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Real Estate crowdfunding in Australia seems like a spectacular idea. Australia is probably one of the last great frontiers for Real Estate Crowdfunding. Most parts of the world already have Crowdfunding Real Estate in some shape or form. Australians love property and are 3 times more likely to invest in property than an American. Everyone seems to be in on the property game in this country yet there are quite a few who are locked out as they do not have sufficient capital to invest and enter the property space.

A Real Estate Crowdfunding platform that allows you to invest small amounts and invest in specific projects of your choice is a winning idea. But it comes with a host of challenges.

First is obviously the regulation, under currently law you can only raise upto 2 Million from 20 retail investors and make only 20 offers in a year. And there are significant restrictions around promotions. If you want wholesale investors to participate in your project funding you are kosher, but the fact of the matter is that wholesale investors do not have any shortage of investment opportunities being presented to them. They can do everything that a crowdfunding site can claim to do themselves and remove any middle men in the process. A crowdfunding site for wholesale investors only doesnt make any sense for the simple reason wholesale investors do not care for crowdfunding.

Crowdfunding is a retail investor play. Which is why at www.estatebaron.com we have partnered with the right compliance partners to ensure that the opportunities listed with us are open to unlimited number of retail investors. A full Public Disclosure Statement has been lodged with ASIC. Estatebaron is the only real estate crowdfunding platform in Australia open to all retail investors.

The second issue is if you are going to offer people the opportunity to invest in a house then the essential offer is to invest in the capital growth and the rental return. But there is a significant amount of paperwork that goes into making an investment offer possible and the cost of compliance means that the a couple of percentage points are knocked off the return. Assuming a capital growth rate of 6 to 7% and a rental yield of 4.5% the inhand rental yield comes to just above 3 to 3.5% and capital growth is meaningless till the house is sold. 3 to 3.5% is better than the cash rate a bank would offer but not enough to get even a retail investor out of bed. Most crowdfunding platforms are learning this the hard way that people want to invest in property online, but they also want strong returns.

Which is why at www.estatebaron.com we also offer access to invest in Development projects, these are the kind of exclusive deals that were previously limited to wholesale investors only. Now investing at EstateBaron.com you can pick and choose the projects you want to participate in. Generally development projects run anywhere between a year to four years and can offer profits around 20%. But an investor must look at the offer documents for the specifics of a deal. In the next post we will look at the checks and balances we have built to ensure that Investor interests are secured and the deals that are presented are only of the highest quality.

A Real Estate Equity Crowdfunding platform like estatebaron.com has all the challenges of a market place, along with the issues in crowdfunding combined with a healthy dose of legal issues which if you get wrong can land you in jail. Having said that the rewards at the end of the tunnel can be immense. The era of crowdfunding real estate is finally coming down under and in the next few months we will see a number of crowdfunding platforms pop up. Some will wither away, there will be some consolidation, but the leading platform will occupy just over half of the total market share.

When you account for the fact that Real Estate Equity Crowdfunding is the fastest growing sector among crowdfunding segments and that it is projected to be a 250 Billion US Dollar industry by 2020 (less than 5 years now) along with the fact that Australian Residential property wealth is 5.7 Trillion the numbers start veering in to Facebook territory. The leading crowdfunding real estate platform in Australia will be worth around 20 to 30 Billion Dollars within 5 years. Australia is the last great frontier and we are currently in the Wild West era where the rules are still being written.

Along with the promise of great riches, there are great dangers as well. Legals primarily. The regulatory regime is still being crystallized. While estatebaron.com has already staked out the position that it has to be a full retail license others are waiting for the deregulation to come. But beyond that getting a market place going is terribly hard. Initially there are no buyers nor there are sellers. The sellers wont come to an empty market place and the buyers wont come if the choice is limited.

The way you break through this is by securing the best possible deals for your investors. The two deals which we have currently on estatebaron.com (Frankston and Caulfield) offer return to retail investors which even wholesale investors don’t get. We had to pull a lot of strings and sacrifice some of our profits but once the market is educated it will be worth it.

And we have no shortage of developers knocking on our doors seeking funding, even at this early stage of the estatebaron.com story. We have made the decision that in this 2 sided market place our customer is the investor and we will always focus on securing the investors best interest first. The one with the money wins. We are not worried about loosing out on the best deals. When you are backed by the people who put together Eureka towers and Australia 108 you can be assured that deal flow wont be a problem.

And our focus does not extend beyond Melbourne at this stage. We are not even running any ads beyond Melbourne. Our investors are local and so are our Developers. The investors in our mind should have the ability to visit the project they are investing in. In this early stage of the game, people in Perth are not going to go click, click, click and invest 10K in a project in Brisbane. Property is loved by Aussies primarily due to its tangible nature. An online approach will only be accepted gradually.

Estate Baron has been fortunate to have the backing of all the right players. And we are going to place the investors interest above the Developers. The Golden rule is … those with the Gold make the rules. Plain and Simple.