Why all the fuss about Crowdfunding and how does it work with Real Estate?

Jan 8, 2016

The fact that the term “Crowdfunding” has become an official addition to the Oxford English Dictionary tells you a lot about just how widespread the practice has become. Driven by smarter phones and the democratisation of the internet, the term crowdfunding refers to an online system whereby a company or individual can raise capital through small donations or investments from large groups of people. From its inception it was clear that the applications of crowdfunding are extremely wide-ranging, providing a new method of investment in industries that used to be nearly inaccessible to the general public.

Unsurprisingly, Crowdfunding has opened up some exciting new opportunities to evolve the real estate market. Investing in property used to be reserved for the mega-rich or bonafide property experts, but real estate crowdfunding with sites such as Bricksave levels the playing field, meaning that palm-moistening sums of money are no longer required for investment. The idea is that investors use a crowdfunding platform such as Bricksave to collectively buy the property on a buy-to-let basis (with Bricksave doing all the legwork), and then collect a proportional share of the rental income, as well as a share of the capital gains once the property is sold after four years.

The overall aim is to allow more people to get themselves on the investment ladder. Say, for example, you have a few thousand dollars in the bank and you want to do something with it – it wouldn’t be enough to invest in a property as a whole, even on the lower end of the spectrum, but it is enough to invest in a high-end crowdfunded property using Bricksave.

As is normally the goal of alternative online solutions, Bricksave simplifies the real estate investment process – one of the things that often puts people off about the real estate market is the sheer admin and knowhow involved in actually investing, which could be everything from setting up an LLC to buy the property and engaging an accountant, to finding a manager for the property and a tenant. If you use real estate crowdfunding, this is all already organised and you don’t have to do anything. All the properties are researched and sourced for you, with a focus on low-risk, high-yield; and in the case of Bricksave, they even ensure that there is a long-term tenancy agreement in place, allowing you to browse properties on the Bricksave site as easily as browsing for your weekly shop. It’s passive income: once you find a property that you’re interested in, you can invest anything from $2,500 upwards, and then just monitor the returns as they come in and collect the capital gains after the property is sold four years on.

In short, Real Estate Crowdfunding streamlines the property investment process and opens up the market to a much wider demographic, bringing investment opportunities to those who may not previously have been able to afford it.

Written by Bricksave CEO, Tom de Lucy