Real estate crowdfunding is getting popular day by day all over the world. If we look at the recent past there were only a few investors in this market and only wealthy players seemed moderately interested in investing. But the last few years has changed this scenario. The increase in social media websites has contributed to an explosion in the number of real estate investing in real estate crowdfunding platforms. Today more than 70 platforms are operating in United States and to talk about the international market, the number is more than 100.
Thinking about the current condition of the industry, you might be considering entering in this world. Remember that real estate crowdfunding is not just for rich investors anymore rather nearly anyone can get involved in it. This is because the concept now works off the building of capital from a multitude of investors from all over the globe who work together to support any number of projects. Keeping that in mind however there are a few things you need to remember for further research on crowdfunding opportunities in real estate. Now, if you are really serious about investing in real estate crowdfunding here are a few facts that you really need to consider.
- Debt or Equity?
First you need to realize that which crowdfunding platform will work best for your needs and that means knowing the answers to basic questions before making the commitment:
➟It’s longevity in the market.
➟Number of projects that are already finished.
➟Amount of money that is already invested using the platform.
➟What feedback the older investors give about it?
➟Condition of investment of the platform itself in real estate options.
- Used geographic area:
There is an old real estate phrase “location,location,location.” that actually applies when it comes to investing in areas that you are comfortable and understand its demographics, you may feel better when it comes to investing in areas near you live thanks to your familiarity with the community and knowledge of the market. However, there are others who prefer to invest in the markets where they see more potential, even if they are farther away from your residence. While, the potential for earning more can be far greater, there is less concern over having the close, intimate knowledge of the particular project. In either case, you may want to make your selection carefully and deeper knowledge.
- Who is the developer?
Things you need to know include:
- Developer’s track record.
- Amount of money that the developer or his company invested in the project.
- Financially stable or not?
A financially stable developer with a good track record who has already made a noteworthy investment is an important part of any investment that you will make in the same venture.
- Is this a residential or commercial investment?
There are differences between each type of investment in terms of profitability. You will need to be well versed on every type of investing before considering whether you should invest in it or not.
Residential properties with an eye towards cash flow make for an outstanding long term investment. For example, earning a percentage of the rents each and every month over the course of 10 or 15 years can make up to a tidy sum that makes your initial investment worthwhile. However, there are complications with running cash flow properties that you will need to think before making the investment.
Commercial properties offer a greater profit margin considering the investment, but they are also more complicated in terms of taxes, renting the property etc. It essentially means you will need to investigate the risks and rewards before making such investment.
- How much money to invest?
You need to decide whether you prefer to invest in several projects/platforms that spread out money but offer more security if one or two fail or you might want to go ahead and put all your eggs in one basket which maximizes the profit margin. The risk which you take will depend on how risk averse you are and will differ between individuals based on their risk-reward ratio.
- What is an investment horizon?
Real estate crowdfunding projects offer a wonderful opportunity for you to invest in various smaller projects or perhaps a single project based on the returns on offer and the history of the developer. However, with all the attributes that crowdfunding offers, it still pays to cover the bases and make sure that your investment is in safe hands. The time element is very important factor when it comes to investing your money in real estate crowdfunding venture. However if you have done homework, investigated all the reasonable possibilities, checked out the venture and who is behind it, then you will be in a better position to make a accurate decision.
- Which is the right crowdfunding platform?
Choosing the correct crowdfunding platform could be the biggest factor when determining the success or failure of a project. The platform you choose should always be helpful in answering your questions and most importantly you should trust it.
It is important whichever crowdfunding platform you use is broad enough and diverse enough to offer a number of investment opportunities. You will also need to make sure that the organization has a good track record with its project so you can have faith you will earn the returns that have been advertised.
In addition to the platform’s track record, your job is to look for the feedback with those who have already invested with the company so you can access first-hand experience. The crowdfunding platform you choose should always be helpful when you ask question and most significantly, you should trust it. Once your criteria have been fulfilled, you can make the decision to invest.
Perhaps you have done your research and you are ready to enter into the investment world of real estate crowdfunding. Or maybe you still want to gain a bit more information. There are some ways you can go about this that will help get you ready, minimize the risk and potentially bring in some substantial rewards over the long run. Use internet wisely as your primary research tool.