Growing Trends for 2016 Real Estate - Crowdfunding

Have you ever wondered what it would be like to own a large commercial property (i.e. retail plaza, office complex, high rise apartment building), but unfortunately don’t have the millions of dollars in the bank to make it a reality? Well the rise of crowdfunding in real estate might just be the opportunity you’ve been looking for.

But first, what exactly is crowdfunding and how does it work?

You might be familiar with fundraising sites such as Go Fund Me or Kickstarter, or US based peer-to-peer lending sites such as Prosper or Lending Club. Crowdfunding for real estate is similar to these platforms and the basic premise is simple. An investor can access individual real estate properties through an online platform and pool money with other investors to invest the required funds for a property. Say for example, the property cost $10 million dollars, it could be split into 10,000 shares of $1,000 each or 0.01% ownership for each share.

Real estate crowdfunding falls into two sub-groups: debt and equity.

In debt crowdfunding the investors act as a lender for, rather than as, the owner of the property. In such circumstances, the investment would be secured by the property and the investor would be entitled to monthly interest and a return of principal, but not to any benefit from property appreciation.

In equity crowdfunding, the investor becomes an indirect owner of the property by obtaining shares, limited partnership units, or other securities in the entity that owns the property/project. This form of investment carries inherently more risk, but also a potential greater return as a result of a direct interest in the property appreciation.

Crowdfunding for real estate is still in its early days in Canada. However, it has been making significant inroads in the US. The Ontario Securities Commission has been reviewing the industry as it matures and tries to regulate to protect investors. So check back often on the regulations as the industry matures in 2016.

Though crowdfunding will allow more people access to the commercial real estate market, for companies being able to solicit investments in projects from the general public online both greatly increases companies’ ability to raise the capital they need, from a greatly expanded pool of potential investors, but may also greatly increase the likelihood of lawsuit, especially if the investment performs poorly.

So there you have it. We are on the precipice of “the democratization of the real estate investment opportunity”. Are you excited?

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Russel Lalovich
russel@lalovichrealestate.com
Office: (519) 966-0444
Cell: (519) 995-5620

Growing Trends for 2016 Real Estate - Electronic Signature

With technology changing the way we work and play, it is only natural to see advances relating to the real estate industry. One new development from last year that we are excited about is electronic signatures. This paperless option should increase productivity across the board and significantly reduce waste (saving trees).

Already sweeping through a myriad of other industries, electronic signatures became legally binding in Ontario real estate transactions on July 1, despite the province’s initial trepidation. Ontario joins British Columbia, Alberta, Saskatchewan, Québec, New Brunswick, Newfoundland and Prince Edward Island as provinces that allow e-signatures in real estate transactions. **
The amendment to the Electronic Commerce Act originally was expected to occur under Dalton McGuinty’s government, but his resignation and the election tabled the motion. An unusually long subsequent review by the Law Society of Upper Canada caused further delay.

Rightful concerns over security have been allayed. E-signature companies adopt the same impervious security measures that banks use for their online services, rendering hacking virtually impossible. Many electronic signatures companies are cloud-based. A built-in feature for all these products is an audit trail. As soon as sales agents or customers log in, everything they do – whether providing signatures, initials or simply changing pages – is time stamped right down to the second. Their IP addresses are also recorded. Everything is meticulously recorded, should a transaction become subject to litigation.

Our office has chosen to use DealTap’s software. Additional features included for the benefit of agents and buyers/sellers:

1. Sign on any device without apps
2. Sign cursively or with a keyboard
3. Guided client sign highlighting so nothing is ever signed wrong again
4. Keep everything all in one place so no paperwork is ever lost
5. Easy archiving

So next time you are finished booking your next vacation stay on Airbnb, while waiting for the ride you requested on Uber, you can sign the offer your realtor put together for your dream property, from your smart phone or tablet.

Increased productivity anyone?

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Russel Lalovich
russel@lalovichrealestate.com
Office: (519) 966-0444
Cell: (519) 995-5620