Crowdfunding the Fair-Haired Dumbbell
In 2007, I was a fresh-faced engineer working my first job after graduation and a year of travel. Flush with cash relative to years of penurious living, I wanted to invest my money, and not in old project cars like the above.
My reading list at the time was full of books about Warren Buffett and other money managers. Armed with tactics, I thought I could beat the market. I spent hours each day poring over stock charts, pretending I knew what I was doing.
I didn’t. When the 2008 financial meltdown nuked the market, I got hammered with (most) everyone else. Unfortunately, I had to sell at the bottom to free up cash after quitting my job, locking in the losses. My brilliant wife held onto her stocks through the chaos and came out way ahead.
What We Do Now
Eight years later, my investing style is much different. We mostly invest in index funds and via the stocks of a few companies whose services we use and like (e.g. Amazon, Netflix, Apple). I prefer set-and-forget weekly or monthly auto-investments through Wealthfront. This allows me to rarely think about the market crashing, burning, or whatever strong words the news uses for a 1% daily change. THE SKY IS FALLING! BUY GOLD AND PALLETS OF AMMO!
We also invest in what we know: real estate. Specifically, real estate in Portland, refuge for water-starved Californians searching for sub-seven-figure properties.
The problem is that single family real estate is a long-term play and requires managing the property, finding tenants, and being actively involved. On the other hand, commercial properties require a ton of cash to access or you have to buy a generic real estate investment trust (REIT) that holds shopping malls in the Midwest or office buildings in Florida. *Yawn*
As an alternative, we recently invested in a fun, different building named the Fair-Haired Dumbbell that breaks ground soon. A local developer (and cool dude) named Kevin Cavenaugh from Guerrilla Development is the brains behind this idea. They’ve done other interesting, successful projects in Portland, and this latest will house creative professionals on Portland’s east side. Update July 2016: Here’s a take on the project by the New York Times.
Why Do You Care?
We invested because we support Guerrilla’s mission to keep Portland awesome/weird and not just build boring structures with no zing. The exterior skin is a pattern by an Italian designer. Crazy, ugly, cool? At least it’s different.
Secondly, the Dumbbell is one of the first buildings in the country to use crowdfunding for part of its financing.
To do this, Kevin and Guerrilla Development worked to create an SEC-approved “Regulation A” offering. Basically, it’s a Kickstarter-style way to fund $1.5mm in equity in the Dumbbell. This allows someone to invest as little as $3,000 and get an 8% return from a chunk of the building profits. Certainly $3k isn’t chump change, but where else can you invest in a building for so little?
Sound intriguing? Check out Guerrilla’s investor page or watch their fun video about the project and why they crowdfunded it. We believe in this project and have recommended it to a number of friends. (Heads up that due to SEC regulations, this is only available to people who live in Washington, Oregon, California, Massachusetts, Virginia, and Washington D.C.)
I don’t benefit from writing about this, but merely love that crowdfunding opens commercial real estate to people who otherwise wouldn’t have access to it. I think (and hope!) we’ll be seeing a lot more of this type of financing structure in the future.
Dig this kind of article? Email me if you’d like to hear more about how we invest, what services we use, and other financial-related writing. If you’re into it, I may write more like it in the future.