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Source: Corina Vanek / Phoenix Business Journal

Arizona’s first crowdfunding real estate business funded its first project with time to spare.

Neighborhood Ventures, the brainchild of Jamison Manwaring, a former Goldman Sachs tech analyst and Lifelock executive, and John Kobierowski, senior managing partner and co-founder of ABI Multifamily, raised $500,000 from about 100 investors to purchase an apartment complex in Tempe as the group’s first investment.

The Arizona Legislature and Gov. Doug Ducey approved a crowdfunding law in 2015 to encourage investment in startups and other business ventures, including real estate.

“We want to empower the working class to be able to grow their wealth through commercial real estate,” Manwaring said. The campaign for the first investment closed five days early because the group reached the maximum investment much earlier than anticipated.

The first purchase, a 12-unit apartment building in Tempe, was a prime candidate for Neighborhood Ventures, because of its prime location and need for some rehabilitation. The project will be called Venture on Wilson and is on Wilson Street in downtown Tempe.

"We find properties that need a spruce up," Manwaring said. "We remodel the outside and inside, stablilize the rent."

Areas such as downtown Phoenix, Tempe and downtown Scottsdale are target locations for future investments because they become desirable places to live, are walkable to many amenities like restaurants, shopping and other resources.

The group plans to sell the first complex in about three years. Manwaring said the model is to sell properties within two to four years.

All investors must be Arizona residents, because the company operates under Arizona’s crowdfunding laws.

“The appeal for these 100 folks is they can drive by it and see the progress,” Manwaring said. “People are able to stay involved. It’s not just a fund that people can’t see.”

The maximum the law allows someone to invest in a crowdfunding project is $10,000, and Neighborhood Ventures requires a minimum $1,000 investment.

The company aims to operate with relatively little debt to help secure the investments in the case of a financial downturn. Manwaring said they are under 65 percent debt for the first project.

Manwaring and his team are using software that allows investors to see investment project updates, which helps the team communicate with investors and manage each one.

“Before the internet and software, there would be no way to manage 100 investors on a project,” Manwaring said.

Arizona law allows a crowdfunding campaign to last for a maximum of one year. If the campaign does not raise its target amount during its stated time period, the money raised by the campaign is given back to the investors, Manwaring said.

On the first project, investors are to receive a 12 percent preferred return. Neighborhood Ventures also plans to put between 5 and 10 percent of the company’s money in common equity into each project. Manwaring said most of the money will be made from the project's sale.

So far, there have been “very few wealthy people invested in the project,” Manwaring said. Investors include retirees, nurses and young people interested in building a portfolio but would not have enough money to invest in real estate under the laws before crowdfunding.

Omar Abdallah, a recent law school graduate from Arizona State University, said he always wanted to invest in real estate but did not have the money to invest traditionally. He invested $1,000 in the first project after reading about it from real estate publications online.

“Crowdfunding real estate makes it possible for people like me to get in the game,” he said. Abdallah's goal was something to allow him to be a passive investor, but still enjoy some cash flow from the rent, and hopefully make a profit from the eventual sale.

“With any investment, there is going to be risk, but I’m confident that demand will be high and that Phoenix is a really great place to invest in real estate,” Abdallah said.

Manwaring said Neighborhood Ventures has not announced its next project yet, but they plan to continue to offer more projects in upcoming years. The company is on target to complete two to four campaigns this year, with plans to double that number next year and double it again the following year.

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