Crowdfunding Website for real estate investment

Hi,

I'm a Web developer who had help build a crowdfunding Website (like Kickstarter) for social enterprises. On average, $40k is raised a month for the campaign owners via our site. The Website is based in US as it is founded by an American.

I'm curious if it is legal in Australia to create a crowdfunding site so investors can invest in real estate through crowdfunding.

Thanks.

Brandon
 
Last edited by a moderator:
I think the red tape you'd have to go through would make this idea a nightmare.

essentially you looking to establish a property unit trust, property syndicate or something similar.

Companies exist that already do this and there are lots of them. Essentially any "managed fund" is crowd funded.

Lots of compliance, lots of costs. I'm pretty sure you'd need a financial services license, ASIC approval extra.

I like your thinking but I would expend too much resources on this idea.
 
I'm curious if it is legal in Australia to create a crowdfunding site so investors can invest in real estate through crowdfunding.

Unfortunately, ASIC rules would most likely prevent you from achieving something like this.

While ASIC doesn't cover real estate investment directly, they do cover managed investment schemes and other financial structures, which I am pretty sure this would fall under.

As previously mentioned, it's not too far removed from the idea of a property trust, where multiple investors buy units in a trust structure (ie partial ownership of the property) and the trust then pools the money to make the investments.

ASIC rules are pretty strict on these things - firstly, you cannot solicit funds or investors (even discussing it on a site like this can be troublesome). If you will have more than 20 investors, you will need to issue a PDS, which is a formal document about the investment.

What do you see the differences would be between "crowdfunding" a real estate investment versus using a unit trust structure like existing property trusts?
 
isnt crowdsourcing pledging a 'donation', rather than an investment, with some of the ideas returning a 'gift' of their product, or a mention on the back of their album, or free tickets at their next concert etc?

I think it might work in a limited way, for very low cost properties. It would be a great way for land for wildlife or something similar to raise funds and buy up small landholdings.....

I cant see how it would work for larger investments/investors, as outlined above, but happy to be proved wrong.

How would handloans be treated by ASIC these days I wonder? thats something that could be opened up my a crowdsourcing site....under a minimum ASIC threashold etc...
 
ASIC rules are pretty strict on these things - firstly, you cannot solicit funds or investors (even discussing it on a site like this can be troublesome).

I know that some soliciting does happen. Isn't it simply a matter of having a licence, rather than not being able to do it fullstop?
 
Thanks for your response guys. I guess this idea is a no-go. But I'd still like to build something meaningful for the real estate industry.

I've another idea for a Web-based software which allows residential property management companies to track and measure leasing performance, then strategically place top performing leasing agents at the apartment communities that need them most. I call this "placement optimization".

Do you see it solving a real problem?
 
strategically place top performing leasing agents at the apartment communities that need them most

What exactly do you mean by "place" an agent?

If you are talking about what I think you are, this sounds more like something the large development companies or real estate trusts would use, rather than small residential investors like us ... so you might be asking the wrong people.
 
I'm curious if it is legal in Australia to create a crowdfunding site so investors can invest in real estate through crowdfunding.

Thanks.

Brandon
Hi Brandon

ASIC had something to say about this recently.

‘Crowd funding’ involves the use of the internet and social media to raise funds in support of a specific project or business idea. Project sponsors or pledgers typically receive some reward in return for their funds. In some cases, the reward expected may be of minor value and is merely incidental rather than the purpose of the contribution.

ASIC Commissioner, Greg Tanzer, said ASIC has been monitoring increasing use of crowd funding for investment purposes to identify any arrangements, or aspects of those arrangements, that may be regulated by ASIC.

‘Crowd funding, as a discrete activity, is not prohibited in Australia nor is it generally regulated by ASIC’, Mr Tanzer said.

‘However, depending on the particular crowd funding arrangement, ASIC's view is that some types of crowd funding could involve offering or advertising a financial product, providing a financial service or fundraising through securities requiring a complying disclosure document. These activities are regulated by ASIC under the Corporations Act and ASIC Act and may impose legal obligations on operators of crowd funding sites and on people using those sites to raise funds.

‘We want to make sure anyone involved in crowd funding is aware of these obligations to ensure they operate within the law and don’t potentially expose themselves to penalties under the Corporations Act or ASIC Act’, Mr Tanzer said.

Along with other factors, depending on the type of ‘reward’ offered by the project creator to those giving funding, crowd funding could involve a managed investment scheme under Chapter 5C of the Corporations Act, provision of a financial services requiring an Australian financial services (AFS) licence or a fundraising under Chapter 6D of the Corporations Act.

There are also advertising and publicity restrictions that apply to advertising and publicising an offer of financial products or securities, in certain circumstances.
Check it out here.

http://www.asic.gov.au/asic/asic.nsf/byheadline/12-196MR+ASIC+guidance+on+crowd+funding?openDocument

Would be interested to hear your ideas and for you to share your experiences. Would be up to the mods though whether this is the right forum to do so.

Cheers
N
 
On first thought no.

As it is such a new concept and you would need to comply with a myriad of laws, to get a considered well written advice, probably about 15-20 hours work.

So would be an expensive exercise. I would suggest if you wanted to explore further you read the asic stuff in depth and try and map out all the steps involved from a person registering through to the settlement of the property. Leave space in between each step to idenitfy possible legal issues, identify tangents for other ways of doing things if you hit a legal brick wall.

That would reduce your costs for seeking advice substantially.

Good luck
 
Back
Top