🔒New Haven-based Invown’s crowdfunding portal opens up commercial real estate investing to the masses

Since 2019, Chris Salerno, founder and CEO of North Carolina private equity firm QC Capital LLC, has acquired more than $200 million worth of multifamily real estate.

Much of the financing for those deals has come from accredited venture capital investors who must meet U.S. Securities and Exchange Commission (SEC) thresholds for annual income and net worth.

But earlier this month, as part of an effort to draw investors for QC Capital’s newest property — a 224-unit Class A apartment complex in Houston, Texas — Salerno opened his latest real estate deal to a new source of investors: crowdsource funding from non-accredited investors.

Salerno hopes to raise $5 million — the maximum amount the SEC allows from non-accredited individuals — and he’s turned to a new crowdfunding platform developed by New Haven-based startup, Invown, which officially went live in May.

Invown — a combination of invest and own — was founded by Levi Brackman, a former rabbi, business author, corporate executive and nonprofit founder. Brackman said he wanted to democratize commercial real estate and make commercial real estate investing more accessible to average Americans.

“By creating a marketplace where [property] owners seek investors and everyday investors get into real estate at a low financial barrier, more people can participate in an asset class traditionally dominated by the wealthy,” Brackman said.

Invown’s funding portal is registered with the SEC and is Financial Industry Regulatory Authority-regulated.

Small investor focus

Crowdfunding, which is often used by startup companies or growing businesses, allows people to raise money — typically online — for a project or venture in small amounts from a large number of people. The global crowdsource market overall, fueled by the growth and popularity of social media, is expected to grow annually by more than 16.5 percent between 2022 and 2028, according to Vantage Market Research.

But the global real estate crowdfunding market is expected to grow even faster — at a 45 percent compound annual growth rate — to more than $250 billion by 2030, according to Polaris Market Research.

Crowdfunding — which first started in 1997 and has spawned sites like Kickstarter and Indiegogo over the past 25 years — has gained more traction in real estate deals in the last decade.

The 2012 JOBS Act signed into law by President Barack Obama paved the way for non-accredited investors to play a more active role in real estate investments, while opening up new streams of capital for businesses following the aftershocks of the Great Recession.

That’s fueled the growth of real estate funding portals like Invown’s, Brackman said. But unlike many crowdfunding sites — which include real estate alongside funding opportunities in other industries — Invown is focused exclusively on commercial properties, including office buildings, apartment complexes and self-storage units.

Brackman said the attractiveness of commercial real estate for small investors is they’re often cash-flow entities.

“For instance, if you’re going to put money into a commercial property, you’re actually making money from day one because there’s rent involved,” he said.

Invown’s portal is only available to property owners who offer investment opportunities under an entity that can offer ownership shares, such as a limited liability company structure.

“It can’t be property owned in the name of an individual,” Brackman explained. “What clients are selling (through our portal) is an ownership stake in an LLC, and our investors are silent or limited partners,” he said.

Positive results

Unlike some real estate crowdsource portals, Brackman said, he and his company don’t own any of the properties available for investment. He likens his company’s business model to Priceline, which facilitates travel services including airfare and hotel reservations at discounted rates.

“They don’t own hotels, planes or rental cars,” Brackman said. “But they’re almost indispensable to the travel industry.”

Similarly, under Invown’s fee-based model the company’s portal serves as a transaction conduit between issuers and investors. Brackman said the issuing company sets the minimum investment amount, but entry-level investments for the non-accredited can be as low as $500 to $1,000 depending on the project.

Crowdfunding has produced positive results for Alyssa Phillips, a Houston-area developer who sought to attract $250,000 through Invown’s crowdfunding site, as part of a $5 million investment to build phase one of Oasis Noir, a resort and residential community immersed in Black culture.

“I originally was going to work through a traditional lender, but I thought it would be cool to afford people the opportunity to invest and get returns,” Phillips said. “I wanted to go into the community and allow people to see how real estate investing works and create generational wealth.”

Phillips said within three days, she had raised her target $250,000.

“It was really awesome to get more (investors) involved,” she said. “It’s also a way to give back and spread wealth.”

Brackman said he’s looking for more developers like Phillips who publicize their property investment opportunities themselves. In contrast to some crowdsource portals, Invown — due to SEC restrictions — can promote its portal but not specific property deals.

Brackman said the company has a podcast about real estate investing and has used social media to promote its services.

QC Capital’s Salerno said he thinks Invown’s approach will be a model that others follow.

“I think they’re a pioneer, but I think you’ll find more companies that follow suit,” he said.