Economies of Scale


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What are Economies of Scale?

Since the birth of the amendment to the JOBs Act on September 23, 2013, concern for investor security continues to be a trending topic in the media. As the real estate crowdfunding industry’s top influencers highlight the importance of investor security, we are slowly beginning to see an emergence of authentic platforms.

The Inevitable Barriers to Entry

For early adapters, platforms with previously established backgrounds in real estate investing are becoming industry leaders. More specifically, companies’ success is fueled with track records backed by operational sustainability and scalability. On the other hand, platforms without established business models are falling to skepticism and remain under scrutiny.

Adaptability in an Ever-Changing Market

There has shown to be a necessary balance for platforms who are chasing markets and investing in what they know best. For those successful platforms, chasing markets require manpower while those who invest in what they know could be slow to adapt if the market endures potential significant fluctuation. As markets continue to show signs of change, although minimal thus far, there needs to be just enough openness to analyze the profitability of new markets based on platform’s investor-base as well as exhausting profitability on deals that produce double-digit returns.

Craig Cecilio, Founder of DiversyFund, provides insight on his past experience with market expansion, “As long as we continue to build and nurture relationships, we will sponsor the right operators, invest in the right area, and be flexible when potential changes in the market hit. Although we are still seeing an abundance of distressed assets statewide, we are also looking into new construction investment opportunities in the primary market.”

Overcoming Barriers to Entry

For those looking to overcome barriers to entry, here are just a few ways to get ahead in the game:

Exceptional Resumes
Platforms with executives from Fortune 500 companies are the golden ticket. The company name in itself attracts the media, and media accesses the masses. That being said, W.O.M. (Word of Mouth) is your baby.
Strategic Partnerships
Cultivate and optimize relationships by partnering with other platforms or executives that compliment your strengths and vice versa.
Work From the Ground Up
We all start somewhere. Gain trust one investor at a time. You may be slower than your competition, but it works.

Creating Leverage with Skin in the Game

Investors like to see institutional players whether it be 3rd party and/or solely the platform in the deal. It creates validity that their due diligence. That’s why third party edification and skin in the gameplay a huge part in the success for those using institutional capital as leverage.

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