In the past few years, there has been an explosion of crowdfunding and crowd-investing as an ideal method of raising capital across all industries. It has been a buzzword amongst investors and has found a home in real estate investing since it allows investors to put their money directly on real estate without the need to deal with an intermediary.
Whilst it is still in its infancy stage, it is already changing the real estate atmosphere. This new method of real estate investing has advantages not only for investors but also for the whole industry as well.
Traditional Real Estate Investing
Before the crowdfunding boom, private real estate investing is all about your personal connections. Access to private deals is only given to those who know who. So having good connections is important. As soon as an investor locates a private investment, they would have to fund it and they need to raise at least money in the six-figure range.
These skyrocket funding and inaccessibility limited investment portfolio of average investors. Since fewer investors are willing to shell out as much money, real estate developers often have difficulty raising the needed capital for their projects.
Crowdfunding Eased Real Estate Investment
The introduction of crowdfunding in real estate enabled startups and small businesses to join the big wigs as they are able to raise more funds with much ease that in 2015 along, hundreds of millions of dollars were raised via crowdfunding for real estate.
Instead of depending on connections to identify real estate deals and shelling out hundreds of thousands into a single deal, crowdfunding allows investors to access real estate deals from their tablets or laptops. Now, investors have easier access to pre-vetted deals and start investing for as little as $1,000.
Changes in Real Estate Through Crowdfunding
Without the restrictions imposed on real estate investment, investors now have freedom. They enjoy the flexibility of diversifying their investments and not putting all their capital in one real estate project reducing potential risks.
Since real estate through crowdfunding is not limited to those with connections, investors have more exposure to different types of projects. They can choose what kinds of projects they want to invest more. Investors also have the chance to check the project and get familiar with it before funding it.
Since crowdfunding platforms offer investors with speed and efficiency more than banks and lenders, investors can grab more opportunities. Crowdfunding allows more people to join deals in raising funds, the time needed to fund the project is shorter. This translates to faster completion of projects and earlier return of investment.
The beauty of crowdfunding is its undeniable global reach. Investors are given more leeway when choosing projects they want to put their money on wherever they may be. Crowdfunding platforms provide investors all the information they need about a particular project and investors can choose to fund it through their online accounts. This means investors can have higher profits across different foreign currencies.