Market Views

How Does Jasper Compare to Real Estate Crowdfunding?

While real estate crowdfunding and Jasper do share some similarities, there are several important distinctions. To understand the differences between the two, it is best to first define Jasper and real estate crowdfunding.

What is Jasper?

Direct ownership of commercial property is expensive, and the alternative of buying shares in more traditional property syndicates can have some major pitfalls. Jasper has made it possible for any investors of all types to invest in high-quality commercial real estate. Here's how it works:

Investors create an account through Jasper's online platform. From there, individuals will be able to review various commercial real estate opportunities and select properties to invest their funds. All information is clear and transparent, including information detailing what fees the investor will pay and why.

What is real estate crowdfunding?

Real estate crowdfunding involves a group, or "crowd", of investors who pool their funds together to purchase an investment property. In doing so, everyday investors can put small amounts of money toward commercial property and, depending on the fund, will receive dividends on the income the investment property produces. The return on investment is contingent on how the property performs over the investment horizon.

Similarities between Jasper & Real Estate Crowdfunding:

Both real estate crowdfunding and Jasper offer investors the opportunity to pool capital from multiple investors to lower the barrier to entry and improve diversification. When investing in commercial real estate traditionally, most investors only have enough capital to invest into one single property. However, when investing on real estate crowdfunding platforms or with Jasper, investors put small amounts of money into several different investment opportunities. As an example, an investor may place $5,000 in an office tower, $7,500 in a retail site, and $5,000 into an industrial building. This diversification helps investors reap returns on several different investments rather than only relying on one single property whilst spreading an investor’s risk across multiple properties, asset classes and geographies.

Advantages to Investing with Jasper vs. Real Estate Crowdfunding:

Crowdfunding marketplaces are purely transactional businesses, which mean their revenues are tied to how many opportunities they place on their platform. This can lead to a misalignment of incentives which ultimately mean weaker returns for those who invest.

1. Due Diligence

Jasper’s investment team performs thorough analysis and due diligence on every opportunity we make available to our investors. Our team has worked for some of the world's leading property funds, with experience extending to over 1,000 transactions for more than $12B worth of institutional-grade real estate. Crowdfunding marketplace owners do not typically complete their own rigorous due diligence; they rely on a third-party operator to have the investment expertise. Crowdfunded deals are often lightly vetted by third parties that are not associated with the crowdfunding platform or marketplace. Instead, the crowdfunding platform simply acts as an intermediary.

2. Fee Structure

Jasper's fee structure is built primarily around ongoing fund management fees and the property's performance. This means we are incentivised to build long term investor relationships and drive investor returns. Crowdfunding platforms, on the other hand, operate as a brokerage and charge fees on total funds raised. This fee structure urges crowdfunding platforms to sell as much as they can, regardless of investment quality.

3. Jasper invests alongside investors

Unlike a large number of real estate crowdfunding syndicates, Jasper and our operating partners invest alongside our investors in every single deal. Jasper has a vested interest in properties that produce strong returns – for our investors, and ourselves. Typically, crowdfunding platforms do not invest their own capital in the offers on their marketplace and tend to focus more on connecting people who need money with people who have money.

4. Liquidity

Crowdfunded real estate deals are generally not liquid investments with most real estate crowdfunding platforms having an investment period of up to ten years. Jasper aims to launch a secondary market in 2020 that will offer investors the opportunity to sell their property investments to other investors on Jasper's platform. This will provide enhanced liquidity options for direct property ownership in a traditionally illiquid asset class.

5. Transparency

Real estate crowdfunding syndicates have strict reporting guidelines, however most investors know very little about the properties in a crowdfunding portfolio or the fees applied by the manager at the property level. This information asymmetry is a concerning trend found throughout the industry. At Jasper, we provide our investors with full information and absolute clarity on every property placed on the platform. Investors are provided with all the information they need to make a prudent investment decision, all in one place.

Key Takeaways

Both real estate crowdfunding and Jasper offers investors the opportunity to diversify their portfolios by putting small amounts of capital into several different commercial real estate properties. In addition, Jasper provides a transparent fee structure, undertakes careful due diligence, and has a vested interest in every property on our platform.

Ready to become an investor with Jasper? Click here to get started.

Mark Campbell

CIO & Director, Jasper

Published December 11th, 2019