Rise Companies Corporation, also known as Fundrise, acts as a crowdfunding and real estate investment platform based out of Washington, D.C. to promote local investment in real estate developments nationwide. ((The Fundrise Story (Sept. 30, 2014, 10:03 AM), https://fundrise.com/about#story.)) Officially founded in 2012 –five years after the collapse of America’s financial and housing markets – Fundrise has put real estate crowdfunding on the charts. ((Deborah Gage, Renren-Backed Fundrise Bulks Up In Real Estate Crowdfunding Sector, Wall St. J. (Sept. 28, 2014), http://blogs.wsj.com/venturecapital/2014/09/26/renren-backed-fundrise-bulks-up-in-real-estate-crowdfunding-sector/.)) Since Fundrise’s inception, real estate crowdfunding has skyrocketed from something that no one had ever heard of to becoming a major player in the real estate market. ((Id.)) For instance, investors like the Chinese social media giant Renren and Silverstein Properties are now investing millions in Fundrise. ((Id.))
Despite this recent attention, Fundrise’s primary purpose is to encourage investment in the real estate market for any interested private investor. ((See Jonathan O’Connell, Fundrise Lands $31 Million in Financing Led by Chinese Social Media Firm, Wash. Post (May 28, 2014), http://www.washingtonpost.com/news/digger/wp/2014/05/28/fundrise-lands-31-million-in-financing-led-by-chinese-social-media-firm/.)) Fundrise offers a simple operation to tech savvy users, which makes real estate investment worthwhile by cutting out the costs of the middleman and posting public offerings with the SEC as well as state regulators. ((How it Works (Sept. 29, 2014, 4:06 PM), https://fundrise.com/investing-with-fundrise.)) By simply signing up for an online membership, an investor can choose to invest as little as $100 in short term maturities that typically last between one and five years in individual properties pre-screened and selected by Fundrise. ((Id.))
In the few years that Fundrise first existed, the platform has funded projects nationwide including real estate deals in Washington, D.C., San Francisco, and Seattle. ((O’Connell, supra note 5.)) Fundrise is actively raising investments for properties in fast-paced real estate markets like New York as well as in developing markets in Ohio and Maryland. ((Companies (Sept. 23, 2014, 8:06 PM) https://fundrise.com/networks.)) Moreover, the type of property that an individual can invest in varies anywhere from the development of affordable housing to commercial hotels. ((Amy Cortese, Fundrise, a Crowdfunding Website Raises $31 Million, N.Y. Times (May 27, 2014), http://dealbook.nytimes.com/2014/05/27/fundrise-raises-31-million-as-interest-in-crowdfunded-real-estate grows/?_php=true&_type=blogs&_php=true&_type=blogs&_php=true&_type=blogs&_r=2&.)) As Fundrise continues to select and fund potential investments the benefits this platform provides becomes obvious: it creates an opportunity for individuals to own a financial stake in the community that they live in. In a world of increasingly curious and intelligent consumers, the opportunity to invest in your own backyard – at a potential 12-14% yield – is a fascinating and tempting offer. ((O’Connell, supra note 5.))
However, Fundrise is not the only online platform around that is providing this opportunity as new competitors like Realty Mogul, AssetAvenue, and RealtyShares continue to emerge on the market. ((Gage, supra note 2.)) Moreover, Fundrise’s original mission to open real estate investment opportunities to everyone through crowdfunding has scarcely been met. ((See Id.)) For instance, only three of Fundrise’s deals have featured small private investors, largely because of the bureaucratic process often involved with finalizing deals and getting approval from the SEC. ((See Id.)) Fundrise’s first project required two years and $800,000 in legal fees alone. ((See Id.))
Fundrise provides an immense opportunity for individuals who want to diversity their investment portfolio and own a stake in the real estate market. As the SEC works to finalize crowdfunding regulations created by Congress under the JOBS Act, platforms like Fundrise stand to benefit from reduced legal fees and administrative costs to complete deals. ((See Id.)) While the SEC should work to ensure that crowdfunding platforms provide adequate assurances to its investors, it should also look at the bureaucratic process and voluminous paperwork that is often required of platforms like Fundrise. By finding ways to reduce costs, the SEC would give Fundrise and its competitors the opportunity to handle smaller deals that include investments from small private investors. Not only does this help platforms like Fundrise reach their full potential and ultimate goals in making real estate investment possible for the layman, this could also create opportunities for communities that need individuals to invest in their real estate market.