Points To Ponder In Real Estate Crowdfunding

By : Silky Malhotra

27 September, 2016

Crowdfunding has become the latest trend these days that has been taken well specially in real estate industry. Crowdfunding basically refers to a method where one can raise capital through collective funds of his family, friends, customers and individual investors. The term has been redefined in context of real estate sector where it has become a most profitable way to earn passive income. Besides being profitable it is also an easy and quick method where one can just sign up on a crowdfunding site and in a couple of minutes select his perfect investment opportunity. It is not only beneficial for the real estate companies and the investors but the overall real estate industry also. Both the investors and realty developers are able to spread their risks through crowdfunding and can reap good financial returns. The investors on the other hand get easy access to the property market by investing comparatively smaller amounts of money and can get the opportunity to work directly with the developers and have a say in the entire process along with having a control on their investment. Since there are a slew of projects available, they can wisely take a decision to invest their capital with the project of their choice.

Real estate crowdfunding has been popular since ages where relatives of a family put their money together in one common pool and bought some property. Several investment firms have also pooled their funds to purchase grand land parcels. However, the main difference between crowdfunding in today’s date and the collective investment of the past is the facility of initiating everything online and having an access to the distribution platform.

Though the method is still in its infant stage, but it will soon transform the way individuals and investors search and make investments in real estate. However, this rapid growth momentum means that there are certain things to be kept in mind before getting started and opting for a platform to make a capital investment.

1.    It's not necessary to be filthy rich: Initially it was required that the investors need to be accredited and recognized and have a particular minimum amount of annual income but this criterion didn’t really go well with the investors. Now the realty experts have made real estate crowdfunding open for general public and without any annual income clause. Most of these sites only require a minimum investing income and that is the reason even people with lower financial resources can sign up.

2.    Myriad of property options: Real estate crowdfunding gives you the option of choosing from amongst different properties available and choose the one with you are most comfortable with. There are several properties available be it in commercial segment or single or multifamily residences. Many a time investors prefer opting for smaller residential properties due to the complex financing involved with the larger ones.  There are some others who invest in commercial real estate due to the benefit of diversifying the risks involved.

3.    Lower Risks: Real estate crowdfunding allows you to spread the funds to be invested across multiple properties and reduce the burden of losses incurred in case any. While investing via a REIT, the investors need to deposit 25% of property value. For example if a property is for Rs 30,00,000, he need to pay Rs 7,50,000 and invest in just one property but in case of crowd funding , he can invest the same amount in smaller portions in several different properties, thus reducing the risks.

4.     Smart way to earn passive income: It is the easiest and most hassle-free method to earn quick passive income as it is like funding your investment and watching your wealth accumulate. You don’t need to monitor your investment regularly and in case you opt for a site that prefunds their deals, you will start getting immediate returns.

5.    Not a pooled investment:  REIT’s are unsecure and unpredictable with little or no security. Whereas this method gives you a complete freedom to make your own choice in regards to the property and amount to be invested. Several projects are secured by personal guarantees or first lien positions.

Hence, real estate crowdfunding is the latest buzzword amongst investors and is completely changing the way property investments are being done whether residential or commercial. It is taking the world by storm and is a safe and secure method to increase your income and project portfolio.

What are you waiting for….get up and get started….sign up online….make an investment and start earning today!