Real-estate crowdfunding is unchartered territory in SA

13 November 2015 - 02:00 By Lisa Dewberry
Buying or renovating a home or investment property is a big commitment.
Buying or renovating a home or investment property is a big commitment.
Image: Thinkstock

There’s been significant development internationally in real-estate crowdfunding. However, although this practice is gaining popularity in South Africa, its regulatory guidelines still need to be ironed out by authorities

The US and Europe have been blazing a trail, in recent years, when it comes to real-estate crowdfunding, enabling projects to be funded through the monetary contributions of many individuals online. However, while this practice is gaining popularity in South Africa, the regulations of this activity seem to be unchartered territory, with crowdfunding firms applying for Financial Services Board (FSB) licenses, but the FSB saying this activity falls outside of their regulatory net.

Scott Picken, CEO of Wealth Migrate, crowdfunding investment firm, says South Africa currently has no legal stand on crowdfunding and, compared to the rest of the world, has fallen behind in embracing crowdfunding as an opportunity for citizens to raise funding for businesses and as a tool to invest. He says in most countries around the world governments and compliance boards are actively working with crowdfunding market leaders to find solutions for problems faced by middle and lower income classes regarding access to finance and investment opportunities.

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“Until now, it was almost impossible for the average person to access good deals on their own and invest in first world or high priced properties as this was the privilege of a few individuals with access to money and great property deals. With crowdfunding, individuals invest with others in real estate in different world economies, using a portal to access deals. There’s no need to travel to negotiate the deal and no hassle with maintenance of the property,” says Picken.

He explains that crowdfunding as seen today started in the US in September 2013 and in the UK around a similar time, and has rapidly gained popularity worldwide. He says he believes there will be an increase in crowdfunding platforms and would love to work with regulatory bodies to gain their support of crowdfunding so that South Africans can benefit from this activity currently popular in the rest of the world.

Bryan Smith, CEO at RealtyWealth.com, a real-estate investment platform undergoing regulatory approval in South Africa, says crowdfunding offers South African investors a straightforward, effective and secure way to invest in the US commercial property market. He says their platform enables South African investors the opportunity to invest in commercial real estate known as Single Tenant Net Lease Properties.

“The investment properties are secured by long-term leases occupied by a single credit-rated corporate tenant responsible for incidentals, including taxes, insurance and maintenance, and pays the investor a net lease payment monthly. We offer products ranging from corporate guaranteed equity investment deals to short-term bridge financing debt investment deals in US dollars. We aim to make investing simple, accessible and affordable,” says Smith.

 

This article was originally published in Sunday Times Neighbourhood: Property & lifestyle guides. Visit yourneighbourhood.co.za, like YourNeighbourhoodZA on Facebook and follow YourHoodZA on Twitter.

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