Crowdfunding is becoming more and more popular as a way to acquire funds across a range of industries, and its place in the overall economy has been growing year on year. From its inception the idea was simple: instead of looking for bank loans or institutional investors, projects could raise money from big groups of people giving relatively small amounts. This allowed people to put money into projects they believe in, often for the sheer joy of seeing the project succeed.
The giving model was where Crowdfunding started, but from this equity Crowdfunding has emerged, becoming a legitimate form of investment in its own right. Instead of simply giving money to ideas you like, equity Crowdfunding allows people to invest money in large projects with the aim of gaining capital from the returns and actually owning part of the project.
This model can be applied directly to real estate. Much like other forms of investment, real estate was previously reserved for high net worth individuals, but this is no longer the case. In the same way that donation-based Crowdfunding helps small projects bypass stringent bank loans, Real Estate Crowdfunding helps normal investors overcome the financial barriers that used to be in place when investing in property, as well as helping developers gather funds outside of banks and institutional investors. This in turn balances the market and reduces inequality, stopping the large investors from ruling the landscape.
The idea of Real Estate Crowdfunding is very similar to donating money to a cause you believe in, but instead of donating money, you and other Crowdfunders are actually collectively buying a part of a property, sharing the rental income and the proportional capital gains when the property is sold. This allows smaller investors to put money into upscale properties that have a much higher chance of appreciation, properties that would have previously been off-limits.
In the past, non-institutional investors with even relatively large amounts of capital would still be restricted to putting money into mid-range properties that are unlikely to appreciate and carry more risk of downturns or high vacancies. Real Estate Crowdfunding changes this reality and opens up the high-end property market to a wider range of investors, allowing normal people to benefit from the appreciation of luxury real estate.
We can take Bricksave’s Miami property as an example. Millicento Apt. 3503 in Brickell Village, Miami, is a luxury property designed by Pininfarina, the legendary designers behind the avant-garde models of Ferrari, Maserati and Rolls-Royce. The amenities that come with the apartment include the building’s two incredible swimming pools (one of which is rooftop), state-of-the-art fitness centre, private movie theatre, and luxury spa. The apartment also has a large balcony with a fantastic view of the Miami cityscape. This is a high-end property that would usually be unavailable to a normal investor, but Real Estate Crowdfunding with Bricksave means that investors can put relatively small amounts of money in and become part of a large group of Crowdfunders who collectively buy the apartment. The desirable location and luxury nature of the property means that it is far more likely to appreciate than many other, more modest apartments, meaning that it is a much safer investment option. What’s more, Bricksave’s platform is entirely online and easy to use, and Bricksave cover all the administration, so the process is far simpler than it has ever been.
Real Estate Crowdfunding is all about sharing costs and splitting returns, and about giving more people access to investments in secure luxury properties that have much higher chances of being profitable in the long run.
Written by Bricksave CEO, Tom de Lucy
February 16, 2016
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