The Diligence Factor: Why EarlyShares Vets its Real Estate Crowdfunding Investments


As with any disruptive new industry, equity crowdfunding – for real estate or growth-company investments – has its detractors. It’s understandable that casual observers of equity crowdfunding are a bit skeptical about this new market. It’s not understandable, however, for them to disseminate damaging and ill-informed information.

A common (and reckless) contention of many is the argument that the issuers of crowdfunded securities are largely scammers, only interested in acquiring money from ‘duped’ investors.

Case in point: A recent article on headlined Crowdfunding is More Like Crowd-Frauding referred to online investors seeking returns as “greedy people” who make “good suckers” for being “ripped off” by online capital raisers, who could be “criminals, fraudsters, or scam artists.”

The author of the piece neglected to back up any of his claims with data, sources, or examples, so his perspective lacks credence. (And for the record – no investor is “greedy” by virtue of the fact that he or she aims to make money.) Nonetheless, the writer’s comments promulgate the idea that private investment crowdfunding is a “wild west” – an unregulated space where no rules apply. And that’s an unfair mischaracterization of the market at large.

How so? For one, all crowdfunding investment opportunities, whether for real estate deals, growth companies, or other equity or debt capital raises, are either Regulation D Rule 506 securities offerings or Regulation A+ “mini-IPOs.” Both rules involve investor protection provisions, including one that bars issuers from utilizing the securities exemptions if any of their covered persons are “bad actors” with problematic criminal or legal histories. Issuers on real estate crowdfunding portals and other investment crowdfunding sites are required to complete “bad actor” disqualification checks and disclose the information to potential investors.

That’s where the online nature of the investment crowdfunding process is clearly beneficial. Since crowdfunding platforms house all of an issuer’s compliance-related documents and details inside a secure portal, they actually make it easier for investors to review such information.

Beyond that, all platforms in the real estate crowdfunding industry recognize the fundamental importance of weeding out fraud and protecting investors. It’s only logical: Real estate crowdfunding portals provide value to investors by giving them a tool to make safe, secure investments – and ultimately earn return. A single instance of fraud would destroy a platform’s reputation at zero benefit to the business.

That’s why access, trust, transparency, and vetting are the core values of EarlyShares. We partner with CrowdCheck, the most trusted name in crowdfunding compliance, to carefully screen each issuer’s background and track record. Then, we apply our decades of expertise in commercial real estate to take a critical look at the potential sponsor’s projections, terms, and financials to make sure the deal meets our high curation standards. (For more on our selection criteria, click here.)

And that vetting factor is proving to be a key benefit to us. While we expect all real estate investors to conduct their own research and due diligence on opportunities to decide if they’re right for their portfolios, we also expect them to utilize our own thorough (and easily accessible) screening intel to assist with the decision making process.

We’ve heard from multiple investors that our in-depth vetting makes a difference. As S.A. Lawrence, an investor in Park East Apartments, put it: “The due diligence EarlyShares conducts helps you invest with confidence.”

All skepticism aside, the best way to invest in any sector or industry is to work with a trusted partner. We hope you’ll partner with EarlyShares to grow your real estate investment portfolio.

The EarlyFive: Meet our $5,000 minimum opportunities

EarlyShares was founded with the mission of helping small investors capitalize on big opportunities, and two of our latest offerings are case examples! For small minimum investment amounts  of just $5,000 respectively, these two deals offer investors big-time access to exciting redevelopment projects in high-potential locations.

  • Our just-launched offering from Accordia Realty Management is an equity investment in the redevelopment of the Shoppes at Godwin, a mixed-use retail center in an affluent area: Midland Park, New Jersey.
  • The Downtown Las Vegas Redevelopment deal has a limited number of investment slots remaining. Unfamiliar with Sin City’s exciting downtown resurgence? Click here to learn why the market is ripe for investments.

mini-logoAug. 14, 2015
Spooked by Stock Market Turmoil? Look to Commercial Real Estate Investments
Heather Schwarz-Lopes, EarlyShareholder Blog
The volatile global markets this week gave investors good reason to reflect on one of the most important rules of investing: Diversify. Read our latest blog post for insight on why commercial real estate is a smart asset to add to your portfolio to ensure your returns aren’t hostage to the whims of the stock market.

PSFK_Logo_bigAug. 25, 2015
Your Future Ford Might House a Living Room
Jason Brick, PSFK
The next real estate frontier may be parked in your garage! Piggybacking on innovations in driverless vehicles, Ford has announced a patent application for a new passenger area featuring front seats that can turn to face backward – giving the cabin a feel more similar to a family room than the cars we’re used to riding in.

NREIonlineAug. 28, 2015
10 Most Popular States for Private Commercial Real Estate Offerings
Elaine Misonzhnik, National Real Estate Investor
In the second quarter of this year, there were $8.4 billion in private real estate offerings in the U.S., mostly from the commercial property sector. Syndication activity is the strongest in California, which accounted for a whopping $3.39 billion of the Q2 total.

CPE_90x90Aug. 24, 2015
In Demand: Top Cities for Multi-Family Rentals
Amalia Otet, Commercial Property Executive
The demand for rental housing is increasing nationwide, and a combination of factors have pushed rental prices up 6.5 percent over the past year to a record high of $1,155 in July 2015. Based on share of renters of renter-occupied units, our booming city of Miami tops the charts with 65 percent.

XtTZlC8VAug. 25, 2015
5 reasons why the Fed won’t raise interest rates in 2015
Daryl Jones, Fortune
This week’s market upheaval has made many investors more concerned than ever that interest rates are headed for a hike. The author of this piece, however, makes an analytical case for why “rates will remain both lower and near zero for longer than most people believe.”

Spooked by Stock Market Turmoil? Look to Commercial Real Estate Investments

stocks268When applied to investments, “volatility” is a dirty word… and recently, the global financial community has experienced a lot of it.

August 24, in particular, was a noteworthy day on Wall Street for all of the wrong reasons. As the markets opened that Monday morning, an 8.5 percent drop in the Shanghai Composite index quickly reverberated around the world – wreaking havoc on stock prices in the U.S., Asian, and European markets.

China’s instability was the biggest influence on the ‘Black Monday’ upheaval – the country’s steep stock declines were on trend with the poor economic performance it experienced all summer – but many other factors also contributed.

Decreased demand for oil has led to weak economic conditions in many energy-producing countries. (The American and international oil benchmarks have fallen to their lowest point in more than six years.) Emerging markets in Asia and South America have been collectively experiencing sharp declines in stock and bond prices in recent months, and the financial instability in Europe of late has been well documented.

As the global markets adapt to the current reality, investors are struggling to make sense of such a sudden drop in stock market performance. The remarkable tumble on Monday the 24th has everyone wondering: Are we in the throes of a ‘perfect storm’ of global economic turmoil, or just experiencing a recent run of bad luck?

“These aren’t just a series of unrelated accidents,” posits economist and columnist Paul Krugman. “Instead, what we’re seeing is what happens when too much money is chasing too few investment opportunities.”

And there are plenty of other opportunities to chase. Granted, now is not a time for making rash portfolio decisions or for pulling oneself out of the stock market altogether. Swings in the market are nothing new and investors have an across-the-board tendency to overreact to ups and downs.

Yet investors are fooling themselves if they consider couching all their money in stocks to be the smartest all-around use of their investable funds – especially given that today’s stock prices are still historically expensive relative to long-term corporate earnings.

“Don’t expect the next few decades of stock returns to be as good as the last few,” warned New York Times columnist David Leonhardt on Tuesday. “Be prepared for a period in which market dips are not inevitably followed by bull markets that make the dips look like footnotes… because stocks can’t boom forever. And the last 30 years, for all of their ups and downs, have mostly resembled one long boom.”

Ultimately, the market volatility experienced this August is giving investors good reason to reflect on one of the most important principles of investing: Diversify.

Financial advisors recommend that as much as 20 percent of an investor’s portfolio be comprised of assets that are not correlated to the stock market. Yet many American investors fall far short of allocating even a 5 percent slice to alternatives, thus holding their portfolios hostage solely to the whims of the stock market.

“The true risk to any portfolio… is having all of your investments going up and down together,” says financial services expert Ed Butowsky on “Therefore, the real risk is not having alternatives in your portfolio.”

Investors’ hesitance when it comes to alternatives is understandable, given that many alternative asset investments come with asterisks regarding their return potential: commodities futures are highly leveraged and time-consuming to buy and sell; startup investments rarely come with firm exit strategies involve very high failure rates; collectibles (cars, wine, art, etc.) have ambiguous, long-term time horizons and their value can be difficult to quantify.

Commercial real estate (CRE) investments, on the other hand, are tied to physical assets and come pre-packaged with clear terms, defined hold periods, and built-in return expectations. Investors can utilize real estate crowdfunding platforms like EarlyShares to search for deals that match their preferences in terms of cash flow, appreciation potential, and time horizons.

All investing involves risk, of course, and commercial real estate is no exception. Property values can and do fluctuate – albeit with far less volatility than stocks or futures – and (as with stocks) the overall health of the real estate market is subject to economic forces, interest rates, and other factors beyond investors’ control.

But compared to many other assets, commercial real estate’s inherent sense of structure and strong recent performance makes it worthy of consideration in any investor’s portfolio: CRE has seen double-digit annual gains for more than four years running, with aggregate prices increasing more 13 percent over the 12 months ending February 2015. The gains are impressive – especially considering that the commercial sector experienced a far less dramatic drop during the ‘Great Recession’ than the residential market did.

In today’s uncertain economic landscape, rash decisions should be avoided – but a well-considered rebalancing of assets may be warranted. Review your current allocations, think about your long-term investing goals, and browse a selection of curated CRE investment opportunities to get started.

The EarlyFive: Where to Catch Us this Fall

As Summer 2015 winds down (how is August almost over already?!) we’re prepping for our busiest Fall event season ever. Here are the conferences and forums where you can catch us speaking next month:

mini-logoAug. 14, 2015
How to Get Manhattan Real Estate into Your Investment Portfolio
Madelyn Young, EarlyShareholder Blog
New York City real estate has been notoriously expensive for decades, and it reached a milestone this year when housing prices in Manhattan hit record peaks. But NYC real estate is not out of your reach, since you can currently access an East Village investment opportunity on our platform.

friedAug. 16, 2015
Real Estate Crowdfunding Reaches Apex in EarlyShares
Jim Fried, Fried on Business Blog
Our co-founder & CSO Heather Schwarz-Lopes stopped by the Fried on Business radio show last week to discuss how raising real estate capital on EarlyShares is “syndication on steroids!” Listen to her segment here or check out the writeup by our friend Jim Fried outlining how sponsors can capitalize on “the future of real estate financing.”

NREIonlineAug. 21, 2015
Why I’m Optimistic About CRE for the Next Few Years
David J. Lynn, Ph.D., National Real Estate Investor
Commercial real estate has been a star performer over the last five years, delivering high returns on the back of strong and improving fundamentals and a gradually recovering economy. Find out why the author has a bullish view for “more strong years ahead.”

cnbc-twitterAug. 18, 2015
Where Apartment Construction is Hottest
Diana Olick, CNBC
After a decade of underbuilding apartments, cranes are scattering city skylines – and the numbers are truly staggering. According to a new report, multi-family construction activity is above historical averages in more than one-quarter of the nation’s largest metropolitan housing markets.

bisnowAug. 18, 2015
9 Sports Legend Commercial Real Estate Investors
Benjamin Mazzara, Bisnow
Call yourself a real estate investor? You’re in a hall-of-fame club! With the NFL pre-season in full swing, we thought now was a good time to admire the real estate portfolios of star athletes like Joe Montana, Roger Staubach, and Emmitt Smith, among others.

Why the Real Estate Market in Downtown Las Vegas is Ripe for Investments

downtown-las-vegasDowntowns across the U.S. are seeing booming activity these days, as millennial renters flock to city centers to enjoy walkable streets and convenient live-work lifestyles. But something much more unique and exciting than garden-variety urban migration is happening in the formerly dormant downtown of Las Vegas – and you can now be a part of it.

Las Vegas was one of the U.S. cities hit hardest by the Great Recession, but its downtown took a beating well before that. As Las Vegas grew from its humble 1950s neon roots into the global entertainment destination we know today, its urban core was largely abandoned. By the 1980s the Las Vegas Strip had become a world-famous adult playground, but the city’s downtown (situated just seven miles north of flagship hotspots like the Bellagio and MGM Grand) had digressed into an economically depressed area of low-end casinos, seamy motels, and a small handful of neighborhood haunts.

By the early 2000s the district had become home to a swath of boarded up buildings and empty lots – but recently, a big-name investor decided to change that.

Tony Hsieh, CEO of, took a keen interest in Downtown Las Vegas after moving his company’s headquarters into the area – into the former Las Vegas City Hall, in fact – in 2009. In late 2011, Hsieh announced that he was personally committing $350 million to revitalize Downtown Vegas into a hub of culture and innovation.

Hsieh’s vision is being realized thanks to the Downtown Project, the entity managing his investments with the goal and purpose of making downtown Vegas a place of “Inspiration, Entrepreneurial Energy, Creativity, Innovation, Upward Mobility, and Discovery.” The Downtown Project launched in 2012 and today is an owner or investor in over 300 businesses and legal entities that collectively employ more than 900 people.

The Downtown Project is putting Hsieh’s millions to diverse use. In addition to commitments of $50 million apiece into area tech startups, arts & education, and small businesses (respectively), the project’s $200 million real estate comprises over 100 properties on 58 acres – totaling 215,000 square feet of retail space and 130,000 square feet of office space. Noteworthy developments the Project is involved with include Container Park, a sustainable indoor-outdoor shopping attraction and entertainment space, and Gold Spike, a renovated hotel-casino and event venue.

Hsieh and the Project are not the only ones investing on a new future for Downtown Las Vegas. The City and State have committed $50 million to road and street improvements in the region, including a $13 million beautification project in the Arts District, just one mile from the Downtown Project’s primary focus area of East Fremont Street.

The Arts District of downtown is an exciting, up-and-coming neighborhood that’s home to dozens of galleries, shops, restaurants, coworking spaces, and attractions. It’s also the site for a unique new real estate offering on EarlyShares from Metroplex Group: a preferred equity investment in the acquisition and redevelopment of a retail center on Main Street – the exact subject area of the above mentioned beautification project.

The sponsor of the deal has a stellar track record in the region: In just the last two years, they’ve acquired and redeveloped two commercial projects in Downtown Las Vegas, earning ROI of 111% and 200+%, respectively.

Accredited investors can get their own piece of the revitalized real estate action in Downtown Las Vegas for just a $5,000 minimum investment in the deal. With hundreds of millions of dollars betting big on this redeveloped area, you may want to consider whether a slice of Downtown Vegas belongs in your investment portfolio.

Click here and request access to learn more about the Downtown Las Vegas Redevelopment deal on EarlyShares. For more on the Downtown Project, click here.

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