Tag Archives: Crowdfunding Real Estate

Crowdfunding in Midtown

when pigs fly

Some say it will be a cold day in hell before Wall Street embraces Crowdfunding. If so, we were very nearly there Thursday, February 19th at the offices of the Citrin Cooperman in Midtown. Braving temperatures in the single digits and a gale blowing pedestrians north on Fifth Avenue, a large group of brave souls turned out to learn about Crowdfunding.

Citrin Cooperman, to my knowledge the first accounting firm to specialize in Crowdfunding, co-sponsored the panel discussion with iFunding, one of the earliest and certainly one of the best real estate Crowdfunding portals. The panel was moderated by Harmen Bakker, a partner in Citrin Cooperman’s real estate practice, and included William Skelley, the founder and CEO of iFunding, and Mark Mascia, the President of Mascia Development. Mark actually wore two hats: one, as a developer who has used Crowdfunding successfully to raise equity for his own deals; and two, as an investor in Crowdfunding deals offered by other sponsors.

As much as I try to know about Crowdfunding, I’m always amazed how much I can learn from the guys in the trenches, i.e., portals and developers.

To my delight, Mr. Skelley revealed that iFunding is exploring two new products:

  • A pooled-assets fund, where investors can invest in a category of real estate assets, rather than just a single project; and
  • A product that allows an investor to choose where in the capital stock he wants to invest (e.g., mezzanine debt or preferred equity), depending on his risk/yield preferences.

Wearing his developer’s hat, Mr. Mascia talked about the two Crowdfunding investment models, the first where investors come directly into the developer’s cap table and the second where the platform creates a special purpose vehicle for the investors. Each has advantages and disadvantages; for example, the SPV is great because the platform takes care of investor relations, but the direct-investment model gives the developer more “ownership” of the investor pool.

The audience was smart but troublesome, typical of New York. For example, someone asked “What happens when a Crowdfunding deal goes sideways?” As if that could ever happen.

To my mind, the most revealing fact is that iFunding – like the other top platforms, I believe – is funding deals within hours after they appear on the platform. Does this mean Crowdfunding investors are speed-readers, able to digest information about complex real estate projects between the main course and dessert? No. It means that Crowdfunding investors are relying on the portals. Legally and otherwise, that’s a really big deal.

By the time we finished the temperature outside had climbed to 3. Thank you to Citrin Cooperman and iFunding for a great morning.

Questions? Contact Mark Roderick.

Crowdfunding A Reit

REIT Blog Post Image

People sometimes ask “Will Crowdfunding replace REITs?” That’s not exactly the right question.

A REIT – an acronym for Real Estate Investment Trust – is not a function of real estate law or corporate law. A REIT is solely a function of tax law. Section 856 of the Internal Revenue Code defines a REIT as a corporation, trust, or association that satisfies certain criteria, including these:

  • At least 75% of the entity’s assets must consist of real estate assets or cash.
  • The entity must have at least 100 owners.
  • Interests in the entity must be transferable.
  • No more than 50% percent of the interests in the entity may be held by five or fewer individuals.

There is only one benefit of qualifying as a REIT: as long as he distributes at least 90% of its income to its owners, the entity itself is not subject to tax. Only the owners are subject to tax, when they receive dividend and capital gain distributions. The whole REIT industry is built around this tax benefit.

Because the REIT label is solely a function of tax law, not corporate or securities law, a REIT can be:

  • A publicly-registered company with publicly-traded securities; or
  • A publicly-registered company with privately-traded securities; or
  • A private company with privately-traded securities.

The second category of REIT is probably most common and, frankly, it is the category that has given REITs a bad name. Sold through the traditional broker-dealer channels, it is not unusual for the shares of publicly-registered, privately-traded REITs to carry a load of more than 10%, great for the broker, terrible for the customer. That’s why people say “Private REITS are sold, not bought.”

Compare a publicly-registered, privately-traded REIT to a garden-variety limited liability company owning real estate assets. In both cases, the entity itself pays no tax. And now, through Crowdfunding, the garden-variety LLC can solicit investors using the Internet, leading to transactions cost (load) much lower than the private REIT. Economically it’s a no-brainer: the Crowdfunded real estate LLC is better than the private REIT.

As I said, however, that’s really comparing apples with oranges. The REIT designation is about taxes; Crowdfunding is about how you find investors.

The real question is “Can I find investors for a private REIT using Crowdfunding, rather than through the traditional broker-dealer channels?” And the answer to that question is a resounding “Yes!” When you check the deals available at your favorite real estate Crowdfunding site tomorrow morning, you could well see a REIT.

And why would a sponsor offer a REIT rather than a garden-variety LLC? One reason – maybe the only reason – is tax reporting. An investor in an LLC receives a full-blown K-1 each year, and faces at least the theoretical risk of paying tax on “phantom” income. An investor in a REIT, on the other hand, receives only a simple 1099 and pays tax only on actual distributions.

Be that as it may, nobody should be paying a 10% commission. By connecting sponsors directly with investors, Crowdfunding promises to squeeze this kind of inefficiency out of the capital formation industry. Especially when Regulation A+ comes into effect, opening the market to non-accredited investors, there is every reason to believe that Crowdfunding will replace the traditional broker-dealer as the preferred method for distributing REIT shares.

Questions? Contact Mark Roderick.

CFGE CROWDFUND BANKING AND LENDING SUMMIT IN SAN FRANCISCO

Roderick CFGE

Since Labor Day, I’ve spoken at half a dozen events: for entrepreneurs, for intellectual property lawyers, for finance professionals, for digital marketing groups. This week I’ll be speaking at one of the premier Crowdfunding events in country, the CFGE Crowdfund Banking and Lending Summit on the 16th and 17th in San Francisco.

The conference features some of the leaders in the industry, including:

  • Richard Swart, Director of Research for Innovation in Entrepreneur and Social Finance, Colman Fung Institute for Engineering Leadership at UC Berkeley.
  • Ron Suber, the President of Prosper.
  • Jason Fritton, the Founder and CEO of Patch of Land.
  • Tom Lockard, the Vice President for Real Estate Investment and Institutional Sales of Fundrise.
  • Nikul Patel, the Chief Lending Officer of LendingTree.
  • Jesse Clem, the Co-Founder of LOQUIDITY, LLC.
  • Joy Schoffler, the CEO of Leverage PR.

Whether you’re new to Crowdfunding or an industry veteran, I’d strongly suggest you attend. I’m always amazed how much more there is to learn.

To register, click here. Make sure to use my promo code and receive a 25% discount! Promo code: Roderick

And while you’re there, please stop by and say hello. Crowdfunding and skiing – those are my two favorite topics.

IMPROVING LEGAL DOCUMENTS IN CROWDFUNDING: INTERNAL RATE OF RETURN

Internal rate of return, a financial concept, is not always used correctly in Crowdfunding documents.

The internal rate of return, often referred to as IRR, calculates the total rate of return of an investment, expressed as a percentage. Suppose you invested $100 in a bond that paid $5 at the end of each year for four years and were redeemed at the end of the fifth year for $105. Not surprisingly, that investment has an IRR of 5%.

Suppose you try to calculate IRR at the end of the fourth year? You tell Microsoft Excel that you paid $100 and have received $5 per year for four years and Excel says your IRR is minus 43.25%, i.e., you’ve made a terrible investment. What went wrong?

What went wrong is that you didn’t give Excel all the information it needs. It’s like the George Carlin joke, when he plays a sportscaster and announces “Here’s a partial score: Yankees 3.”

To get the right answer for IRR at the end of the fourth year, you have to tell Excel that the bond is still worth $100. When you do that, Excel calculates that your IRR is 5%.

And so it is in Crowdfunding. Often, the sponsor promises that upon any “capital transaction” – a sale or a refinancing, typically – the investors receive an IRR of X% before the sponsor receives his “promote.” Typical language:

The net proceeds of a Capital Transaction shall be distributed first to Investors, until they have received an internal rate of return of 8%, and then 70% to Investors and 30% to Sponsor.

But that’s like “Yankees 3.” It works if the Capital Transaction was a sale of the entire business, but it doesn’t work if the Capital Transaction was anything else, like a refinancing or a sale of only part of the business. With this language the investors are going to receive a complete return of their investment even if only a portion of the project has been sold, which might not be what the parties intended.

To get the right result you need to say something like this:

The net proceeds of a Capital Transaction shall be distributed first to Investors, until they have received an internal rate of return of 8%, and then 70% to Investors and 30% to Sponsor. If the Capital Transaction does not consist of the sale of all of the Company’s property and the distribution of all of the net proceeds to the Members, then the internal rate of return shall be calculated by (i) assigning to the remaining assets of the Company a value determined in good faith by the Manager, and (ii) assuming a residual value to the Investors equal to the amount they would receive if all such remaining assets were sold for such value and distributed in a Capital Transaction.

As for a definition of internal rate of return:

The term “internal rate of return” means the internal rate of return calculated using the XIRR function in Microsoft Excel.

Questions? Contact Mark Roderick at Flaster/Greenberg PC.

NEW DOMAIN EXTENSIONS BECOME AVAILABLE

Crowdfunding Image - XXXL - iStock_000037694192XXXLargeWe started with .COM. Then .NET, .EDU, .INFO, .ORG, and a handful of others. But we’re about to be flooded with new domain extensions, more than a thousand of them.

In the world of finance, we’re going to have .BANK, .BROKER, .CAPITAL, .FUND, .INVESTMENTS, and .FINANCE. In the world of food we’re about to have .FOOD, .EAT, .GROCERY and .KITCHEN. You get the idea.

The flood of new extensions offers opportunity and challenge. Maybe the .FUND extension would work great for your new Crowdfunding portal. On the other hand, maybe you’re already using portal.com and now you have to worry about a competitor using portal.fund (Hint: a different domain extension doesn’t give a competitor the right to violate your trademark).

Some of the new extensions are already available, while the rest are coming soon. For a complete list and to register, go to a registrar website such as www.Godaddy.com.

Questions? Contact Mark Roderick at Flaster/Greenberg PC.

IMPROVING CROWDFUNDING LEGAL DOCUMENTS

I don’t know much about videos or marketing, but I know a lot about legal documents. In a series of posts I’m going to suggest improvements to some of the legal documents used in Crowdfunding. Most of the time, I’ll suggest actual language a portal or issuer can cut and paste – after talking with a lawyer, of course.

By and large, the legal documents you see on Crowdfunding websites were pulled from other deals. For example, the Operating Agreement you see on a real estate Crowdfunding website is usually the same document the lawyer used for pre-Crowdfunding deals. And in many respects that’s okay because legal documents are pretty agnostic as to industry.

But in other respects it’s not okay. Sometimes you have to tailor the legal document to the industry.

An example is the section of the Operating Agreement that talks about an investor’s right to information. The provision from one well-known site says that the records of the company “. . . shall be available at the Company’s principal office for inspection and copying by any Member at any and all reasonable times during normal business hours at such Member’s expense.” Another says “A Member and the Member’s authorized representative shall, upon reasonable request and for purposes related to the interest of that Member, have reasonable access to, and may inspect and copy, during normal business hours all books, records and other materials pertaining to the Company or its activities.”

No! These provisions were typical in the pre-Crowdfunding world, but they don’t work with Crowdfunding.

You might have 218 investors in a Crowdfunding deal. You have to limit the right of investors to come to your office to inspect the books, and you have to limit what they can see. Under the Delaware limited liability company statute, if you don’t provide otherwise, your investors have the right to see basically everything, including a list of all the other investors. With one or two unscrupulous or irrational investors, that’s a recipe for losing sleep.

We want to:

  • Be fair to investors and provide all the information they need
  • Avoid spending an inordinate amount of management time dealing with bad apples
  • Protect your confidential information
  • Avoid dealing with 218 investors each asking for the same information
  • Give you discretion to protect your business and the interests of your investors

For an example of actual legal language that does just that while, I believe, fully complying with the Delaware Limited Liability Company Act, click here.

Questions? Contact Mark Roderick at Flaster/Greenberg PC.

CHOOSING AND PROTECTING A NAME FOR YOUR CROWDFUNDING BUSINESS

Names matter, even for a local business, but they matter a great deal for a Crowdfunding business, where your customers know you only from a distance.

Generally speaking you can choose three kinds of names:

  • A name that describes what you do, e.g., Real Estate Crowdfunding Portal, LLC.
  • A name with no inherent meaning, e.g., Xeta, LLC.
  • A name somewhere in between, e.g., Lifelong Investments, LLC.

Each category has advantages and disadvantages:

  • A name that describes what you do…well, it describes what you do. When a consumer sees the name she knows what you’re selling. On the other hand, a name that describes what you do is often not very memorable.
  • The strongest names are those that start out with no inherent meaning. Amazon, Starbucks, E-Bay. When consumers think of Amazon they think about the gigantic online retailer, nothing else. The name is worth a billion dollars! On the other hand, Amazon had to spend more than a billion marketing dollars to give meaning to a name that otherwise belonged to a river.
  • A name somewhere in between is somewhere in between. It might be sexier than a name that is merely descriptive and require a lot less marketing fuel than a name with no meaning, but with the associated disadvantages as well.

In the Crowdfunding industry to date, most portals have chosen the more descriptive over the more powerful. Poliwogg is an exception. Fundrise might be another.

With two well-known Crowdfunding companies – Crowdentials and VerifyInvestors – we see two different approaches to choosing a name. And we can’t say for certain whether one is better than the other. That will depend on what each company does with its name.

Having chosen a name, how do you protect it?

To start with, a business acquires “common law” rights to a name merely by using it, without filing anything with the government and without involving lawyers. If another real estate Crowdfunding portal tried to use the Fundrise name today they couldn’t do it, even if the Miller brothers had never done anything to protect their name (they have).

Contrary to common belief, merely registering a company name with the state by forming a corporation or other entity provides no real protection. State filings are simply a matter of bureaucracy – the state wants to make sure that no two names are confusingly similar on its own records.

For the best protection, however, the business owner should obtain a Federal trademark from the U.S. Patent and Trademark Office. A Federal registration provides important benefits, including:

  • The registration constitutes “constructive notice” to all later users in all locations.
  • The registration permits the owner to get an injunction against a trademark infringer and sue for damages, including profits, costs, treble damages and attorneys fees.
  • The registration can strengthen the value of the name as a corporate asset.
  • The registration demonstrates your right to use the name to the owners of other websites, such as Google, Facebook, and Twitter, which are often called on to “officiate” disputes over names.

The trademark application process normally takes about a year, assuming no significant problems. Once granted, a trademark registration can last forever if continuously used and renewed.

NOTE: Not every name can be trademarked. A name like “Real Estate Crowdfunding Portal,” which merely describes the product or service, probably cannot be registered by itself. But it might be registered with a distinctive logo.

Finally, don’t forget to acquire the domain name.

Questions? Contact Mark Roderick at Flaster/Greenberg PC.

REBUILDING AMERICA, BY JASON FRITTON, FOUNDER & CEO OF PATCH OF LAND

Statue of Lib CF_PurchasedBy: Jason Fritton, Founder & CEO of Patch of Land

Our headquarters is in Los Angeles, but Patch of Land was really born in Chicago.

Like all American cities, Chicago is a tale of two cities: one where the streets are lined with mansions, tidy row homes, and plush high-rises; and the other where most houses, if you can call them that, have boarded up windows, loose bricks, and rotting wood.

You can’t see those neighborhoods without wanting to help, and if you’re a real estate entrepreneur, as I am, you think there must be a lot of money to be made from all those vacant and abandoned buildings.

I went to foreclosure auctions but found that the market was broken. On one hand, the same handful of ultra-wealthy individuals or companies bid on $10 million properties. On the other hand, nobody bid on the smaller properties in blighted neighborhoods even though they could be had for a pittance, $10,000 or $20,000 apiece. The problem was (and is) that banks wouldn’t touch them, even if the developer had a proven track record. So the properties stayed vacant and abandoned, basically worthless, eyesores in the community.

I had a great idea – Crowdfunding! I’d ask for money from everyone. Not just as charity, although revitalizing neighborhoods would be the goal, but also as good investments for the donors/investors. We would start in Chicago and then move across the country, helping communities along the way.

We had our motto – Building Wealth & Growing Communities – before we knew how we were going to do it.

As it turned out I was a little early. I wanted to advertise my investments to everyone but in securities law terms that would have been “general solicitation,” which was still illegal. To keep my idea alive I found myself in Washington, D.C. lobbying for the JOBS Act, where I learned how political compromise can work. Republicans liked the economic freedom the bill gave to entrepreneurs and individual investors, while Democrats liked the potential for improving neighborhoods and the boost for small business.

Both sides came together and President Obama signed the bill into law on April 5, 2012. Now, without going to jail, I could start improving those neighborhoods.

There is an old African proverb: “If you want to go quickly, go alone.  If you want to go far, go together.” I started building my team piece by piece, knowing a lot of other smart people were getting into the market at the same time. And I’m proud of the team I built, the best in the business as far as I’m concerned. We did our first deal on October 15, 2013 and within six were the leading platform in the country dedicated to real estate debt.

We pre-fund all our deals, meaning we invest our own money before asking for money from anyone else. Unlike some other platforms, we also start paying interest as soon as we take an investor’s money. We are completely transparent. We charge no fees to investors. We offer very fast turnarounds to borrowers and very competitive returns to investors. We do a great job evaluating loans, based on our credit experience to date. We’ve taken big steps toward bridging the gap between the old world of behind-closed-doors capital formation, and the new world of online transparent capital structures.

But they’re just first steps. We and the industry have a long way to go. More than anything, we need a workable Title III or its equivalent. Accredited investors, all eight and a half million of them, make up only a small fraction of American adults. To truly democratize the formation of capital, we need to let everyone into the game.

Less than a year after Title II came into effect the market is exploding, with some very large real estate players getting into the business. To me, that’s just vindication of our business model, proof that the Crowdfunding business is being taken seriously.

I don’t worry much about the competition from those companies because small, nimble companies like Patch of Land enjoy a bunch of advantages:

  • Crowdfunding is a new business. Those of us who have been here from the start know the business inside out.
  • There’s a reason Walmart can’t seriously challenge Amazon. Amazon’s business was built online from the ground up, while Walmart’s entire model, entire way of thinking, is based on bricks and mortar. For more on that, click here.
  • Our business runs on technology, and our technology is second to none. In one seamless, integrated process, we control a project from application to interest-paying loan.
  • Our cost structure is far lower, allowing us to share the savings with both borrowers and investors.
  • There are wide swaths of the American real estate market the big players have never touched and will never touch. We call that market “under-served” or “most of America.” That’s the market Crowdfunding was created to address.

Among the many transactions we’ve complete, our loan to Deborah Smith in Georgia shows what we’re about. Deborah developed a rent-to-own program where veterans with poor credit could qualify for financing from the Veterans’ Administration. Using financing from Patch of Land, she was able to get those veterans in homes they couldn’t afford otherwise. And our investors made money in the propatch of landcess. That’s a long way from solving every problem in the real estate market, but it’s a start.

I’m super optimistic about the future of Patch of Land. If you had told me five years ago that I could be doing what I’m doing today, I’d have thought you were dreaming. Wait until you see what we’ve built five years from now.

Follow Jason Fritton on Twitter: @JasonFritton

Follow Patch of Land on Twitter: @PatchOfLand

 

WHAT CAN I SHOW ON MY SITE, TO WHOM, AND WHEN?

The SEC no-action letters issued to FundersClub and AngelList early in 2013 created some confusion around the deal-specific information that can be shown to prospective investors. Let’s try to clear that up.

Rule 506(b) Deals

You cannot show your Rule 506(b) deals to just anyone browsing the Internet, because that would be “general solicitation and advertising,” which is permitted under Rule 506(c) but still prohibited under Rule 506(b). If you’re a real estate portal, you can say “We have great real estate deals on our site,” but you can’t say “Look at this multi-family rental project in Austin.”

Both FundersClub and AngelList hid their deals behind a firewall. A user couldn’t see the deals until he registered at the site and promised he was accredited. In the 2013 no-action letters the SEC approved this arrangement, sort of.

I say “sort of” for three reasons:

  • The two no-action letters weren’t actually about registering users. They were about whether FundersClub and AngelList had to register as broker-dealers. Nowhere do the no-action letters say “We agree that, because you hide your deals behind firewalls, you’re not engaged in prohibited general solicitation and advertising.”
  • The no-action letters were issued by the Division of Trading and Markets within the SEC, not the Division of Corporation Finance. Typically, the Division of Corporation Finance would deal with so-called “exempt offerings” (offerings that are exempt from the general registration requirements of the Securities Act of 1933), of which general solicitation is a part.
  • Most intriguingly, the no-action letters aren’t exactly consistent with prior SEC rulings dealing with the online solicitation of customers, specifically the IPONET rulings in 2000. Those rulings assumed that the person doing the online solicitation was a registered broker-dealer; by definition, FundersClub and AngelList were not broker-dealers.

As a result, we can’t be 100% certain that the SEC, if asked point blank, would approve those arrangements from the perspective of general solicitation and advertising.

Nevertheless, the no-action letters were issued and the Crowdfunding industry has adopted the FundersClub and AngelList model: if you’re doing Rule 506(b) deals, you put the actual deals behind a registration firewall.

Once an investor registers at your site he can see the deals, but he can’t invest in them. In a series of no-action letters issued long before the JOBS Act, the SEC established that once an investor has become a customer, he has to wait before investing – the so-called “cooling off period.”

Some sites today are using a 21 day cooling off period, presumably because Title III incorporates a 21 day cooling off period. But the Title III rule is irrelevant to Rule 506(b). Thirty days is probably better, although, again, the notion of a cooling off period comes from SEC rulings, not a statute.

One more twist: at the end of the cooling off period, your investor can invest only in new deals, not deals that were on the site when he registered.

Rule 506(c) Deals

Rule 506(c) is far simpler. If you are doing only Rule 506(c) deals, you can show anything to anyone anytime.

Using Rule 506(c), you can show every detail of every deal to every casual viewer, even before the viewer has registered at your site. If you think that’s a bad idea from a marketing perspective or because you’re trying to protect confidential information, no problem. You don’t have to show all the details on your home page, but you can.

You can also make users register before they can see deals, just like Rule 506(b). If you take that route, you can ask users whether they’re accredited when they register, as you would under Rule 506(b), but you don’t have to ask. You can let everyone see the deals, accredited and non-accredited alike.

If you ask whether users are accredited – because you think it’s a good idea from a marketing perspective – that doesn’t mean you have to stop non-accredited investors at the door. Non-accredited investors can see the deals, too. Maybe they’ll tell their accredited friends.

Suppose a user tells you she’s accredited when she registers. Can you take her word for it? At that point in the process, absolutely! We don’t want to spend money or time on verification yet, and we don’t want to create transactional friction where we don’t have to.

With Rule 506(c), there is only one critical moment: when your investor is ready to write a check. At that point you must verify that she’s accredited, not merely by asking her but by looking at her tax returns, or getting a letter from her lawyer, or, most likely, having her verified by a third party service like VerifyInvestors or Crowdentials.

There’s no cooling off period with Rule 506(c), either. Your investors can see all the deals and invest right away.

Have I mentioned before that Rule 506(c) is better for Crowdfunding?

Questions? Contact Mark Roderick at Flaster/Greenberg PC.

CARRIAGES, CARS, AND POLICEMAN – BY SCOTT PICKEN, SENIOR MANAGING PARTNER OF WEALTH MIGRATE

WM ScottBy: Scott Picken, Founder & Senior Managing Partner of Wealth Migrate.

I’m Scott Picken, the founder and Senior Managing Partner of Wealth Migrate. Our investment committee has collectively 227 years of experience in international real estate. We have facilitated 10,779 investments to a value of over $1.3 billion and invested on five continents. We’re passionate about Crowdfunding as an enabler of our current business, helping to make everything more efficient, accessible, and transparent.

When I spoke at the Coastal Shows event in New York City at the end of June, many of those speaking and attending seemed to believe that Crowdfunding was invented in America in 2012. Far from it! In Australia and elsewhere around the globe, companies have been Crowdfunding for years. At this moment I’m returning from a Crowdfunding conference in Singapore, which was conservatively speaking 10 times the size of the New York City event.

Why invest globally? Because real estate markets do not all move in synch. When the U.S. market was plummeting in 2007-8, the Australian market was doing quite well, actually growing on average by 8.6% in 2009. And if anyone hasn’t noticed, the U.S. dollar has lost about 72% of its value against other major currencies over the last 10 years. No one market, not even the U.S., can protect itself against that kind of loss.

It is just like in nature. When winter comes in the Northern hemisphere the birds fly south and when summer returns they fly north. Migration is a law of nature, and yet we humans remain firmly planted in one place, winter and summer. It is why we called our company Wealth Migrate, as in the 21st century it is about finding the safest and best returns, globally.

Robert Kiyosaki, the author of Conspiracy of the Rich and Jim Rogers in Street Smarts, both teach that the easiest way to get rich is to follow long-term trends. If the globalization of the international economy is not a long-term trend, then I don’t know a long-term trend.

Actually, globalization is not enough – just try selling American cheeseburgers in China. At Wealth Migrate we believe in glocalization, which means thinking globally and acting locally. McDonald’s modifies its menu to fit local tastes and we find best-of-breed partners on the ground in local markets and then partner with them. A bird in a flock can fly 70% further than a bird flying on its own.

Read my book, Property Going Global. It’s all about successful investing in foreign markets.

When I read Ben Miller’s post about the problems he faced with his first Crowdfunding offering, I knew exactly what he was talking about. You can’t imagine how many accountants and lawyers told us “No!” when we started to look at the U.S. investor market and the opportunities in the US. With everyone using the Internet for everything, with Twitter literally driving the Arab Spring, the investment world needed to change from horse-drawn carriages to automobiles and these “experts” were like policemen not giving us a license to drive a car. It just about drove me crazy but fortunately not so crazy that I gave up.

In 1998 I wrote a dissertation about the real estate market and the coming IT revolution. My synopsis said “taking an old industry, steeped in tradition and run by many smaller, disparate and often inefficient operators, and redefining it through the use of web technology to increase global reach, partnerships and efficiencies of scale, so as to provide a ‘one stop’ enhanced and personalized service to our clients.” I didn’t realize then that I was talking about Crowdfunding, the real estate finance market, and Wealth Migrate, but that sums up our business model pretty well.

Look, almost 50% of the world’s wealth is held in real estate yet only a small fraction of the world’s population (12.9%) owns real estate, much less has access to great deals. I am a firm believer in the business philosophy of Zig Ziglar that “You can have anything you want in life if you help enough other people get what they want.” The Afrikaans say “Ver van jou goed, na aan jou skade,” which loosely translated means “Keep your assets close to home, if you don’t want to lose them.” But in the 21st century that is no longer true. To give millions of individuals what they want, we need to look beyond our own homes, even beyond our own national borders, and ultimately help create global wealth for all.

In my opinion it’s a great time for cars, not a great time for carriages or outdated policemen, but the cars do need to be driven safely. It is all about trust, transparency and most importantly everyone’s interests being aligned. You are no longer bound to a country, a currency, an economy or even an asset class. I believe it is less about where you live and more important about where you wealth lives.

 

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