by Dan Rafter
Marshall Saunders believes in the power of crowdfunding, and he believes that it can help ordinary people invest in real estate.
That’s why Saunders, a Minnesota native who now lives in Saint Paul, founded SaundersDailey, a real estate crowdfunding platform that lets smaller investors own a piece of their own neighborhood.
“There is something about crowdfunding that has always appealed to me,” Saunders said. “There is a basic fairness to it. A lot of people are left out of income-producing properties. They are not asked to participate. They need to bring large amounts to be able to invest. With crowdfunding, people can be involved with a much smaller investment required.”
A visit to SaundersDailey shows exactly what Saunders means. Check out the company’s Web site at SaundersDailey.com, and you’ll find a multifamily property in Minneapolis that you can invest in for just $2,500. That property is expected to bring a 5.98 percent to 8.65 percent dividend return each year and another 12 percent to 14 percent return on your original investment when the property is sold.
Another multifamily property in Minneapolis is expected to bring a yearly dividend return of 6.18 percent to 7.74 percent. You can invest in this property for a minimum of $2,576.
For Saunders, offering these investment opportunities at such affordable levels – there are higher-priced investments on SaundersDailey.com, too, of course – means that a greater number of people can realize the income that can come from commercial and residential real estate.
“There are opportunities out there. Unfortunately, most people aren’t asked to be involved with these kinds of investments,” Saunders said. “Usually, we get 100 accredited investors in a room, we need to raise $5,000 and we need five investors to put in $100,000 each. We then hope that five people raise their hands. Most people aren’t asked to be part of those groups. A lot of people don’t have that $100,000 available to them, either.”
Through crowdfunding, real estate investments become more accessible, Saunders said. Crowdfunding companies like his can also help bridge the income gap that is becoming an always bigger issue in the United States, he said.
“The more people who can invest in these income-producing properties, the more we can help close the gap of wealth in this country,” he said. “The growing wealth disparity is partly because the most profitable investments are not available to as many people as they should be. Wealthy or accredited folks get more opportunities. Unaccredited and less wealthy people don’t. That’s part of why the income gap keeps growing. It’s a true problem. You can’t have such a very small class of people owning so much wealth. It creates an unstable economy.”
How it works
People who want to invest through SaundersDailey start by logging onto the company’s Web site. Once there, they can browse real estate investment opportunities. Some of the investments are open to anyone who can come up with the cash. Others require accredited investors.
“It’s all about determining what type of investor you are and what investments are open to you,” Saunders said.
Listings explain the basics of a property, provide a list of expected returns – both on a yearly basis and when a property is sold – and lists the minimum amount of money people need to invest.
Investors make their profits in different ways. In the site’s equity investments, investors become part owners of an LLC that owns the property. These investors get stock certificates. Saunders said that such investors can expect yearly returns of about 5 percent to 8 percent.
These investors also hope for their properties to appreciate in value. That way, when it sells in five to seven years, investors would profit even more.
SaundersDailey also offers debt investments. Investors in these properties receive a promissory note in which they are promised a static yearly return, say 9 percent or 10 percent annualized with a term of about 18 months.
For example, investors who put up $10,000 might earn 9 percent of that investment over a period of 18 months.
“Crowdfunding looks new and different,” Saunders said. “But it’s a natural evolution of what we’ve long seen going on. We’ve seen it in the stock market. People want to become more involved. They want to make their own investment decisions. The next natural progression is investing on the Internet.”
Real estate is a perfect fit for crowdfunding, Saunders said. That’s because multifamily buildings, say, have a tangible value. That inspires a bit more confidence in investors, he said.
“Investing online is still a little weird and new,” Saunders said. “The fact that through our program you own a piece of real estate that has some core value takes away some of that apprehension people often have. A property has been appraised for a certain amount of money. Real estate can lose value. But you can be confident that if you are buying a home for $100,000, you know that, at the very least, the lot should be worth some money. There is a floor to the level of risk you have.”