Decoding Compliance

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feature or ig i nat ion ANALYTICS se r v ic i ng crowdfunding website. "Real estate is a vital aspect of identity and brand; from fundamental infrastructure to iconic landmarks, people identify with the real estate in which they live, work, play, and learn. Today, for any real estate project to succeed, it must be investment-worthy from the start and appeal to multiple public and private stakeholders with different bottom lines. Whether the goal is social or commercial development, early capital is increasingly difficult to attract. Traditional sources are still recovering from the financial crisis, foundation budgets are shrinking for social development competitions, and commercial developers require more equity to start and finish a project." Model Behaviors C S e c on da r y M a r k e t a na ly t ic s rowdfunding, according to the AIA study, can take many forms. "Reward-based crowdfunding is the most commonly known model," the study said. "Here, the campaign owner offers something tangible in return for the raised funds. In contrast to donation-based crowdfunding, offering rewards opens up funding from individuals that do not necessarily agree with or feel an emotional attachment to the reason behind the campaign but, simply put, are intrigued by the offered rewards. This type of crowdfunding was first adopted by independent artists, who have used the model to presell music, movies, tickets, etc. Recently, most of the capital being raised in this category has shifted to established companies, who use the reward-based model as a means to test the market before making their product." In some cases, crowdfunding could be a substitute for or a natural extension of the practice used in some cultures to pool savings. In this model, a particular group helps one member of an extended family buy a home. Afterward, the group helps another family member, an approach that might appease lenders. "With a family organization, there's a sense of camaraderie and of accountability," said Caldwell-Tautges. "This would lead to a sense of responsibility to keep current on the loan/ investment or to even pay it back or return the favor for another member down the road. The odds of unscrupulous activity would be lower if it's a 'family organization' versus an unknown person asking for funding." The AIA study, detailed three successful campaigns—none for an individual residential home: The "I Make Rotterdam" initiative recreated the inner city of Rotterdam, the Netherlands, and facilitated a more pedestrianfriendly environment; Boston-based special 64 | The M Report interest group "Franklin Park Coalition" was created to activate the local community that made use of the park; and a local independent group initiated the "Rebuild the Joplin Mosque" following the heavy thunderstorms and tornadoes that struck Joplin, Missouri, in 2011. And there are other crowdfunding campaigns aimed at helping others. Crystal Dawn in Alaska used crowdfunding for a needy family. "My husband works at an alternative school. Many of the students are homeless. Many of them are homeless parents," she said in her appeal. "There is a young lady who attends his school who has a little girl enrolled in the daycare at the school. The student lives in very poor conditions but is trying to make a better life for herself and her daughter by attending school. She has no support from parents or other family members. Her only projected income this winter is her PFD (Alaska Permanent Fund Dividend). She is going to use it to fix up her current home. My husband and I have found volunteers to help repair her home or even build her a new one if we can gather enough resources. Many people have offered to donate their time. It takes a village to raise a child; we all know that. Those of us that have lived in villages know that when someone is in need, we come together and help them. We have contractors willing to donate some materials, a construction crew ready to build, and all we need is some money to help to purchase the rest of the materials to build a new home for this young lady and her beautiful daughter. Any amount will help." She raised $11,876 of the $10,000 she said she needed. Caldwell-Tautges isn't convinced. "Crowdfunding is gaining some ground as a way to fund startups," he said. "In our industry, it has funded projects in the commercial real estate market, where companies like allow individuals to jointly invest in local business real estate. This seems like an interesting way to create a strong sense of shared community—you can eat at the restaurant or shop in the store in 'your' building and receive a share of the rent and profits. It seems to have more immediate rewards for investors." For home finance, he added, "I wonder about the sustainability of crowdfunding. Even if a person is able to achieve homeownership through this alternative funding source, it is important to make certain that the person can sustain ownership. As recent trends have demonstrated, just putting people in homes is not enough. We want people to be able to stay in their homes. That's a successful model!"

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