Know the Costs of Crowdfunding for CRE New Construction Projects

Get a good-faith estimate before you start and see financial investment leverage in action

The November 2020 SEC rule change to crowdfunding offerings now allows businesses, entrepreneurs and real estate developers to directly access the capital markets with arguably the highest potential surety of a successful outcome to obtaining capital financing on a non-recourse basis.

But what does it cost?

The real answer is, of course, whatever it takes because there are some unknowns – such as how much you ultimately raise (and you can raise up to $75 million) and how much advertising and market costs you will have to absorb. Having said, using the laddered structured financing approach, the real cost of at-risk capital for raising these insane levels of capital may be incredibly attractive, with financial investment leverage being greater than 100:1 if everything works out. We use this planning tool to help clients come to grips with what their financial responsibilities might in fact entail.

commercial real estate project non-recourse new construction financing program

Of course, pre-offering advertising may result in a funding counter-offer at any time, and that shortcuts the whole process, risks and costs when it works out. If you aren’t taking a serious look at the crowdfunding tool, you are missing the boat and may be left on shore for a long time. Here’s hoping the odds are ever in your favor.

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