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The Advantages of Real Estate Crowdfunding for Investors

Real estate has been the foundation and expression of wealth for centuries. In fact, most historians tie growth in ownership of land as the root and creator of most multi-generational wealth and investment until the last two centuries.

Real Estate Investments with Crowdfunding

Real Estate Investing for the Individual Investor

For some time, investors who want to benefit from owning real estate have been able to use a number of different approaches. This includes buying a property (home or commercial) and an individual, purchasing an interest in a Real Estate Investment Trust, or REIT, or through partnerships. Each of these methods of investing have their own advantages and disadvantages.

Today, both technology and new ways of using that technology have opened the doors to real estate investment in exciting new ways. The use of crowdfunding is an increasingly popular way for developers to access the working capital they need to develop projects. Once a new project is funded and then completed, the final buyers purchase the property and secure new financing.

Once this process is completed, a cycle that normally takes 24 to 36 months, the developer repays the crowdfunders and starts another project. This creates a win-win-win situation where the developer has needed funds without the hassle of using a bank or other traditional lender, the investors make an attractive return, and purchasers have a larger selection of properties from which to choose.

The Built-In Advantages to Crowdfunding

The use of crowdfunding as a way to participate in real estate deals is growing in popularity and the volume of money invested. The reasons for this growth are many, including:

  • Availability of low-levels of investment. Investors can find multiple offerings with a wide range of amounts needed to participate. Some projects are available with as little as 500 Euro units.
  • Short-term investment periods. There are a wide range of investment options for periods as short as a year and seldom over 36 months. This avoids the traditionally longer-term periods involved, especially if buying a property individually.
  • Absence of investment fees. An attractive feature of most crowdfunding opportunities is that there are no investment fees. When investing in REITs or buying an individual property the fees can be substantial, and these expenses eat in to the profitability of each investment. With no investment fees, a crowdfunding ROI is often much more attractive when comparing final numbers.
  • Transparency of the transaction. Members of a crowdfunding project know exactly where their funds are going and to which property. While the crowdfund itself is a pool, it is very different from the larger real estate investment pools that spread money over a large number of properties and even countries.

Ability to Work with Proven Experts

One of the most attractive aspects of crowdfunding investors is the ability to invest in multiple projects over time through a trusted and proven crowdfunding platform. Developers pass a vetting process to be included in acceptable projects offered to the crowdfunding platform investors.

This in turn gives the investors the opportunity to "shop" a number of different projects that offer different terms and interest rates. The process also offers full flexibility to the investors, allowing them to pick and choose the deals they find most attractive. Investors can invest in one deal and wait until it is completed, or they can add one or more projects to their portfolio as they desire.

The Diversified Portfolio as Wise Investing

Modern investors understand the importance of diversifying their investments over a number of different investment classes, and within the investment classes themselves. Such proper diversification is proven to increase overall long-term returns on an investment portfolio while reducing the potential of significant losses from market cycles.

With real estate standing as an important way to protect against inflation and maintain purchasing power in a portfolio, it is an important part of diversification. Real estate also provides a number of potential tax advantaged investment strategies.

For everyone from the new real estate investor to the most experienced of investors, crowdfunding presents a new and powerful way to generate attractive returns from different types of real estate projects. It is worth taking the time to explore how a quality crowdfunding platform can help meet investment goals by making real estate an affordable opportunity.