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Wall Street Journal: Real-Estate Crowdfunding Finds Its Footing

April 14, 2014

As originally posted online at the Wall Street Journal. Written by Andrew Blackman.

Before last year, Ed Medley had never invested in commercial real estate. Now, he’s a part-owner of shopping malls, mobile-home parks and apartment buildings from Los Angeles to Tennessee.

Dr. Medley’s springboard into real-estate investing was supplied by a process known as crowdfunding—the sale of shares in a venture, in this case real-estate projects, to hundreds or even thousands of individual investors. Dr. Medley, a consulting engineer and geologist in San Mateo, Calif., has invested in 15 properties, with a minimum of $5,000 in each.

“Being able to invest relatively small amounts of money into different real-estate ventures was appealing” as a way of limiting risk, he says.

Clearly, other real-estate investors feel the same way, with new websites springing up that allow individuals to buy stakes in everything from self-storage facilities to luxury hotels.

“The interest is huge,” says Scott Whaley, president of the National Real Estate Investors Association in Cincinnati. “There’s massive demand, both from entrepreneurs who want to get access to capital, and from people who want to invest capital.”

Focused Investments

Crowdfunding has caught on in a variety of industries, spurred in part by regulatory changes that make it easier for such businesses to look for investors. In real estate, Mr. Whaley says, the key advantages are the ability to access more deals, invest smaller sums and connect directly with developers to ask questions and research deals. Unlike real-estate investment trusts, crowdfunding also allows people to invest in particular buildings.

Dr. Medley found his opportunities on RealtyMogul.com, operated by Beverly Hills, Calif.-based Realty Mogul Co. When a property starts to earn rental income, he gets a share of that. Most pay 8% or 9% annually, and he has received a couple of thousand dollars so far. He’ll also receive a share of any profits when the buildings are sold.

Dr. Medley and his wife are in their mid-60s and semiretired, so the income stream is “attractive,” he says. He knows there’s risk involved, but says he isn’t too concerned. “The total position that we have in crowdfunding is a relatively small part of our portfolio.”

Most crowdfunding deals work in a similar way, with investors funding a project and receiving a share of the income when it’s up and running, plus a share of the proceeds when the property is sold. Jilliene Helman, co-founder and CEO of Realty Mogul, says that while returns vary and aren’t guaranteed, the company aims to provide investors with a 14% to 15% annual return, including quarterly payments and price appreciation.

Right now, most crowdfunding deals are limited to accredited investors, those with an annual income exceeding $200,000 or a net worth (excluding a primary residence) above $1 million. But the Securities and Exchange Commission is working on proposed rules to open crowdfunding to non-accredited investors as well.

Types of deals offered vary by site. Fundrise LLC of Washington, D.C., accepts investments as low as $100. “We’re focused on letting everyone invest in private real estate, not just high net worth individuals and institutional investors,” says Fundrise Co-Founder Ben Miller. The average investment is less than $10,000, compared with $60,000 at Realty Mogul.

Micah Lubens, 26 years old, has used Fundrise to put a total of $700 into two Washington, D.C., buildings under redevelopment. “I’ve lived in D.C. for the last seven years and I love it, so this was a way for me to own and be invested in the city,” he says.

For higher-end projects, some investors turn to New York-based Prodigy Network. The company has raised more than $200 million from 4,200 investors in Colombia to build that country’s tallest skyscraper, and $30 million for a luxury extended-stay residence in New York’s lower Manhattan. It’s now seeking to raise $55 million from individual investors for another luxury New York hotel project.

Do Your Homework

Experts caution that crowdfunding in real estate is a very new area, and that investors should do plenty of research before committing.

“By nature, [real-estate] crowdfunding is a high-risk asset class,” says Sherwood Neiss, co-founder of consulting firm Crowdfund Capital Advisors. He recommends starting with only a small portion of your overall portfolio, and focusing on the track record of the people running the projects. “Have they had prior successes? Who knows them? Look at all the disclosures. You can’t go into this thinking that just because the opportunity’s there, it’s a good investment,” Mr. Neiss says.

Prodigy Chief Executive Rodrigo Niño says investors should make sure any money they invest is handled by a third-party fund administrator and held in escrow until the project is fully funded. Ask for full disclosure about “related parties” in the transaction, too. “If I bring in my cousin to do the construction and my wife to be the hotel operator, that is shady,” Mr. Niño says. And be sure investors have equal rights. “You want to know that the sponsor is not making money if you’re not making money as well,” he adds.

Gary Spirer, CEO of technology firm DilogR LLC in Austin, Texas, and author of a book on crowdfunding, advises investors who are just starting out to become an expert in one type of property. “Look at a lot of deals,” he says. “Learn about the criteria for determining value, then weigh that against what’s being shown to you.”

And finally, investors should ask about the exit strategy, since some properties can take a long time to sell. Even if a promised yield is achieved, says Mr. Spirer, “there’s still a risk that you won’t get the cash out at the end.”

To read more, visit http://on.wsj.com/1gxeTj8

Q & A: The Chicago Real Estate Market 2014

March 28, 2014

Do you have questions about the real estate market this year? Our residential broker, Neil Hackler, sat down with the Neighborhood Parents Network to answer common questions:

Neighborhood Parents Network

The Chicago Real Estate Market 2014: Frequently asked questions…

How is the real estate market this year?

The real estate market is having a slower start this year.  Many people are saying it is due to the weather.  Although it is a slow start many properties are still going under contract very quickly due to the continued low inventory around Chicago.  Single-family homes, townhomes, and 2-flats, in many neighborhoods, are selling very quickly and going under contract within days of being listed.  There are many multiple offers on properties which are continuing to drive up property value.  There is also new construction going on in many areas for single-family homes and condos.

Is now a good time to buy?

Yes, now is a good time to buy due to the low interest rates.  Keep in mind that the tough thing for buyers right now is the low inventory, and there are multiple offers being made on many properties.  Although this is good for property values, it makes it tougher for those looking to buy.  FHA loans are also available which the down payment is only 3.5% of the buyer’s purchase price or conventional loans as low as 5% down for qualified buyers.

Is now a good time to sell?

With this low inventory, now is a great time to sell because property values are going up!  The market place has picked up quite a bit.  Although the property values are increasing, some seller’s are still under water on their property.  The best thing to do is have a Realtor do a market analysis for you to determine an estimated value for the property.  This is free!  Also, if you own a condo, then the association and building need to be in good standing.  For more details feel free to contact me.

What is a good way to find an estimated value of my property?

Many sellers go on-line and visit several websites to try to determine a good estimate of their property value.  This can be timely and in many cases the values can be skewed.  The best way to get a good estimate of value, outside of paying for an appraisal, would be to contact a Realtor like Neil.  He can pull comparative properties via the MLS just like an appraiser will do.  A market analysis can be completed for you for FREE!

If I want to buy a property, where do I start?

Many people start by looking on-line across several different websites, but as a result, you may start seeing the same properties listed over and over again.  The best way to start is by contacting a Realtor to arrange a free property search, which will automatically email you potential properties.  At the same time, you’ll want to begin speaking to a mortgage broker to see what loans are available to you.

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Neil Hackler is a Residential Realtor with Chicago Real Estate Resources.  He works with buyers and sellers in and around Chicago.  Educating his clients on the home buying and selling processes is key!  Honesty, experience, & knowledge are his methods to helping clients find just the right property.

Contact Neil today with any real estate questions at neilh@crer.com or 773-677-3479!

CRER Brokers Recognized as Top Chicago Producers

March 14, 2014

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CRER Brokers Recognized as Top Chicago Producers

[3/13/14] Chicago Real Estate Resources is pleased to announce that four of its commercial brokers have been recognized as the 2013 Top Sales Producers by the Chicago Association of REALTORS® (C.A.R.).

The four associates recognized include:

  • Nate Gautsche – Platinum Sales Award for Multi-Family 5+ Units Sold, Gold Sales Award for Industrial Units Sold and Silver Sales Award for Retail Leasing Gross Square Footage
  • Steven Rapoport – Platinum Sales Award for Office Rental, Gold Sales Award for Retail Sales Units and Silver Sales Award for Industrial Sales Units
  • Michael Tolliver – Gold Sales Award for Multi-Family 5+ Units Sales Volume and Silver Sales Award for Multi-Family 5+ Units

“Having four of our commercial brokers recognized as top producers by C.A.R. is confirmation of the professionalism anddetermination of our brokerage staff at CRER and how effectively they serve our clients. These top performers truly represent the best of the best in commercial real estate, and they richly deserve to be acknowledged for their proven expertise,” said Eric Janssen, President, Chicago Real Estate Resources

C.A.R. awards are open to all members and were announced only after a precise recording of 2013 had been calculated. While all members are eligible to receive this top honor, only a small percentage of the 11,500 CAR members are able to produce the high volume of sales to rank as one of the best Chicago brokers for the year.

CRER Broker Recognized as Top Chicago Producer for Residential Properties

March 14, 2014

CRER Broker Recognized as Top Chicago Producer for Residential Properties

Image[3/13/14] Chicago Real Estate Resources is pleased to announce that one of its residential brokers, Christie Carmody, has been awarded as a 2013 Top Sales Producer by the Chicago Association of REALTORS® (C.A.R.).

Carmody was recognized as a Top Producer with sales of $12+ million during an award ceremony on Wednesday, March 12.

“Christie has been a great asset for our team, and this recognition is simply confirmation of her professionalism and dedication to our clients,” said Eric Janssen, President, Chicago Real Estate Resources

C.A.R. awards are open to all members and were announced only after a precise recording of 2013 had been calculated. While all members are eligible to receive this top honor, only a small percentage of the 11,500 CAR members are able to produce the high volume of sales to rank as one of the best Chicago brokers for the year.

When you were born says plenty about your housing needs

March 5, 2014

As originally written, by John Handley, online at the Chicago Tribune.

Not too long ago, builders followed a one-size-fits-all approach with prospective homebuyers.

Basic, plain vanilla floor plans were designed for a diverse group of people.

Now, demographics are driving housing styles and choices. Generation Y, Generation X and baby boomers have all sorts of ideas about their dream home. And homebuilders and multifamily-housing developers are catering to these segments to expand their market share.

“Builders are absolutely focused on serving the different demographic groups,” said Stephen Melman, director of economic services for the National Association of Home Builders. He pointed out that each age group has different forces shaping its housing decisions.

“Gen Xers are the sweet spot in the market. Roughly in the 35-to-45 age range, they are going full blast with dual incomes, kids and looking for larger, more efficient homes. For these trade-up consumers, builders must offer well-designed homes that give buyers a reason to move,” he said.

Melman noted that Generation Y is the market segment with the greatest pent-up demand but has delayed entering the housing market.

“They are sitting on the sidelines and need to move out of their parents’ basement,” he said.

“Boomers, who are going to be empty nesters, want to give up that five-bedroom house and downsize,” Melman said.

Generation Y

The young, tech-savvy Generation Y, also known as millennials, continues to redefine the American Dream. Members of this group, born from the 1980s to 2000, desire flexibility in housing choices, and renting permits that.

Nationwide, the slew of new high-end apartment buildings with amenities galore is testament to the appeal of renting.

James Mateka found what he wanted in a studio apartment at K2, a 34-story, 496-unit luxury rental tower completed in 2013 by Fifield Cos. and Wood Partners.

In the West Loop at 365 N. Halsted St., K2 appeals to techies with such features as Wi-Fi-equipped cabanas next to the lap pool.

The 25-year-old medical student said he and his friends take into account the following factors when choosing a place to live: “First is price. Second is proximity to the city with restaurants and sports bars and entertainment for nights and weekends. Third is style. My generation prefers modern-looking buildings rather than traditional,” Mateka said.

“Housing is just a place to live,” he said. “I’m not ready to settle down and start a family.”

Younger buyers want technology in a home, said Helen Velas, president of Eleni Interiors in Naperville. “They want automated lighting and sound and even motorized shades — all controlled from their phones. State-of-the-art electronics are more important than curb appeal. They want space they can actually use — social spaces, but not a formal living room. They want a home office or a place to work and plug in,” she said.

“In decorating styles, millennials like retro-modern with brighter colors than older groups,” Velas said. “They don’t want separate living and dining rooms. Because they are on a budget, they do a lot of do-it-yourself projects. They want to live in the city where the action is and don’t want long commutes to work.”

Beth Callender, principal at the Greenhaus advertising and marketing agency in San Diego, said many millennials have no illusion about buying a home and settling down. They rent because they are not ready to put down roots or to be burdened by a mortgage.

“They are going through a sort of delayed adolescence, taking longer to finish school, marry and start a career,” she said.

Generation X

Gen Xers were born from about the mid-1960s to 1980. Typically in their peak earning years and married with children, they often move to the suburbs.

According to a 2013 survey by the National Association of Realtors, Gen X buyers account for the greatest number of recent home sales and purchases.

“First-time buyers just want value, but 30-somethings and 40-somethings want added features such as more style on the exterior and 9-foot first-floor ceilings,” said Debbie Beaver, vice president of operations for William Ryan Homes in Schaumburg.

Velas noted that this generation is attracted to houses with large backyards for their children to play.

“They want a smaller home than their parents’, but no less expensive,” she said. “They prefer quality to quantity. They want it to be a livable home, not a museum.”

“Gen X buyers intend to live in the house for 20 years or more, so they purchase with the best schools in mind,” said Jessica Lautz, survey research manager with the National Association of Realtors.

This group is particularly attracted to energy-efficient homes.

“Since they plan to live in a house for years, they know that buying energy-efficient appliances will pay off over that time period with lower utility bills,” said Sara Benson, president of Benson Stanley Realty in Chicago.

Baby boomers

Some baby boomers, born from 1946 to 1964, are rediscovering vibrant urban lifestyles, trading in suburban houses for town homes or condos in the city.

But AARP reports that most baby boomers, having lived their entire lives in the suburbs, likely will age in place there.

“When they move, they want a place to fit their aging lifestyle,” Velas said.

“It should have plenty of storage space for all the things they’ve acquired over the years. Unlike millennials, they like formal dining rooms,” she said. “They like traditional architectural designs, classic colors, first-floor master suites and guest rooms for the grandchildren.”

Boomers who have relocated to age-restricted developments haven’t downshifted to a slower pace of playing bingo in the activity room.

“Besides the social clubs, they want running and walking clubs,” Callender said.

Many of these developments offer a maintenance-free lifestyle, allowing residents to enjoy amenities such as dance classes, fitness centers, golf courses and pools in a resortlike atmosphere.

In October, Dan and Diana Miller moved several miles away from a five-bedroom house in Sleepy Hollow to a two-bedroom ranch home at Carillon at Cambridge Lakes, an active adult retirement community in Kane County’s Pingree Grove.

“We like that it’s a ranch with no steps,” Dan Miller said. “We’re pleased with all the activities offered here, and the chance to make a lot of new friends in our same age range.”

To read more, visit http://bit.ly/1iFVoqH

Solid Investment Returns Continue in 2014

February 24, 2014

As originally posted online at CCIM:

Commercial real estate investment returns are expected to remain steady through year-end, according to Expectations & Market Realities in Real Estate 2014 —- The Future Unfolds, a forecast released jointly by Real Estate Research Corp., Deloitte, and the National Association of Realtors®.

Although uncertainties remain, the economy will continue its slow ascent this year. With capital becoming more available for commercial real estate investment, investors continue to seek quality assets across all five major property sectors in secondary and tertiary markets.

“We have seen steady if slow progress since the commercial real estate market collapsed in second quarter 2008, and as the future unfolds, we expect that the positive returns for commercial real estate will continue,” said Kenneth Riggs Jr., CCIM, president and CEO of RERC. “The value increase from the trough is now about 30 percent, just slightly less than the value lost during the past six years. Although returns are likely to be positive in 2014, we forecast them to be a little lower than in 2013, but still a very reasonable approximate average of 8.75 percent.”

Continued stability in the commercial real estate market has given investors a reason to be “cautiously optimistic,” according to Matthew Kimmel, principal and U.S. real estate sector leader for Deloitte Transactions and Business Analytics LLP. “Overall, we see the potential for moderate and continued growth in the volume of commercial property transactions and in property prices,” Kimmel said.

The commercial real estate recovery is expected to continue throughout the year as a result of the slightly stronger economic growth, noted Lawrence Yun, NAR chief economist. With an estimated 2.2 million jobs expected to be added by year-end, the demand for all commercial real estate sectors should increase as well, according to Yun.

- See more at: http://www.ccim.com/newscenter/323435/2014/02/21/solid-investment-returns-continue-2014#sthash.jvdJuRjF.dpuf

Downtown condo market shows gains

February 14, 2014

As originally posted online at the Chicago Tribune. Written by Mary Ellen Podmolik.

It’s a sweet time to be a condominium owner in downtown Chicago.

With a lack of new product for sale, other than ultra-luxury units, appropriately priced condos are selling fast, and values continue to recover.

Compared with the tail end of 2012, resale prices at 65 condo buildings downtown rose 9.3 percent in 2013, putting them only 6 percent below the market’s peak in 2008, according to a year-end report by Appraisal Research Counselors. Annual sales volume rose 8 percent from 2012.

“We’re hearing from brokers there’s a shortage of product,” said Gail Lissner, a vice president at Appraisal Research Counselors. “Definitely we are in recovery mode.”

Among new projects, the success stories include Trump International Hotel & Tower, where only 15 of the 486 condo units remain unsold, according to a year-end report released Thursday by Appraisal Research Counselors. Also faring well are the three-building South Loop condo project taken over by Related Midwest, where half of the 500 units are sold and the company is raising prices, and Belgravia Group’s CA Condos on Adams, which will not be completed until later this year but 42 of the 50 units are already under contract, Lissner said.

There are expectations that pricing will continue to be in seller’s favor, benefiting not just developers but also current owners considering a sale.

In January, the median price of a condo sold in Chicago was 26 percent higher than in January 2013, and on average, sellers received 95.2 percent of their original list price, according to data provided to the Chicago Association of Realtors by Midwest Real Estate Data LLC.

Meanwhile, the number of condos under contract for the week ended Feb. 1 was up almost 28 percent from a year ago.

To read more, visit http://www.chicagotribune.com/business/breaking/chi-downtown-condo-market-growth-20140213,0,1921292.story

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