By providing a cheaper, easier and more efficient way to invest in property, Real Estate Crowdfunding has sky-rocketed in popularity among professional and non-professional investors alike. Its elegance and simplicity as a concept - i.e. property investment is expensive, so why not share the cost and then share the returns - has helped transform the practice from a niche investment method into a legitimate way to grow your money. It is no surprise that current forecasts see the Real Estate Crowdfunding sector growing to US$5.5 billion by the end of 2017. (Bear in mind that its estimated worth was only US$19 million back in 2012).
But we are still in the relatively early stages of Real Estate Crowdfunding’s ascent, and the future looks bright; indeed, Real Estate Crowdfunding attorney Mark Roderick says that “98% of the innovation is yet to come” in the industry.
As Real Estate Crowdfunding refines its process and investors become more discerning, it will begin to shed the deadweight in terms of sub-par companies, meaning that those platforms that are not up to the newly heightened industry standards will fail. This will be good for Real Estate Crowdfunding as a whole because it will leave investors with only the best of the best platforms to choose from.
Legislation with regards to equity crowdfunding is changing too, aiming to create new opportunities and safer investments. The fallout of Title III of the JOBS Act in the US, for example, means that platforms are now required to provide more information and more disclosure to their investors, placing the responsibility of due diligence and adequate risk research on the platform itself and not the investor. If this trend continues (and it’s looking like it will), Real Estate Crowdfunding may become a far safer way to invest in secure properties than traditional methods because the risk of investors making a mistake in their research is significantly lowered, if not eliminated altogether. In order to avoid breaching legislation and losing investors, platforms are likely to continue perfecting their method of choosing the right properties, meaning that over the next few years they may well become some of the most astute real estate selectors in the market.
Real Estate Crowdfunding’s ease of use and lower investment costs also mean that portfolio diversification is now a much simpler process – one can simply and efficiently invest in multiple properties around the world from one place. As platforms develop, they will become the market’s best tools for diversification, which will attract more investors (including institutional investors) and therefore help the industry to evolve.
July 27, 2017
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