Ben Miller at a congressional hearing in 2013, discussing a crowdsourcing strategy his company has since moved away from. (Washington Post)

The pitch was simple: Locals know their neighborhood better than national real estate companies do, so they should be allowed to invest in it.

With their startup called Fundrise, brothers Ben and Daniel Miller of Washington offered just that, a chance for individuals to go online and invest as little as $100 in the storefront or development down the block.

The idea proved so popular that less than 18 months after introducing Fundrise as a way to “Build Your City” in 2012, the Millers had attracted $10 million from investors online and spawned dozens of imitators.

But now the company that helped create real estate crowdfunding is surrendering the strategy that made it a forerunner. In a series of regulatory filings in recent months, Fundrise disclosed that it is no longer accepting investments in singular properties, preventing individuals from buying a small stake in their neighborhood any longer.

Instead, Fundrise, based in Dupont Circle, has itself become a national real estate company, buying more than 60 properties from coast to coast and forming two subsidiaries that offer shares in larger portfolios.

Fundrise reports having raised $66.8 million in investments online. But in recent filings it disclosed that it had “wound down” a business that sourced dollars for other property owners and “ceased continuation” of seeking investments in its own individual properties, prompting real estate web site the Real Deal to write that the company had “abandoned” its crowdfunding technology. Fundrise now operates as a more traditional company called an equity real estate investment trust, or REIT.

The company now includes a disclaimer on its web site: “Fundrise’s services do not constitute ‘crowdfunding’ as described in” the Jumpstart Our Business Startups Act, the federal law that made crowdfunding legal.

Fundrise declined to say what motivated the change, saying only in a statement that the new format constituted not only “the next evolution in the mission of the company but a giant step forward in realizing the power of the internet to revolutionize how investing works.”

“We believe the eREIT model is superior to any other publicly available real estate investment today but recognize that ultimately our performance will be the measure of whether or not that is true,” Fundrise said.

The changes come as Fundrise undergoes leadership changes including the recent departures of co-founder Daniel Miller and of its former former chief financial officer, Michael McCord. McCord accused the company of ousting him after he said he alerted executives there to fraudulent behavior. Fundrise disputes the allegation.

[Fundrise CFO says he was ousted after alerting crowdfunding company of ‘serious fraudulent behavior’]

The new strategy also marks a turn away from the Millers’ egalitarian vision for local real estate investing that put Fundrise at the forefront of an industry. Andrew Dix, publisher of the industry website CrowdfundInsider.com, remembers the Millers hauling reams of paperwork to the Securities and Exchange Commission so they could launch their platform before competitors. Since then, crowdfunding has expanded dramatically. A new report released in April from researchers at the Cambridge University and University of Chicago business schools found that in the past three years real estate crowdfunding has more than tripled annually, to $483.8 million in 2015.

“They were doing something that no one else would want to do or did do due to sheer determination and I give them credit for that,” Dix said of the Millers. 

In its first quarterly report on the REIT, Fundrise said it was earning a 9.7 percent annualized return. It said it had committed $31.5 million to building a 13-property portfolio of properties in Atlanta, Los Angeles, New York, Memphis, Seattle, Pittsburgh, Phoenix and Richland, Wash. (The company lists the size and general type and location of the assets it has purchased, but it does not list their addresses, taxes or revenues.)

On April 28, the company emailed investors to say that it was creating a second REIT because the first was already 80 percent subscribed and there were over 56,000 people on the waitlist.

“I see Fundrise as a disruptive Internet finance firm and they continue to push forward with new ways to provide access to capital and access to investment opportunity for a broader audience,” Dix said.

Follow Jonathan O’Connell on Twitter: @oconnellpostbiz