Daniel Summers has been in the real estate business since 1976. He’s seen a lot. He might even tell you he’s seen it all.
But about 18 months ago, something new caught his attention. Something that made even this veteran businessman take notice.
That something is “crowdfunding” of real estate, which in 2013 produced about $400 million in equity financing, he said.
By the end of 2014, that figure had jumped to $1 billion – with a “B”.
Then it hit $2.57 billion – also with a “B” – in 2015.
Over the next five years, he said, real estate crowdfunding is expected to raise some $150 billion for real estate investment. That would make anyone sit up and take notice.
Summers is CEO at IHT Realty Group, LLC, in Jacksonville. He joined us on the most recent Fried On Business show to talk about IHT Realty Group, which is a spin-off from IHT Capital Advisors specifically designed to facilitate the real estate crowdfunding platform.
IHT stands for Integrity, Honesty and Transparency, Summers said, and IHT Realty Group’s crowdfunding emphasis allows individual investors to invest in “big boy” deals.
It – crowdfunding – is the marriage between technology and real estate, he said. Old opportunities are marketed via social media, so to speak.
Now, Dan and I both agree that – regardless of how the investment is promoted – at the end of the day it’s still real estate. Which means that an investor needs a reliable and competent partner who can do underwriting on the deal.
“It’s still real estate at its bare essence. So, no matter what company you elect to invest through or with, make sure that in fact that the owners of that company have a strong real estate due diligence team,” he said.
IHT works with accredited investors as defined by the Securities and Exchange Commission under Rule 506 of Regulation D.
Not only do they check out the investors, they also check out the sponsors who place investments on their site – ihtrealty.com – Summers said.
“We look at 100 deals a month, and maybe pick four or five at the end of the day. Underwriting the sponsor is as important, if not more important, than underwriting the financials and the bricks and mortar of the deal itself,” he said.
Crowdfunding and diversification
Crowdfunding allows the investor to investigate a menu of opportunities in a variety of geographic locations and socioeconomic conditions, Summers said, as well as asset classes.
IHT originally operated in the Florida market, but now is expanding into North Carolina, Wyoming and Las Vegas. IHT does a physical inspection and underwriting of every asset, Summers said, and the majority of investments are through IRA custodians.
“If you have an IRA that’s earning 0.01% in some Treasury bill or Treasury bond, there’s no reason why you should let it languish there. You should align yourself with a custodian which will allow you – the IRA holder – to become self-directed,” he said.
“Tell the custodian that you want to take $100,000 or $10,000 and direct it into one of IHT Realty’s debt programs or equity programs. The IRA is really an untapped opportunity for the crowdfunding industry.”
For accredited investors, Summers said, some investments can be as low as $5,000 or even $1,000. Returns on equity deals can be as high as 16% to 18%, he said, and debt returns can reach 8% to 10%, depending on the risk.
This was a fantastic interview, and we talked about a lot more, including:
– The international footprint among IHT’s investors.
– What property types interest IHT as this time.
– What internal rate of return IHT requires to bring a property into the equity program.
– Why crowdfunding is akin to online syndication.
Click here to listen to the full interview with Daniel Summers, CEO at IHT Realty Group, LLC, in Jacksonville.
