Crowdfunding - What You Need To Know To Stay Ahead of the Herd

What Is Real Estate Crowdfunding?

Firstly, crowdfunding is the pooling of funds from a group of investors. Secondly, it is the dedication of that capital towards a real estate project. Individual investors see an initial ROI from rental income and then a profit from the sale of the property. In the past, this investment was the territory of the wealthy or the experienced. Lately, the platform has expanded to make itself available to first time buyers and beyond. According to Forbes Magazine, the trend is here to stay. “By 2025, the crowdfunding industry as a whole is anticipated to be valued at more than $300 billion. Consequently, online real estate marketplaces are primed to capitalize on that explosive growth.”

As exciting as this kind of investing is, it is still a relatively new model.  As with any trend or new investment there are pros and cons to consider.

Pros

  • With crowdfunding, minimal initial capital is needed. In some cases, as little as $500 is needed to start.Furthermore, potential investors can find a wide range of amounts and opportunities.
  • Crowdfunding is helping to revitalize decaying markets. Most opportunities can be found in undervalued metropolitan areas. Consequently, as these areas gentrify, property prices and ROI’s skyrocket.
  • Unlike REITS, or real estate investment trusts, crowdfunding gives investors the opportunity to choose the property they fund.

Cons

  • Because the platform is relatively new, there is not much validating data available. Consequently, it’s difficult for investors to analyze or predict long term returns.
  • Within the platform, rapid turnaround on investment is non-existent. Most crowdfunding require a commitment to hold the property for as many as five years.
  • Liquidity is problematic. Crowdfunding does not guarantee instant access to returns.
    If you would like more information on this or  any other real estate investment please visit our site and contact us for consultation!

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