“Necessity is the mother of invention” has become a well-known, English-language proverb. While its true author is unknown, its meaning certainly is not. Its roots trace back to Latin in the 1500s, Plato in the 1800s, and even a fun Schoolhouse Rock video in the late 1900s. The phrase essentially declares that “need” is the driving force behind most new inventions. Until recently, this was still the case for real estate investing as well.
Traditional banks hadn’t kept up with the needs of modern real estate investing – or investors
That’s the simple reality behind the creation of EquityDoor, the open door to real estate investing. Several years ago, EquityDoor founder, Clint Anderson, was a successful veteran of the high-tech startup scene in Austin, Texas. He was also a part-time real estate agent and investor. With growing experience in property management, single and multi-family rentals and house flipping, real estate was more than a hobby.
Anderson owned multiple properties but wanted to continue to expand his portfolio. About a decade prior, he had converted his first home into a rental property. He built significant equity through regular principal payments and solid market appreciation.He was hoping to leverage the equity he had gained in the property to fund new projects. He enjoyed the rental income the property generated and was not keen to sell.
Unfortunately, the traditional banks gave him very few alternatives. “Sell the property and cash out” or “We can help you re-finance ” were about the only two choices they offered. Of course those options worked well enough for the banks. Given Anderson was approaching the latter stages of his loan, the interest component of his current monthly payment had dropped considerably. This made his current loan far less interesting to the bank. With interest rates rising for refinances, a new loan would have generated more interest income for the bank which was definitely their preference.
Enter Regulation Crowdfunding: an Innovative Alternative
Anderson needed a legitimate alternative to the traditional banks to achieve his real estate investing goals. With a growing frustration for the embedded financial institutions, he continued to look for a better option. In his research, he learned about Title III of the Jumpstart Our Business Startups (JOBS) Act. He also envisioned how Regulation Crowdfunding (Reg CF) could provide alternative financing to investors who are looking to share equity in real estate projects. Guided by the Securities Exchange Commission (SEC), Reg CF effectively allows project issuers (like Anderson) the opportunity to sell portions of equity in exchange for financing (cash).
The lightbulb went off in his head! Anderson knew exactly how to bridge the gap in the real estate investing marketplace. Leveraging Reg CF, he decided to create a real estate crowdfunding portal to empower investors of all types. No longer would banks have a stranglehold on loans. No longer would small investors be locked out of the market because they didn’t have the 20% down-payment or the expertise to go it alone. The crowdfunding portal would connect projects and investors so that everyone would have access to investing in mid-market real estate. And yet another benefit: no banks means no loans. No loans means no debt service. No debt service means higher cash flow and lower debt-to-equity ratios. Real estate crowdfunding with Reg CF looked better all the time!
Anderson collected a small team of professionals, advisors and investors with much larger experience than their size, to make his vision a reality. With history in real estate (sales, development, FSBO, owner-financing, property management, etc.), high-tech (portal integration, marketing, security, etc.) and legal compliance (contracts, SEC, FINRA, etc.), the EquityDoor team would bring his vision to life and leverage real estate crowdfunding to bridge the need-gap in the current state of real estate investing.
EquityDoor Brings Regulation Crowdfunding to Life for Real Estate Investing
After a year of company startup, SEC compliance and FINRA approvals, the EquityDoor portal is live and operating. Project issuers can list their projects and share equity with anyone who has $1,000 or more to invest.
True to its name, EquityDoor has opened the door to fair and equitable access to real estate investing for every interested investor. Whether the project is across town or across the nation, investors and project owners can meet on the portal. They share equity in the same projects and are tied at the hip for mutual success.
Proof, once again, that necessity truly is the mother of invention.
For more information, tools and content regarding Regulation Crowdfunding and real estate investing, join our Members page. It’s easy to do and takes less than a minute!