Technology is reshaping the investment market in a big way. What was previously the purview of a tight-knit group of financial professionals is now open to more people than ever before. The innovation of crowdfunding has brought new opportunities for both experienced and inexperienced investors, providing new ways to allocate money for investments and creating a brand new investment culture that focuses on sharing cost. Profitability is still key, but what technology is doing is constantly finding new ways to lower risk and make an investment as profitable as it can possibly be.
Real estate especially has been altered by this new phenomenon, and for the better. Here are seven ways in which real estate has been changed by the crowdfunding revolution:
Before crowdfunding, investing in a property required large amounts of capital to cover the upfront costs. This is due to the fact that the financial burden was entirely on you – you’re the only one investing, so you have to cover all the expenses. The only other viable option was REITs (Real Estate Investment Trusts), but these were not ideal because the investor had little control over what properties were chosen for investment and little to no knowledge about the management of the properties. The collectivist backbone of Real Estate Crowdfunding has removed these high costs, and investors can now invest just a few thousand dollars into a property.
Because initial costs are now much lower, this gives investors more room to spread their money across multiple properties, which therefore makes it easier to build a fully diversified portfolio. Better diversification means more stable returns can be achieved over the long-term.
Real estate investment used to be a notoriously admin-heavy game – mountains of paperwork, middle-men, solicitors to deal with etc. There was also the issue of maintaining the property itself after investment, which again required large amounts of organisation and often input from a third party. Since Real Estate Crowdfunding is done entirely online, investment in a property can be completed with just a few clicks, and property upkeep is handled by the platform itself, leaving investors to sit back, relax and monitor their investment remotely.
One thing that also used to characterise real estate investment was insider knowledge. Real Estate Crowdfunding platforms now do all the research for you and provide any relevant information online, meaning that investors aren’t left in the dark and know exactly what they’re putting their money into. The overall goal here is to allow investors the chance to fully analyse the potential profitability for themselves (with help and advice from the platform) so they can make an informed decision.
Property investment was previously a local endeavour. Real Estate Crowdfunding has changed this entirely: investing online means you can put money into real estate in any corner of the globe, regardless of your current location. And all the information you need on the place and the property is provided for you by the platform.
The paperwork and organisation associated with putting money into real estate used to mean that a completed investment would take months to finalise. This timeframe has been reduced dramatically because of the fact that all Real Estate Crowdfunding transactions are done entirely online.
One final major change that Real Estate Crowdfunding has brought to the property investment market is to do with who can make an investment. Previously only accredited investors (i.e. high-net-worth individuals or financial professionals) were allowed to invest, but now almost anyone with the funds to meet the minimum initial costs can get involved.
by Bricksave CEO, Tom de Lucy
August 30, 2016
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