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Asset Avenue, an online real-estate investment crowdfunding site, has just raised $3 million in funding. The round was led by Matrix Partners and NetEase, and included investments from Vector Ventures, BAM Ventures, Launchpad LA and Russ Meyer.
Asset Avenue pools money from investors to make real estate loans. That is in contrast to other real estate crowdfunding sites, like LA-based Realty Mogul, which sell real estate equity. The startup believes by allowing investors to buy Senior Debt notes they are offering a lower risk investment vehicle into the real estate market. The Senior Debt notes are backed by real estate equity and Asset Avenue claims that debt repayment offers a more consistent cash flow than speculating on the value of real estate equity.
“A lot of the entrepreneurs I’ve met on the equity side have not had much actual experience in the real estate development market,” said Matrix general partner Josh Hannah to the Wall Street Journal. “What they’ve seen is crowdfunding models from Kickstarter to AngelList getting hype, and they view [real estate] as an interesting asset class. But they’re coming in with limited background in the actual domain.”
To hedge against the risk of ignorant investors Asset Avenue’s underwriting team vets a large number of factors before approving loans for pooled investments. According to the company’s website the loans offer a monthly cash flow with a projected seven to 12 percent annual return. Possible investments can range from $5000 to $10 million. Loan repayment options range from six months to five years. To invest with Asset Avenue you have to be an accredited investor, which means you have to have a consistent income of at least $200,000 per year, a joint income of at least $300,000, or more than $1 million in net worth.
Asset Avenue makes its money by charging a one percent fee on all loans issued through the website.
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