Your assignment is to write a report that a) summarizes the articles  in your own words and b) provides your own perspective on the topic  based on your reading.  

Requirements:

1)Minimum of TWO articles  attached and cited in your report;
2)Typed, double spaced, ONE-INCH margins all FOUR sides;
3)Minimum length is 2 pages for report; attach all articles via stapler;
4)List date of articles
5)Spelling, grammar, punctuation, etc., all count in grading; 
6)Include name, date, class at top of paper

This article is part of a Property Report series looking at small investors and real

estate, from new ways for individuals to buy slices of office towers to how to buy a stake

in an investment home for as little as $50.

Dan Miller became a pioneer of real-estate crowdfunding about eight years ago by

selling stakes in mainstream property such as hotels, apartment buildings and offices

to small-time investors via the internet.

Today, he is focused on property with an environmental bent, backing urban farms in

Detroit and a grain and dairy farm in Pennsylvania’s Amish country.

His new approach reflects a broader midcourse correction for real estate and

crowdfunding, the practice of financing a project by raising small amounts of money

from a large number of people.

Several of the original crowdfunding firms in real estate have gone out of business, or

overhauled their strategies.

Some, like Mr. Miller, switched to focus on assets that appeal to socially and

environmentally conscious investors. After leaving Fundrise, the real-estate

crowdfunding company he co-founded in 2012, he recently launched Steward, which

invests in sustainable farms.

Others are tinkering with the way money is raised. Fundrise, run by Mr. Miller’s

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https://www.wsj.com/articles/crowdfunding-�irms-blow-up-the-model-to-survive-in-real-estate-11578398401

PROPERTY REPORT

Crowdfunding Firms Blow Up the Model
to Survive in Real Estate
An attempt at transforming real-estate investing the way Amazon changed retail is getting

another go

Jan. 7, 2020 7�00 am ET

By Konrad Putzier

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brother Ben Miller, today manages pooled investment funds that take advantage of

crowdfunding laws.

Companies such as AlphaFlow and PeerStreet run websites that match lenders with

investors, primarily institutions but also individuals, looking to buy their loans.

Jamestown LP launched a $50 million fund that is developing major projects in cities

such as Atlanta and marketing on Instagram and Facebook. Its minimum investment:

$2,500.

Some firms are targeting wealthier customers, who can write bigger checks, rather

than younger customers who have smaller bank accounts. New York-based Cadre, for

one, requires a minimum investment of $50,000.

Many of the firms focusing on larger investors increasingly resemble those that existed

long before crowdfunding, such as private real-estate funds, real-estate investment

trusts and old-school syndication.

Real-estate crowdfunding is “a revolution that ended up replacing the old guard with

the same thing, which unfortunately happens more often than you would think,” Dan

Miller

said.

Crowdfunding grew through startups such as Kickstarter that gave tiny businesses,

struggling rock bands and others a way to appeal for funds in exchange for such things

as coffee mugs and T-shirts.

Starting in 2012, crowdfunding startups sold stakes as small as a few thousand dollars

in commercial property. New regulations paved the way for real-estate investment

firms to raise money across the country through Facebook ads and other social media.

Proponents thought a tactic that could raise large sums while lowering marketing costs

would transform real-estate investing the way Airbnb changed hospitality or Amazon

changed retail.

But as the economy rebounded, more money flooded into real estate and developers

suddenly had plenty of cheap funding choices. That often left crowdfunding firms with

riskier, less-appealing projects that couldn’t get money elsewhere—a tough sell to

SHARE YOUR THOUGHTS

Would you participate in real estate crowdfunding? Why or why not? Join the

conversation below.

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investors.

For regulatory reasons, most firms limited their fundraising to people with an income

of more than $200,000 or a net worth of more than $1 million, excluding their primary

residence. The hope was that enough of these people, known as accredited investors,

were itching to buy stakes in commercial real estate—hitherto an exclusive pastime of

the very rich.

But these people already

had ways to invest in real

estate, for example by

buying a rental apartment

or shares in a real-estate

investment trust, and

crowdfunding firms have

struggled to convince

them their model is

superior.

“Democratizing real estate

sounds great and it’s

inspiring, but it’s tough

when you go up against

the titans of Wall Street,”

said Ray Sturm, a co-

founder of the now-

defunct real-estate

crowdfunding company

RealtyShares and chief

executive of AlphaFlow.

IFunding, one of the first firms to offer real-estate crowdfunding, was also one of the

first to shut. RealtyShares, which raised about $60 million in venture capital, closed

shop in 2018.

Rodrigo Niño, chief executive of Prodigy Network, which says it has raised money for

five Manhattan real-estate projects, resigned in the fall amid lawsuits from an unhappy

investor and former employees. Mr. Niño and Prodigy didn’t respond to requests for

comment.

But other crowdfunding companies continue to grow, and observers are optimistic that

Dan Miller, founder and CEO of Steward

PHOTO: DARREN BRADE

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the model has a future, even if it takes time.

“I’m a believer, even if maybe the first wave didn’t turn out as planned,” Dan Miller

said.

Write to Konrad Putzier at konrad.putzier@wsj.com

Copyright © 2020 Dow Jones & Company, Inc. All Rights Reserved

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https://www.wsj.com/articles/point-click-own-�irms-transform-how-to-buy-investment-homes-11578398400

PROPERTY REPORT

Point, Click, Own: Firms Transform How
to Buy Investment Homes
Real estate startups exploit new technologies and data on house rentals developed after

the housing bust

This article is part of a Property Report package looking at small investors and real

estate, from new ways for individuals to buy slices of office towers to how real estate

crowdfunding is changing to survive.

Buying a home as an investment property has long been too complex or daunting a

process for all but the wealthy. Thanks to a group of real estate startups, that may be

changing.

The companies enable individuals to assemble a portfolio of rental homes throughout

the country relatively hassle-free. Without ever visiting the properties, investors can

buy and manage homes with a few clicks of a mouse or taps on the phone.

Roofstock, an Oakland, Calif.-based firm founded in 2015, offers an online marketplace

where buyers and sellers trade about 500 rental homes a month in cities such as

Atlanta, Indianapolis and Houston. The homes, which sell for prices ranging from

$50,000 to $400,000, typically come with tenants in place.

REI Nation LLC and JWB Real Estate Capital are getting into what is known as the

turnkey business in regional markets. They buy, upgrade and lease houses, then sell

them to investors.

Other firms are poised to offer investors ways to build their residential portfolios sliver

by sliver. Compound, a startup based in New York, is launching an app this month that

will enable investors to buy small stakes in condominiums in cities such as New York,

January 7, 2020

By Peter Grant

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Miami, Nashville and Austin. The minimum investment: $50.

Compound empowers even investors without much cash “to participate in the growth

of cities where they live and work but can’t afford to buy,” said Janine Yorio, the firm’s

co-founder and chief executive.

The proliferation of the businesses reflects how small investors are searching for fresh

alternatives when ultralow interest rates have made bondholdings less attractive and a

record stock-market run strikes many as vulnerable to a pullback.

Firms like REI and JWB say that investors are getting annual returns after fees and

expenses of 7% to 9%. That compares to the yield on the benchmark 10-year U.S.

Treasury note, which has been stuck below 2% for months. Home buyers also keep any

profit from selling the properties.

“Investors are looking under every rock for ways to have additional cash flow,” said

Paul Pagnato, founder and chief executive of PagnatoKarp Partners, LLC, a Reston, Va.,

firm that advises families on investments. Real estate is particularly conducive to that,

he said.

Homebuying services are also taking advantage of new technologies and data on house

rentals developed after the housing bust. Firms like Blackstone Group Inc. and

Starwood Capital Group bought tens of thousands of houses at discounted prices and

converted them into rentals. Along the way, they figured out how to use the latest

mobile and cloud-computing technology to manage and upgrade homes on a large

scale.

Many of the entrepreneurs behind the new firms learned the business after working at

the larger operations. Roofstock founder Gary Beasley was one of the players behind

A Memphis home sold by REI Nation, which buys, upgrades and leases houses, then sells

them to investors.

PHOTO: REI NATION

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Starwood Waypoint Residential Trust, which went public in 2014.

“We didn’t know when we first started buying homes whether we could do it profitably

on any scale,” he said.

Roofstock, whose financial backers include Bain Capital Ventures, recently started a

new business which enables investors to buy stakes as low as 10% in single family

houses. Roofstock retains at least a 10% stake in each house. The rest of the equity is

divided up among investors.

Each startup operates a bit differently, but many follow a similar formula. In a typical

deal at JWB, the firm buys a house in the Jacksonville, Fla., region and upgrades it for a

total cost of, say, $130,000. JWB also finds a tenant for it paying about $1,175 a month.

Then it sells the tenanted house for $150,000. Investors typically pay with about 20% in

cash and borrow the rest.

Owners can manage the house themselves or hire a local firm. Most use JWB’s

management arm. Rent increases and an eventual sale of the house can boost returns.

But investors shouldn’t expect to make a quick buck by flipping the house soon after

they buy it, cautioned Alex Sifakis, JWB’s president.

“This isn’t a get rich quick scheme,” he said. “You’re buying for market value. We tell

clients they should hold for a minimum of five years or you shouldn’t buy it.”

Even holding it entails risks. Investors who buy houses sight-unseen can be hurt by an

unforeseen maintenance bill or by the vagaries of the rental market. They might even

have to reach into their own pockets if they have borrowed to buy the house, and home

prices tend to flatten or fall during tough economic times.

“You’re getting equity like returns so you need to take some risk,” Mr. Beasley said.

Still, the appeal of a steady return from rental properties is attracting a crowd,

especially as rents rise throughout the U.S.

REI got its start in Memphis, Tenn., developing rental housing for Federal Express

pilots who wanted to invest in single-family homes without the headaches of

management, said Chris Clothier, a partner in the family-owned firm.

Last year, REI sold about 1,000 homes in eight cities. “There are investors that want to

swing the hammers and slap the paint themselves,” Mr. Clothier said. “But there are

way more investors who want to be passive.”

Billy Maloney, a 37-year-old graphic designer in Los Angeles, said he had bought and

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sold investment

properties through

REI to grow his

retirement savings. He

owns a home in

Memphis, one in

Jacksonville and has

bought and sold two in

Cleveland.

“ I’m…thinking like an investor where your money goes further out of state,” he said.

—Laura Kusisto contributed to this article.

Corrections & Amplifications

In a typical turnkey deal, a Jacksonville, Fla., house sold by JWB Real Estate Capital for

$150,000 will rent for about $1,175 per month. An earlier version of this article

incorrectly said it would rent for about $900 a month. (Jan. 7, 2020)

Write to Peter Grant at peter.grant@wsj.com

SHARE YOUR THOUGHTS

What pros and cons do you see to this approach to rental homes?

Join the conversation below.

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