RealtyShares is kind of like a “LendingClub for Real Estate,” providing a platform for crowdfunding real-estate development. And the company just raised $1.9 million led by General Catalyst to make its offering available both to more developers and more investors.
In the past, real-estate developers typically turned to outside investors and banks as a way to raise funds for projects. But the process of raising capital isn’t always easy, and more importantly, the process of paying investors back is even worse.
RealtyShares offers up an alternative through which real estate sponsors and borrowers can crowdfund their projects, bypassing banks and larger investors. Instead they can collect a larger volume of smaller investments, which results in projects being funded in a much shorter period of time.
At the same time, it’s enabling accredited investors to get into the real estate market with little hassle and relatively small initial investments, and it’s putting their money into projects that usually produce a return fairly quickly.
RealtyShares was launched late last year, but already has seen some success in the early going. The company, which was part of the most recent 500 Startups Accelerator, has helped fund 26 real-estate projects in eight different states across the U.S. The total value of properties funded through the site is more than 70 million already.
Projects are typically funded within 12-24 hours after they’re listed, which drastically reduces the amount of time it takes for sponsors to get the money they need to move forward with development. So far, it’s helped fund a wide range of different types of properties, from residential, to multi-family, to office and retail units.
Sponsors and borrowers also benefit from not having to worry about managing their investors. RealtyShares does all the hard work of processing payments and doing all the necessary paperwork.
For as little as $1,000, investors can either pool money in equity investments where they own a share of the property and receive monthly or quarterly cash flows from rental income as well as profits from sale, or they can become lenders on the property and receive fixed interest income on a monthly basis.
Either way, RealtyShares has proven to be lucrative for those who have participated, returning 26 percent of the funds that have already been invested through the platform.
With all that in mind, the company closed its seed funding and is looking to double its team from four to eight. In addition to General Catalyst, whose investment was led by managing director Neil Sequeira, RealtyShares also received some money from former E*Trade COO Greg Framke and president of Gold Bullion International Savneet Singh.