Conklin: When done well, this is an extremely efficient and legitimate way to raise capital. Crowdfunding is a direct-to-investor model in which there are three participants: the online platform, the investor and the real estate sponsor. An effective online platform provides investors with diversification and deal flow, and helps with due diligence and vetting of sponsors. Examples of online platforms are CrowdStreet, RealtyMogul and RealtyShares. Investors seeking to build wealth via real estate benefit from high levels of communication and participation in the online community.

As a sponsor, Investors Management Group Inc. has only recently turned to crowdfunding as part of our equity-raising efforts. We are now a big proponent of online platforms that can connect us with accredited and educated investors who will grow our portfolio and company.

GlobeSt.com: What is the vetting process for sponsors looking for funding?

Conklin: A legitimate crowdfunding site will look at the sponsor's experience and the track record of the principals. Though future results are not guaranteed by past performance, there certainly is a correlation. In a nutshell, sponsors need credentials that demonstrate they can take an investment at this level and achieve the targeted returns. A strong team is important.

GlobeSt.com: From a sponsor's perspective, what are the advantages and challenges of crowdfunding?

Conklin: From IMG's perspective, crowdfunding has the advantage of reaching large numbers of qualified investors who have broad geographic interest in real estate. We are a dynamic company with an entrepreneurial mindset. At the start of this cycle, our equity came from institutional partners and family offices. As the cycle progressed, we recognized this form of equity was beginning to pull back so we pivoted to friends, family and referrals. At present, the cycle has matured and online investing has reached critical mass; therefore, we are pivoting once again and using crowdfunding to reach new investors and secure equity.

As for challenges, we have found that a majority of platforms keep a wall between sponsors and investors. The crowdfunding platform will assemble all the equity, so the sponsor never knows those investors, just the crowdfunding company itself. It's very hands-off. IMG's culture calls for a high level of communication and “touches” with our investors, which is why we now work with CrowdStreet, allowing us this direct relationship with our investors. We want to know with whom we are investing.

GlobeSt.com: From an investor's perspective, what are the advantages of crowdfunding?

Conklin: Investors can see many different opportunities that in the past were out of their reach. In addition, they now have access to a phenomenal amount of information presented to them in a very organized manner. They can analyze a property in Raleigh, Denver and Seattle, for example, and make a very informed decision in regards to investing.

GlobeSt.com: From an investor's perspective, what are the risks/challenges of crowdfunding?

Conklin: There's always a risk. Real estate goes in cycles. Always do the due diligence on the property and the sponsor of the real estate — a savvy investor will do that anyway. The risk is in the market, not in using a crowdfunding platform, which is merely the vehicle to connect investors with sponsors.