Considering Behin’s extensive knowledge of law, real estate and technology, it’s no wonder that he’s one of the most sought-after consultants in the business.
His most recent endeavor is CityFunders, an online platform for New York real estate investors. The idea behind the project is to make real estate investing, particularly in the exclusive and sophisticated Manhattan market, more accessible to the average person.
We sat down with Behin to get the scoop on the rise of crowdfunding in real estate, the New York market and what’s on the horizon for CityFunders.
BuzzBuzzHome: How did you come up with the idea for CityFunders and how did you bring it to life?
David Behin: After syndicating several successful properties, I realized there were a lot more people who wanted to invest in real estate but didn’t know how to make it happen. I asked around to see how I could publicize the investments and learned that the law said I couldn’t solicit investors for these types of ventures. The Jobs Act of 2012 changed everything, allowing for general solicitation of investors, but the law still had about a year left before becoming a final regulation.
In 2014, I got started on the business plan for CityFunders. Understanding the ins-and-outs of equity, I approached Jerry Swartz and Ayush Kapahi, founders of HKS Capital and my mortgage broker and lender on all of our deals, to understand the debt side of the real estate business. After a couple of hours, I walked out with partners for CityFunders and we were on our way. After several months of developing our business plan, we started executing it, building the website, getting our deals in place… and well, here we are.
BBH: Why do you think crowdfunding is becoming so popular today in real estate and investing?
DB: I think the popularity of crowdfunding is currently more hype than reality. As the business matures, however, I think it will become a formidable source of capital for real estate investment. The reasons are several fold. First of all, real estate investing, when done right, can lead to solid cash flow and profits. Secondly, the downside of real estate, when not overleveraged, is mitigated because you have a tangible asset backing the investment.
Plus, investors desire cash flow as part of their investment strategy, and real estate is a perfect avenue for that. Through crowdfunding, or syndications, you can benefit from real estate investing without having to do all the hard work – and it’s a lot of hard work. Finally, many people, like myself, have lost faith in the stock market because we can’t understand it and it’s not transparent. The pairing of real estate and crowdfunding is more so.
BBH: What borough are you finding has the most appeal to investors right now? Any particular neighborhood?
DB: As a Brooklyn native, I’d have to say Brooklyn is one of the most appealing boroughs because it’s such a great place to live and work, making it a great place to invest. But recently, Queens and The Bronx are showing a lot of strength as investments as well. Manhattan is, of course, extremely appealing, too, but at the prices of land and buildings today, you have to make doubly sure that the plan for the building is solid and the sponsor is extremely experienced.
As for neighborhoods, I’m a big fan of Prospect Lefferts Gardens in Brooklyn and Mott Haven in The Bronx these days.
BBH: Why do you think it’s important to give more people the opportunity to invest in New York City’s real estate?
DB: People want to invest in real estate because it’s a stable investment. I think NYC is one of the best places to invest because our metrics — employment, quality of life and housing — lend themselves to a great real estate market. While there are many crowdfunding companies out there, I feel my team and I, who have almost a century’s worth of experience and $85 billion in deals under our belt, can serve as the best stewards of people’s hard-earned capital.
So for people who want to invest in NYC real estate, I feel it’s important to provide them with what we are offering — the best opportunity to invest with a team that has solid real estate experience and uses the same level of analysis and discipline on each deal we post to the crowd as we have in the past for our own capital and our friends and family.
BBH: Do you see any potential risks with making real estate investment too accessible?
DB: Investing of any type has risks associated with it. In the worst case scenario, investors can lose some or all of their investment. While we do as much as we can to protect our investors from those risks, capital losses are a risk of any investment. I think the real risk is in the very unsophisticated investor getting duped or defrauded en masse. Hopefully, the industry is regulated enough to protect investors, but not so much that innovation is stymied.
BBH: How do you plan on protecting your investors, and your company, from those risks?
DB: Protecting our investors is our most important job at CityFunders. Our underwriting and due diligence of each deal we decide to pursue is rigorous. And before any deal is posted, we have a committee of NYC real estate pros who vote on each deal. If they don’t vote ‘yes,’ we don’t put it on CityFunders.
BBH: Crowdfunding is a busy space right now, what have you done to make CityFunders stand out in the marketplace?
DB: There is no other crowdfunding firm with the experience the CityFunders team has. My partner, Jerry Swartz, has been working in the NYC real estate market on the finance end for over 40 years. My other partner, Ayush Kapahi, has closed $4 billion in real estate transactions in the past four years. I’ve closed several billion dollars worth of deals in NYC at MNS Real Estate (formerly The Developers Group) but more importantly, I became an expert in how to create value in residential real estate throughout NYC. And with my partner and brother Albert, we’ve bought and added millions in value to assets we’ve purchased in the last few years.
As a real estate funding platform which is responsible for other people’s money, our experience is our prime differentiator, as is the quality of deals we offer.
BBH: Do you have any specific milestones you want to hit over the next six months? What can we expect to see in the coming months from you and your team?
DB: Like most startups, we’re looking for hockey-stick growth when it comes to our user base, as well as to continue to provide outstanding returns on a consistent basis to our community. You can expect to see more deals in more of NYC’s great neighborhoods from some best-in-class sponsors.
