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Crowdfunding to Build Communities

Real estate crowdfunding allows accredited and non-accredited investors alike to browse deals on the Internet and invest in projects that are shaping the development of American communities.
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Real estate crowdfunding allows accredited and non-accredited investors alike to browse deals on the Internet and invest in projects that are shaping the development of American communities. To propel the industry on a path of continued success, leaders and innovators will convene in Chicago this month at RealCap Chicago. Hosted by American Homeowner Preservation and Small Change, RealCap is a real estate crowdfunding conference that joins pioneers and newcomers, developers and investors to network and explore this expanding industry.

AdaPia d'Errico, chief marketing officer at Patch of Land, will participate in RealCap's "Marketing the Story Behind Your Project" panel. Patch of Land is an online marketplace for real estate crowdfunding that matches investors and lenders to borrowers seeking capital to fund their projects. Inspired by the company's emphasis on strengthening communities, d'Errico joined Patch of Land soon after its launch in 2014. "Wealth is built off of real estate and the idea that there would be access for millions of people to invest was really exciting to me," she said.

In order for crowdfunding platforms to attract investors and developers, d'Errico asserts that they must build trust through transparency. "Being open about the process and being open about what happens when we fund a loan, or what happens if there are late payments, or the asset management process, adds to a platform's credentials," she said. For many participants, crowdfunding may represent the beginning of their investment portfolios. To guide novices, d'Errico calls for open communication between platforms and participants. "Investors expect a lot of communication and honesty because some of them don't have experience. They may not fully understand what it means when a loan is paying late or is nonperforming. There's a learning curve and trust can be built when a platform does its best to recuperate any losses and make investors feel comfortable investing in this asset class," she said.

d'Errico observes that appealing to these newcomers is actually quite simple. As social and economic upheavals challenge traditional investment options, crowdfunding presents an attractive alternative. "I think it's easy to reach new investors because in this very low interest rate environment, people are aware that they need to make some different decisions about where they place their money," she said. High stock market volatility and pension insecurity, according to d'Errico, will lead investors to crowdfunding as a new means of generating returns. "There's a painful realization that we cannot rely on government pensions," d'Errico said. "The idea that we can retire at forty or fifty is gone. People are seeing that the world is different and they are turning to the internet for new investment opportunities."

While trust and transparency will help market crowdfunding platforms to potential investors, d'Errico asserts that developers must simply cultivate their mission in order to attract capital. "Developers don't need to do a lot of marketing for themselves," she said. "The beauty of crowdfunding platforms is that they take the onus of marketing off of the developers so they can focus on their projects and we can take care of the funding."

At RealCap, d'Errico will be joined on the "Marketing the Story Behind Your Project" panel by Ben Shulman of Small Change, Marty Coyne of Connected Investors, Sean Connolly of Strata Investments, Daniel Mulcahy of ZacksInvest, and Matt Abeles of BuiltWorlds. Investors without time or access to private real estate deals are turning to the internet for new opportunities, and d'Errico believes the momentum will only gain strength. "Crowdfunding is the way that real estate investment will become democratized," she said. "There is money to be made in real estate, and crowdfunding is where the future of real estate investing lies."

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