The Rise of Fintech & Crowdfunding | How it Impacts Real Estate
11 July 2016
Last year $22.3 billion was invested in financial technology 'fintech', compared to $1.8 billion just five years before. Similarly, crowdfunding - one of the most talked-about startup sectors for the past few years - allowing people to invest in their own neighborhood. The boom of technology focused on improving archaic financial systems has spurred an interest in alternatives. Alternatives, meaning an asset this doesn't fit into the traditional categories of stocks, bonds, and cash, can capitalize on changing technology because they are free from the red tape that plagues traditional asset classes.
Real estate is already seeing the impacts of this alternative zeitgeist. In the past, real estate research was limited to a highly refined network. You had to entrust your dollars with a broker, who held all the power because of access to information. Today, sites like auction.com allow you bypass this middleman by not only offering knowledge of what is available, but giving a means by which to compare properties. By stripping the category of its primary barrier to entry, we've made the market more transparent.
Similarly, crowdfunding - one of the most-talked about startup sectors for the past few years - is allowing people to invest in their own neighborhoods. Sites like Realty Mogul and CrowdStreet allow individuals to use their own neighborhood knowledge without having to put up large sums of money. This has made formerly apathetic buyers enthusiastic about the space - something we can all get behind.
But despite the fervor for crowdfunding, it's not all glamour. Recently Fundrise, a unicorn amongst the crowded crew of crowdfunders, recently shifted to more traditional REITs. It seems that, despite the talk of change, the call of institutional money is too strong to keep startups at bay.
This isn't to say that technology is failing real estate. Rather, it seems clear that the enthusiasm that spurred an initial interest in alternatives is now looking at more traditional options. We think there's middle ground. Nestled between overhyped tech newbies and archaic, now-failing models, there are products that don't seek to revolutionize investing, just add the appropriate supplemental piece to the ideal portfolio, without sacrificing the security that comes with more traditional assets.
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