Crowdfunding is an interesting new source of investment income for a variety of businesses. It is a potentially useful way to tap into new sources of equity, and it also makes a good potential source of marketing. Developers can accomplish two goals at the same time- bringing in some money for a real estate development and spreading some buzz about the project among potential buyers and other investors at the same time. Crowdfunding has the power to bring in money from sources that might otherwise go unexplored.
The basic idea of crowdfunding is simple. There are several different platforms for crowdfunding on which one can try to find fundings for different kind of enterprises - the most popular ones being for startups and real estate projects.
Crowdfunding platforms offer the informations needed for investors about the specific project, e.g. information about the project, pictures, videos, and descriptions about what the project will be and who stands behind it. The quality and success of the different campaigns, respectively projects, depends on the quality of the platform itself and on the value, that it brings to potential investors.
Nevertheless, Crowdfunding campaigns on these various platforms are gaining a lot of popularity because they can attract a significant amount of money without needing to give away ownership or control over the project. They also lead to a lot of organic buzz, so they are perfect for marketing. The campaigns are easy to share on social media pages, so news about them can spread quickly. There are two good results that can come from going viral. The first is that more people will contribute money, because they learn about the campaign through the buzz and decide that they want to be involved. It is also just good for more people to be aware of the project. In that sense, the campaign is a marketing campaign just as much as a form of investment.
The question of locating sources for financing and funding has become particularly important in the real estate sector as a result of the Basel II and Basel III rules. The new rules increase bank capital requirements, so banks need to hold onto a larger percentage of their assets in capital. That means that banks all over the world will now be less willing to lend money to real estate developers. As a result, bank financing is less available than it used to be, particularly considering the uncertainty surrounding China and how that affects central banks' postures towards interest rates. The fact that traditional sources are no longer coming through means that it is a good time to look into such new means of acquiring funding.
Crowdfunding is getting more and more on the radar of real estate developers. The reality of Basel II and III and the continuing post-2008 softness in the financial world means that now is the time to explore alternatives to the previously common used financing methods. It is still a good time to build, because there is pent-up consumer demand for many forms of real estate, but that demand has not reached through to the banks who traditionally extend real estate loans. Developers need to consider crowdfunding as a way to fill in the gaps of lending and financing.