Community Reinvestment Through Crowdfunding
Detroit-based startup Cooperative Capital is making it possible for neighbors to reinvest in their communities by pooling smaller investments together to fund larger projects. Like many former industrial strongholds, Detroit is plagued with blighted properties in need of repair or remodel. Cooperative Capital’s mission statement is “to build up communities with the direct participation of the community.” Through this funding program, community members are able to facilitate redevelopment, build stronger neighborhoods, and even profit from their investment.
The renovation of a damaged property, like a foreclosed home, can cost anywhere from $30,000 to $70,000. While this investment may be reasonable for seasoned real estate investors, an average person living in the community may not be able to shoulder the burden alone. Cooperative Capital defines itself as a “cooperative private equity firm.” In its first fund, expected to launch this year, residents can buy in with a minimum of $1,000 and a maximum of $10,000. Each $1,000 increment gives the investor one vote. Investors will then vote on which projects they deem most necessary for redevelopment.
Like any venture fund, Cooperative Capital will charge a small management fee, and other fees depending on the threshold of capital. The firm hopes to return investors with at least 6% of their investment annually. The first fund will focus initially on Detroit real estate, but the same model will eventually be expanded to include local businesses. If the investments in Detroit are successful, Cooperative Capital hopes to expand to other struggling Michigan cities like Flint, and eventually reach as far as Oakland, Chicago, and Baltimore.
Cooperative Capital CEO, Kwaku Osei’s goal was to “create a situation where residents were able to come together to collectively invest and build up our community in a way that everyone benefits.” He hopes that through Cooperative Capital projects, rehabbed homes will increase property values, local businesses will be able to thrive and create jobs, and the money generated will be reinvested into continued neighborhood growth.
Sources: Cooperative Capital, Fast Company