With distrust in banks and traditional lenders at an all-time high, the alternative finance industry is in boom. Many believe that the crowdfunding movement represents the democratization of the investment sector, lessening the power of large scale investors and distributing it among normal people, thus giving an entirely new demographic the opportunity to invest. There is no clearer example of this than in the US, where Title III of the JOBS Act was recently passed, allowing non-accredited investors (i.e. investors who do not reach the usual high net worth limit required to invest) to take part in equity crowdfunding.
In 2014 the crowdfunding sector reached $16 billion, and it’s predicted to almost double that number when the figures from 2015 are finalised.
But what does the future hold? The World Bank estimates that crowdfunding will amass around $90 billion by 2020. This massive growth is based on the expanding use of crowdfunding as a platform for gathering capital across a range of industries. Crowdfunding may have started out as a smart way to build funds for small projects, but over the next few years the applications will become more and more inventive. Forbes suggest that even everyday things like registries will be affected: wedding gift lists, for example, may include large items that people can collectively chip in for using crowdfunding. Audience participation in mainstream media may also become a reality, using crowdfunding features to allow audiences to influence the development of the shows or websites they enjoy the most.
The real estate branch of the overall crowdfunding movement has seen some healthy growth alongside the rest of the sector, predicted to reach around $2.5 billion from the close of 2015 – and there are predications for yet more growth in the years to come. The future of real estate crowdfunding will likely see a simultaneous streamlining of the both regulatory conditions that govern real estate and the technological platforms that facilitate real estate crowdfunding, making the entire process simpler and faster, and making the practice as a whole more widespread. This will in turn help move the real estate industry at large out of the dark ages of paperwork and insider knowledge, and into the democratized version of finance. We are also likely to see a diversification of the real estate crowdfunding industry, with more companies offering niche services tailored to very specific requirements.
The most interesting prediction for real estate crowdfunding is that it could soon overtake traditional real estate investment and establish itself as the number one method of raising funds for property. Perhaps this is a little while off, but considering the World Bank prediction mentioned above, it may be closer than we think.
by Bricksave CEO, Tom de Lucy
Sofía Gancedo, the Argentinean who founded a real estate crowfunding platform and is going for a US$ 100 million megafund.
The system uses an algorithm of 3,000 data points, which looks for investment opportunities where there may be appreciation. "Each property has an estimated annual rental return of between 7% …