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Crowdfunding Site Lets Rookie Real Estate Investors Get Piece of Bushwick

By Serena Dai | August 28, 2015 3:06pm | Updated on August 31, 2015 8:48am
 A rendering of 99 Scott Ave. in Bushwick.
A rendering of 99 Scott Ave. in Bushwick.
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Gernot Taschler of Creative Spaces

BUSHWICK — Becoming a Brooklyn real estate baron just got a little easier.

A new crowdfunding site for would-be real property investors called CityFunders announced its first Bushwick project, an event space at 99 Scott Ave. that is slated to eventually house office space, a winery and a beer garden.

The idea is that people who don't have the cash to invest in real estate on their own can use CityFunders to get a small slice of the action, said David Schorr, director of operations for the site.

A group of similar crowdfunding sites has cropped up in recent years, allowing inviduals to invest as little as $100 to get in on the action.

CityFunders, made up of longtime real estate professionals, vets the properties and chooses buildings in neighborhoods like Bushwick that they think are likely to make money, Schorr said.

"We feel strongly about giving the smaller investor the opportunity to invest in real estate," he said.

However, according to SEC rules, only "accredited investors" — those who have earned at least $200,000 per year for the last two years or have a net worth of more than $1 million — can put their money into CityFunder investments.

Additionally, people who do put money into the property technically won't own a part of it. Instead, they're loaning property owner Bushwack Capital money to develop it with the vision of a creative industrial center.

The one-year loan has a 10 percent annual interest rate that pays out every month, Schorr said, and after the loan is paid off, investors get their principal back.

CityFunders makes money because the investor pays a total of 12 percent interest, meaning the crowdfunding site keeps a 2 percent spread.

Despite restrictions, it's still an easy way for professionals without real estate experience — like dentists, lawyers and tech start-up workers, for example — to have some skin in the game in their neighborhood, with help from experts, Schorr said.

"What we are doing is democratizing real estate investing and making it available in that local community," he said.

Many of the investment options will be like 99 Scott Ave. — properties in neighborhoods with potential for growth.

Investors can already can choose from properties in Long Island City, Chinatown and Bushwick.

The industrial space at 99 Scott Ave., which has been operating this summer as an indoor-outdoor music pop-up called Brooklyn Mirage, is expected to start debuting its "creative businesses" as early as next spring, said Dawson Stellberger, managing partner of Bushwick Capital.

Once fully filled with tenants, rent income is expected to provide a net operating income of nearly $750,000 per year, according to the business plan.

No tenants have been officially announced yet, but they include a winery with a bar portion, a large beer garden, design offices and event space for live music.

Stellberger said that Bushwack Capital, unlike many developers investing in Brooklyn, intends to keep its local investment properties as creative commercial centers with an industrial vibe instead of turning them into residential lofts.

CityFunders, which invests cash upfront, is betting on its success — and hopes locals will, too.

"It's a really cool oppourtnity," Stellberger said. "There are a lot of people who are interested in Brooklyn and Bushwick. It gives people access to participate in the neighborhood and borough that is changing quickly."