals, or will the platform raise funds for others’ deals? If the latter, you may be brokering or dealing, and may need to obtain a license.
· Will you be selling equity or debt securities? What type of debt will you be selling? What will it be secured by, if anything? What type of equity will you be selling?
· What type of real estate will you be raising funds for? Will the properties be residential properties? Commercial? Rehab? New development? Is there a geographic scope involved? You should have a specific business plan in mind.
Your particular business plan and activities defines what laws you must comply with, and dictates what license(s) you must obtain. I generally don’t think its wise to try to do everything under the sun. First, your legal costs may go through the roof. Secondly, its not easy to be a master of everything. Those who specialize in syndicating multifamily don’t necessarily understand the mobile home business; rehabbers don’t necessarily understand the nuances of new construction/raw law deals. Similarly, your investors have a certain appetite—usually for the type of asset they know how to evaluation, and may not want to invest in deals they don’t understand.