Do Principles Pay in Real Estate Crowdfunding?

Abstract

This article uses a hand-collected sample of 733 projects from seven leading U.S.-based real estate crowdfunding platforms. The authors analyze how property, financing, and crowdfunding campaign characteristics explain the proposed returns of real estate crowdfunding campaigns based on the principles of investment risks in the real estate market. The authors find that projects with higher average investment risk tend to have higher proposed returns. The financing characteristics indicate that equity-financed projects and higher levels of leverage are positively correlated with higher proposed returns. They are also associated with the campaign characteristics of later payments to investors and higher minimum investment amounts.