Neighborhood Ventures crowdfunding model opens door for new investors

Real Estate | 28 Oct |

It’s been three years since Jamison Manwaring and John Kobierowski decided it was the perfect time to try something new in the world of multifamily investment and redevelopment. The pair founded Neighborhood Ventures, which utilizes “crowdfunding” to raise capital for redevelopment projects. The three-year anniversary of the company’s founding comes in a year in which Neighborhood Ventures is working on its fourth and largest project and has seen its vision embraced by 478 individual investors.

“To get a person to write a check for an investment where they could lose it all, to get almost 500 of those, is no small task,” said Manwaring, whose career started as a technology analyst for Goldman Sachs before he served as Vice President of investor relations for LifeLock. “We’ve learned a lot about talking to investors, communicating, keeping them informed and involved. Our investors are really happy. They are engaged with us, which is the most important thing to me.”

Neighborhood Ventures’ investor pool isn’t drawn from the list of Arizona’s most wealthy residents. Investors in the company can put down a minimum of $1,000 and the average investment across all four projects is just over $5,300.

Neighborhood Ventures’ first project, the 12-unit Venture on Wilson in Tempe, took six months to raise the $500,000 that was needed to fully renovate the property. After the funds are raised, Neighborhood Ventures comes in and fully updates each unit with upgraded flooring, kitchen cabinetry and appliances, as well as installing a washer and dryer in each unit. At Venture on Wilson, the renovations themselves took six months, as the company went through a serious learning curve on their first project.

“The remodel on the first one, we were trying to do everything through a management company and we quickly learned that they didn’t have the capabilities to do that, so I had to jump in and basically jockey that whole thing and show up every day on the property,” said Kobierowski, who has held on to his “day job” as senior managing partner for ABI Multifamily, one of the top multifamily brokerages in the Valley. “Now we have staff, we now have a really phenomenal construction manager. We now have a designer who is totally in tune with both the types of materials we need and the price point and the functionality of it, so all of that stuff plays into getting the project done and we’re ahead of things now.”

As the company shook off the growing pains of the first project, all of that knowledge has paid off on the next three. Project number two, Venture on Marlette, needed just 60 days to raise $600,000 as word spread among people looking for ways to invest in commercial real estate without needing huge sums of capital.

“We had an open house at one of our properties, Venture at Villa Hermosa, and more than 60 investors came out to talk with us,” Manwaring said. “One of the first investors at the event was this guy driving his mail truck. It hit me that this guy, he could never invest in something like this and he told me how much he loved what we were doing. He never thought he could be an investor in real estate projects until he saw what we were doing.”

Everything that Neighborhood Ventures is doing, it is doing better each time out. Renovations on the 12-unit Venture on Marlette project took just three months, and Manwaring said the Venture on 66th project, which is an 8-unit AirBnB complex in Scottsdale, took just under four months from start to completion.

“We’ve learned a lot and I think that’s part of the whole experience, figuring out what you can do better and what we need to do more of,” said Kobierowski. “We realize what our niche is, what kinds of properties to buy, where to buy, how big the pool of investors is in Arizona. Our projects are moving faster, our construction is getting better, our delivery is better, our returns have been stronger. We’re getting better building where we have better people working for us. It’s been fun and it’s been quite a learning experience the whole time.”

The latest project is the companies’ largest, a 14-unit AirBnB complex called Venture at Villa Hermosa in Phoenix. The funding for that project, which drew 161 investors, took 90 days and produced $894,000.

For investors with Neighborhood Ventures, when the properties start collecting rents, each investor gets an annual distribution from those funds. Originally, Manwaring felt a three percent annual return would be the target, but currently, investors in the Venture on Wilson project are receiving a six percent distribution. Manwaring said before Neighborhood Ventures remodeled that project, it was generating, on average, $770 per unit. Now, that complex is generating $1,100 per unit.

“Rents haven’t gone up this year because of everything that’s happening, but they have been steady,” Manwaring said. “To see that sort of increase per unit, 30 to 40 percent, that’s the sort of increase that we and our investors want to see.”

Manwaring said that his promise to investors on each project is a liquidity event by two or three years, depending on the project. So, for the Venture on Wilson investors, that event is scheduled to come in July of 2021. The company will be mindful, however, of the timing in the market to make sure the investors get a solid rate of return.

The co-founders are looking forward to seeing their first project finish its cycle with their company so they can demonstrate to potential investors what a completed project looks like.

“The thing about finance and investments, stability and history and repeatability is so important,” Kobierowski said. “Once we get our first project done and we pay out everything on it, it will be pretty obvious how well our process works.

“When we sell our first project, I’m going to be excited about it, but it’s just the next step. It’s the continuation of the first one. Personally and for our company, that’s important for us. It shows completion of a project, a successful project ticket from start to finish.”

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