Real estate investments are a dream come true for the average investor. Crowdfunded real estate is provide larger pools of investment from different sources in different countries. This method provides several advantages over traditional methods of investing in real estate.
A New Way to Spread Risks
Real estate is one of the best ways to protect against inflation but the barriers to entry prove to be significantly high for many, with high deposit requirements and seemingly unattainable mortgages. Crowdfunding platforms make real estate more affordable, essentially democratising the markets.
Crowdfunded real estate is not the same as collective real estate investing of the past. Crowdfunded real estate gives investors access to larger pools of other investors through the internet.
Crowdfunding platforms may provide investor dashboards which show the performance of investments and other key metrics which users can use to make decisions on their property.
Investing in real estate through crowdfunding mediums typically does not require high amounts of capital like conventional methods of real estate investments. The financial burden of the investment can be shared between a large group of individuals which means the expenses per individual investor is relatively low. Investors have the benefit of being able to maintain some form of control over the investment while lowering costs.
Ease of Investments
Unlike conventional real estate investments, crowdfunded real estate can be much faster for investors to acquire. Less paperwork is required to invest in real estate through crowdfunding platforms. Conventional methods of investing in real estate may take months to execute. Investments on real estate crowdfunding platforms can be executed in an afternoon.
The importance of carrying out through due diligence on crowdfunding platforms cannot be stressed enough. Carrying out research on the track record of crowdfunding platforms, their users, and reviews can reveal red flags that help to avoid high risk investments. This saves a lot of costs.
It is important to look for crowdfunding platforms that are as transparent as possible. Platforms should provide adequate frequency of communication on investment risks and investments. Such platforms are typically more trustworthy than platforms which offer little communication. An investor should be able to have a good understanding of the risk implications of their investment.
Lower Costs of Crowdfunded Real Estate
One of the greatest advantages crowdfunding real estate platforms have over other methods of real estate investment is in the fact that they do not charge investment fees. This allows for greater return on investment. Property fees are typically very significant, cutting into profits.
Despite the advantages, crowdfunding platforms pose a higher risk of investment default than peer-to-peer and direct real estate investments. There is a significant lack of liquidity in real estate crowdfunding sector. The absence of a secondary market reduces the opportunities for investors to make sales.
Crowdfunding platforms do not completely protect investors from the downturns of the real estate investment markets. While an investor may not put as much money as stake on a crowdfunding platform,their investments may remain exposed to falls in market prices of real estate.
Calvin Ebun-Amu is passionate about finance and technology. While studying his bachelor’s degree, he found himself using his spare time to research and write about finance. Calvin is particularly fascinated by economics and risk management. When he’s not writing, he’s reading a book or article on risk and uncertainty by his favourite non-fiction author, Nassim Nicholas Taleb. Calvin has a bachelors degree in law and a post-graduate diploma in business.