Investing in real estate has historically been a privilege only the wealthy or fortunate could enjoy. But as crowdfunding rises in popularity, it looks set to change the rules of investing in the lucrative sector. Here are five of the most important reasons why crowdfunding could change the real estate investment game for good.
Crowdfunded real estate has been growing in popularity since it was first approved in 2016. It’s estimated the industry will be valued at $93 billion, and, in Latin America, Comscore registered a 200% increase in fintech solutions like real estate crowdfunding. This revolutionary new investment strategy is changing the world of real estate as we know it. Here are five of the most compelling reasons why.
1.- Making investing accessible
Though real estate has long been considered a relatively safe, measured way to invest, there has always been one barrier for amateur investors: the high cost of purchasing a property. If your wage has only allowed you to buy a humble home for your family, finding enough money to buy another house as an investment is most likely out of the question.
In markets such as Latin America, average wages are comparatively lower than in the UK and US, with a typical Brazilian taking home 2549 RBL (£342) per month. It’s also harder to finance property purchases, as a typical mortgage will only cover 60% of the purchase price and mortgages are capped at 80% of property value by the country’s regulators.
You can invest as little as $1,000 with Bricksave into a property in some of the world’s most sought-after locations and enjoy consistent rental returns on your investment.
2.- Allowing people to invest in different markets
Even if investors have the capital to buy a property, investing in a number of different cities and markets to further diversify your investments is out of the question for all but the richest. And for investors in Latin America, the high cost of property in countries such as Switzerland and the US is likely to make purchasing property there totally unrealistic.
With crowdfunding, you can invest a much smaller chunk of money into buoyant property markets across the globe. You could explore areas like Miami, where property prices are expected to rise by an impressive 6.8% over the next year, or Detroit, which has enjoyed a 7.7% increase in house prices between 2019 and 2020. And if you invest through a platform like Bricksave, you could see your money grow if your property’s value goes up when it’s time to sell.
3.- Reducing the complexity of international investing
In addition to the cost of purchasing abroad, it can be a complex process to buy a property somewhere you don’t live and, potentially, don’t even speak the language. Each country’s laws and regulations around the house buying process vary and some also restrict which types of property or in which location non-nationals can buy.
If you’re thinking about buying a house in another country, you’ll likely need to make multiple costly trips to your chosen destination and find a reliable solicitor (ideally who speaks your language) to guide you through the process.
Investing in property through crowdfunding offers a simpler way to diversify your investments internationally. All you need to do is choose a trusted investment platform like Bricksave and use its intuitive online tool to invest in your chosen markets with ease.
4.- Making it easier for developers to raise capital
Crowdfunding isn’t just great for the investor. It’s a mutually beneficial strategy, as companies looking to build new or purchase new properties won’t have to rely on angel investors (a high-net-worth individual who solely funds a venture) or seek funding from a public REIT (Real Estate Investment Trust) or REIF (Real Estate Investment Fund).
As the Motley Fool phrases it, “crowdfunded real estate has changed the game by creating more opportunities, both for real estate investors and for those looking to secure funding.” You can invest in a traditionally stable asset and allow developers to build brand new homes for families across the globe.
5.- Removing the hassle of management
The hassle of purchasing property doesn’t end after the purchase has gone through. If you’d like to rent it out and enjoy regular rental income, you’ll need to find reliable tenants, make sure the rent is paid on time and potentially be liable for any domestic issues with the house. Handing over responsibility to a third party, like a REIF, means you can enjoy any returns on your investment without getting caught up in petty tenant troubles.
Looking to invest in property through crowdfunding? Explore our current investment options and get started today.
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