Opportunities for homebuilders to crowdfund their projects is starting to take hold. Open Source Capital, based in Florida, asks builders why not engage investors and homebuyers to be part of the project? With crowdfunding, builders can provide an early stage to showcase their projects to potential investors and homebuyers. Prospects can go online to review the designs, floor plans, square footage and amenities.
Houses can be pre-sold and “options” can be added prior to final house plans being submitted for construction. Accredit investors can also be buyers or just third party investors. Cost efficiencies may be a win-win for all.
Private investors often purchase homes at pre-construction prices and then re-sell or rent them out. In condo markets such as Miami, builders are funding their projects with staged deposits from buyers. This may put the homebuyer at the end of the “food chain” if the project happens to go south. Crowdfunding on the other hand puts the investors in a more secured position.
Open Source Capital has developed a product they have dubbed “equity“. It provides accredited crowdfunding investors an opportunity to purchase a part ownership in the lender’s mortgage. A dequity mortgage holder receives a fixed interest rate plus a share in the profits.
Kyle Meyer, Managing Director of Open Source Capital noted,
“I’ve never seen an opportunity as good as dequity. Unlike corporate bonds or standard mortgages, dequity could pay off a small fortune – as long as one is willing to take the risk associate with construction lending. Construction lending risk is high so you’ve got to be able to do your homework.”
For builders, Open Source Capital’s crowdfunding platform does five things: Provides a stage to showcase their project; allows pre-construction buyers and other investors an opportunity to be “a part of the project;” raises funds to help build the project; reduces the risk of spec building; shortens the sales cycle.