Want further evidence that technology and the internet are going to dramatically transform many “non-tech” industries such as real estate?
Take a look at 1351 H Street NE in Washington D.C (pictured above). It houses a hybrid retail store and restaurant and is probably the first truly crowdfunded real estate project.
The project was completed using a platform called Fundrise, which I’ve written about before here on Architect This City. Their vision is to completely democratize real estate investment by removing middlepeople and outdated regulations that restrict who and how people can invest in real estate.
To accomplish this, the founders of Fundrise went out in 2011 and bought the building located at 1351 H Street NE for $825,000. The goal was for it to act as their proof of concept.
They then spent a significant amount of time and money figuring out how to make it legal for small and local investors to participate in the project (as opposed to just accredited investors). It was ultimately done through a “local public offering” filed with the SEC.
So how does it work?
In the case of 1351 H Street NE, they first went out to the local community and asked them what they wanted to see. That’s how they ended up with a unique retail store / restaurant. It’s what the community wanted.
Once this was established, they went out and issued 3,250 shares and crowdfunded $325,000 from 175 local investors. This was for an ownership share in both the building and the future business. The average investment amount was $2,000, but people were able to invest as little as $100.
This is an incredible accomplishment. It takes real estate investment and development to a local level and really empowers small entrepreneurs to start businesses that may have been previously unfundable by traditional sources.
I don’t know what you think, but I think this is the beginning of a powerful transformation. Many of the structures that are currently in place were formed at a time when it wouldn’t have been practical to crowdsource ideas and crowdfund money. But now that is very possible. It was just done.