Crowdfunding is a concept that has been growing over the past few years, allowing individuals and businesses to raise money quickly. For those who don’t know, crowdfunding is exactly what it sounds like: raising funds through crowd donation. It enables many people to invest a small amount and in turn, allows individuals and businesses to raise a lot of money quickly. In the real estate industry, it allows businesses to reach investors they would have never reached otherwise.
Crowdfunding In Real Estate
Real estate crowdfunding is fairly new, becoming an option in 2012 after the Jumpstart Our Business Startups Act opened the possibility for this form of fundraising. It has become a way to raise capital from retail investors.
Pros for real estate crowdfunding:
- Investors can invest small amounts of money
- Developers can raise money quickly
- Developers have access to more investors in the market
- Investors can choose which real estate projects they want to invest their money in
- Investors have a say over the project
- Investors can invest in multiple real estate projects
- Investors get to work directly with the developers
- Investors have direct access to investment opportunities and can now browse real estate online, research and make informed decisions from their homes
Cons for real estate crowdfunding:
- If the market drops, investors will lose money
- The risk for investors is higher than with the traditional real estate investment funding
- Easy selling access is restricted due to A lack of liquidity, or the ability for the real estate to be bought or sold quickly in the market
Investors can just go online to look for real estate opportunities through crowdfunding sites. When working with a crowdfunding company, investors should definitely look for a well-established company with a lot of capital of its own. Do your research before making an investment. Too many people go with young companies with no capital. Go with a company that excels in its customer service through the development as well as when it closes.