Bringing Entrepreneurism And Real Estate Together Through Crowdfunding
Our CEO, Craig Cecilio, was interviewed by Kenneth Ameduri at Crush The Street. He shared his personal journey in bringing Bringing Entrepreneurism And Real Estate Together Through Crowdfunding.
You can enjoy the video here and/or read the full interview below.
Kenneth: Hello everyone and welcome to crushthestreet.com. I’m Kenneth Ameduri and I’m joined today with Craig Cecilio. He’s the CEO of DiversyFund. Its website is www.diversyfund.com. Crowdfunding, peer-to-peer solutions, real estate and again real estate is just something that was one of my original passions. It still is. I own a number of properties. I’m involved with peer-to-peer lending and real estate is a vehicle that I love to invest in. There’s a limited amount of land out there, there’s cash flow with real estate, and there’s appreciation. It’s an inflation-protected asset. You know what, It’s something that is very much needed and it goes back for thousands of years. Craig let’s start our conversation here, on real estate and crowdfunding. How’re you doing today sir?
Craig: Great, doing pretty well Ken. Thanks for having me on the show.
Kenneth: Of course, of course. Well you know, if you wouldn’t mind letting everyone know how you got your feet wet in real estate and where your passion stemmed from?
Craig: we could go way-way back in time to when I was probably a little kid. I always had this entrepreneurial spirit about things. So, real estate was a natural organic evolution for myself. I got my license back in 1998. I moved to California in 1997, and I started dabbling and real estate back then. The year 1999, I was around let’s say a mentor who taught me a little bit about real estate syndication which caught my interest. It was something unique. It was just not real estate, it’s more real estate syndication. Like anything else, I dove headfirst into it, became pretty much obsessive about it. During that journey, I dabbled in everything in the real estate markets in real estate fields.
Evolution took me to the facts when I heard about crowdfunding in 2013-2014. This is great! I was like, this is fantastic stuff. This is just the syndication stuff I did before, but using technology to leverage it. I would call it, this real estate syndication kind of on steroids. With the passage of all the regulations through crowdfunding which there is a lot of specific regulations that got passed, you’re able to open these investments up to the general public. You’re able to do online direct solicitation to the general public for the first time in the history of the U.S., actually.
Kenneth: yeah, I can imagine it’s an unprecedented territory in many ways and I actually wanted to ask you about that. How are the regulations in this space deemed? Is it considered a security to the SEC? Or, what are we looking at?
Craig: the regulations were passed and the JOBS Act of 2009, but they didn’t get enacted really – the first one was 2013. I believe another phase was in 2015, so really didn’t you get put into action until many years later. So the regulatory agency is the SEC and FINRA.
Kenneth: Okay. I mean obviously, I’m brand new. Are you concerned at all in someone investing their money at this point in the SEC or FINRA coming in and shutting this down? Or, is the forward progression pretty clear?
Craig: The forward progression is pretty clear. I believe it’s just like anything else. It’s how you operate a business, at the end of the day. How well structured your business is. As far as the compliance side, I’ve been doing this for 20 years. I do have a business partner who comes from the corporate securities world on Wall Street. He’s a board as well, so we’re really tight with our compliance. We’re taking our time developing new products and staying kind of within our box. Really focused on real estate and markets that we do know right now.
Kenneth: Sure, okay Craig so let’s talk about crowdfunding. I love it. It’s kind of like the overization of banks in a way. This is a side step of having to go to a traditional bank but really having access to, you know everyday people. People being able to transact and do business with one another it’s another means for that. It’s really cool and I guess my question to you is, why does the average person choose to borrow money in a place like DiversyFund versus the average bank?
Craig: that’s a great question. Actually, we have a vertically integrated platform which is a lot different than other types of platforms out there. The way we interpret crowdfunding because you can interpret it any whichever way you want. The way we interpret it is how do we get a quality product up on our site that someone can invest in. Who otherwise may not invest in real estate before or haven’t had access to these types of investments. We developed our platform, where we are not the broker, we are the developer. We actually hold title to all the assets. Either we are the developer the project or the co-developer of the projects.
That allows us more quality control, more transparency, and transaction. As well as, we’re an institutional grade quality organization so we do leverage our crowd with bank loans and institutional grade investments. I’d say that would be a big difference. Whereas, other platforms out there when a bank says no, people are going to the platform to get their project funded. Well, there’s usually a reason why the bank says no.
Especially in these markets. It’s because usually, it’s someone who is not qualified enough, or doesn’t have the experience, doesn’t have the assets, doesn’t have the balance sheet or some other reason.
This, again, there are exceptions. There are always exceptions, but I’m not looking at exceptions. I’m looking at the actual numbers and people should look at that and say hey you know we’re not doing this. We are not building our organization based on the exception. We’re building our organization based on the data. That’s where we’re focused on. By us focusing on this, within the last 12 months, we were able to put a hundred million dollars of assets under management. We raised all the funds to acquire those assets through the crowd.
Kenneth: That’s that’s powerful. Why aren’t big banks getting involved with crowdfunding? Or at least taking on these other risks or higher returns? is it just not part of their business model that they should be focused on? Or what’s the deal with that?
Craig: I think it’s a little premature for them get involved. It’s right at the infancy stage. Some people call it and compare it to 1996, the year the Internet. Where we were back then. So it’s so new. I think a lot of people are just really watching it and seeing how it is developing. In today’s present environment and administration and whether you do with regulation as well. You might see some acquisitions down the road here. There’s a lot of political stuff going on.
I think a lot of people are kind of on the fence watching to see where this is going to materialize and how they could benefit from it. Banks are trying to get involved. They’re trying to get involved by leveraging lines of credit to some platforms. Maybe buying some paper from the platforms, but they’re not really. They are more on the sidelines kind of watching right now.
Kenneth: Craig what differentiates you guys from let’s say a Peer Street in terms of a real estate crowdfunding investment?
Craig: the biggest difference is that we are not a broker. We do not sponsor third parties, we hold title to the properties, and we are the developer of those properties. That would be the biggest difference. Other differences are that we allow investors to choose the asset they want to invest in. As well as having the option of investing in a fund which is collateralized by multiple assets. We give that individual that chance in that opportunity to do either/or.
Kenneth: Okay, so take us through an investment if you would, and what it would be like for somebody who wanted to invest. I’m just curious about the process and how this would look.
Craig: so I guess I could start way up the beginning. so I don’t start somewhere in the beginning process. Mainly through our relationships, we choose to do a project. We put that project in escrow. We throw a deposit down, we get it there. Then we pack it together, underwrite it, then we put it on our platform. Then it goes live. Once it goes live, through marketing and PR and through our database of existing investors they all look at that investment. If they choose to do it they click a button. Just click a button to fill out their information. Then another screen pops up and they could fill in all their banking information. They hit a button and their funds get wired over.
There’s a little back-end process that we have to process. Do a couple checks on that money to make sure it’s in compliance. If it’s in compliance with that offering then it goes live into our account. Then that person or entity starts receiving interest on that money at that point in time. The way our instruments are traded is some are passive, more income-minded and some are growth minded. The higher returns are growth which means is they get paid the return when we sell the property. When we develop it up and sell the property. Whereas, some are income-oriented where they get quarterly payments on the investment opportunity.
Kenneth: if somebody wanted to actually decide on investing I mean what is your typical criteria for somebody you know wanting to decide to invest with you guys? Let’s say it’s a cash flow opportunity what sort of boundaries do you guys go by?
Craig: the particular person coming to us? it’s all automated. It’s all online. They could go and they could look at all the due diligence paperwork online. They could they could even ask call in and ask questions that they had additional questions to our investor relations department, They’re able to do the whole transaction online. On the backend of the website, they have their own investor portal, which has updates on there. Shows them the investment. It has all the paperwork stored for them on online, on the platform. It’s pretty much opened up to everybody.
The big difference here is, which I haven’t emphasized this yet, is “hey, what’s different about this?” Well, a lot of the good investments out there are a million dollars, five million dollars, ten million dollars. They’re large investments. The average Joe, the average person who wants invest ten thousand, twenty-five thousand, fifty thousand, five thousand, or one thousand. They’re not going to have that opportunity. The person who needs that money for that project is usually gonna hire a broker-dealer who’s gonna charge a lot of fees to do it. Which those fees come out of the investors pocket. Or they’re not going to talk to you unless you have a million bucks.
Most of the population doesn’t have access to these investments because of that reason. A lot of these are really good investments. They’re in prime markets prime properties. Just because the dollar amount is so high, you’re not allowed access. As brokers, they get paid on commission on that. Hence, they’re not going to talk to someone who’s got 5000 dollars to make a commission. They want to talk to someone who has five million dollars. They’re not motivated. Their world’s not motivated to get people involved.
Now, we’re leveraging technology and say hey we’re using technology. We could still close a transaction in 30 days. So people in real estate fields still come to us because they know we can close that transaction. We’re able to do that because now the masses can look at this investment anywhere in the U.S. at any time and they can invest online in real time. That is just, I believe an amazing opportunity for everyone who has not had the opportunity to invest in real estate. As well as they, we stand out. Today we’re sending out monthly updates on all our projects so they could kind of see the process a little bit we’re constantly updating stuff online. Through social media and through our platform, so they actually learn a little bit about the process as well.
Kenneth: Craig so, what sort of protections do investors have then when they invest in this fund? Let’s say a project goes south, you know what is in place to keep you know, the company honest? And for the investors principal to stay intact as best as possible?
Craig: First of all, they’re a would be considered limited partners. They would be on title. They’d own it. Ownership interest in the entity that owns the property. In addition, our company, the parent company, DiversyFund, owns all the assets. We’re a pretty institutional Quaid grade quality organization. We go out there and we have a good balance sheet. We have multiple assets. The chances that something happens to us is very very low in that respects.
We all do know it’s in the day real estate does have its positives and negatives with markets going. We’re very careful based on our twenty years of experience. In my 20 years, the experience is really to look out for our investors. We’re able to handle any type of situations that have arisen. I survived a downturn, I know how those days were, and I came out pretty much unblemished with that. We have a lot of experience and wherewithal to deal with issues. To kind of spearhead them and jump forward and take care of those issues. At the same time, we’re very selective on our projects.
The number one thing in real estate to make money on investments how you buy that? Is that a good project? is that a good piece of real estate? To do that, having those years experience, and having those relationships really minimizes that as well. You have to invest in the best projects possible, you’re backed by an organization that has a balance sheet and then they own part of the project. I mean that’s pretty secure I would say, compared to everybody else.
Kenneth: yeah I know that’s it’s very good points. I’ve heard many people say that when you buy real estate you know you make your money on the purchase you know capturing equity on the front end and just knowing your numbers going forward. That’s basically what you’re saying. Craig, if people want to learn more about the fund, how they can invest, and you know what they what they will find if they visit your website just kind of give us some closing thoughts here and thanks for coming across the street.
Craig: thanks, Ken. You can visit our website www.diversyfund.co m. It should have all the information on there. If it lacks any information, please feel free to give us any feedback. There is contact information there. You can email to our investors’ department, or via chat. Also, there is a phone number on there. We’re always constantly improving our website to put the education out there. Depending on what you need.
If you’re already a real estate investor and you want more details about the project itself. We’re always updating that to make sure that fits your needs. If you’re new to real estate, we will make sure we have enough information where you can really understand how to invest in real estate. If you’re new to invests and alternative investments we want to make sure there’s information up there that gives you a little bit of a background information on how to invest your money. At the end of the day, and not stick all kind of your eggs in one basket.
Kenneth: Alright, Craig. Well, thanks for coming on www.crushthestreet.com. exciting information in real estate. Again, that’s close to my heart so anyone who’s interested in learning more about Craig’s company, visit the website in the description area. Again sir, thanks for coming on Crush The street.
Craig: Thanks again. I appreciate it.
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