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Are HNW Investors Ready for Real Estate Crowdfunding Platforms?

NREI chatted with Craig Cecilio, of DiversyFund Inc., about the intersection of HNW real estate investors and online investment platforms.

From Craig Cecilio’s vantage point, high-net-worth real estate investors have relied a lot on old-fashioned handshake deals and have been slow to embrace technology. But he sees more HNW individuals gravitating toward tech-powered investing.

Cecilio is founder and CEO of San Diego-based DiversyFund Inc., which bills itself as a “vertically-integrated real estate crowdfunding platform.” Rather than acting as a middleman, DiversyFund manages all of its real estate projects from start to finish.

Accredited investors put money directly into development of commercial and residential real estate projects in Southern California, such as a multifamily development in San Diego’s Hillcrest neighborhood. Investors can place as little as $5,000 in one of DiversyFund’s deals. Today, DiversyFund claims over 30,000 investors and more than $100 million in assets under management.

For now, an accredited investor must either make at least $200,000 a year or have a net worth of at least $1 million. But DiversyFund plans to open up its online platform this spring to non-accredited investors who can put as little as $500 into a project, Cecilio says.

NREI chatted with Cecilio about the intersection of HNW real estate investors and online investment platforms.

This Q&A has been edited for length, style and clarity.

NREI: What types of HNW investors are coming to your platform?

Craig Cecilio: We do have a lot of traditional, offline real estate investors coming onto the platform because of the scarcity of deals out there on the market.

NREI: What would your advice be for HNW investors who might be a little skittish about a technology-driven platform versus traditional real estate investing?

Craig Cecilio: With time, things are going to change. You can’t fight technology. It might not be today, but it’s definitely going to happen tomorrow. If they don’t buy online, they’re going to miss out on opportunities.

NREI: Where do you see things headed from the perspective of a HNW investor in terms of investing in commercial real estate?

Craig Cecilio: Platforms like ours will allow accredited investors to not be stuck in their local market due to the fact that they need to have people soliciting them through local relationships. Now, that accredited investor, through technology, can invest anywhere in the United States. That’s going to create more liquidity and more opportunity for them. We have a lot of accredited investors from New York, D.C., Chicago and Atlanta, and we’re located in San Diego.

We’re still in our infancy stage. We just started; it’s going to change drastically. For us to really see that change, you’re going to have to see the participation go up at least 1,000-fold. There’s not enough people participating right now to elicit any big change.

NREI: If you’re a HNW investor who lives halfway across the country from one of your assets, how does that investor overcome the desire to regularly drive by the property in which he’s invested?

Craig Cecilio: I think there’s a book out there that teaches them to do that, but I haven’t found a copy of the book. I think that traditional way of investing will go away because of platforms like ours.

There has to be trust and credibility. Fancy website, fancy pictures—that’s just emotion. You’ve got to drill down and look at the track record of the operators. At the next level, look at the project itself—does it make sense? You’ve also got to see their investment strategy and philosophy.

We’re not asking for all your money, so if you’re accredited, start out with $25,000, $10,000, $5,000. You can start with a low amount—kind of do a teaser, see how it feels, see if it passes your smell test—and then you can throw some more money in if you like it.

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