Real estate crowdfunding offers a number of advantages and disadvantages for investors compared to more traditional property investment:
Whilst there is likely to be a minimum entry level, being able to invest much smaller amounts opens up property investment for everyday individuals. You no longer require tens or hundreds of thousands of dollars to be able to invest in property, you simply own a smaller share of the asset and earn a corresponding share of the profits. Real estate crowdfunding is now also an option for people who might be unable to secure a mortgage but wish to profit from property. It’s the genuine ‘democratisation of investing’!
Historically, investment was largely confined to financial institutions. Individual investors would need to be either exceptionally wealthy or exceptionally well-connected to be able to participate in high-yielding schemes. Today, real estate crowdfunding platforms have democratised the market, bringing many opportunities with the potential to generate institutional-grade returns within reach of everyday private investors.
Diversification of your portfolio is important for both protecting assets and enhancing returns over the longer-term. Crowdfunding allows investors to spread their capital across multiple properties, regions or asset classes and reduce their exposure to risk. The more capital an investor has tied up in one property or one area, the more they will be affected by potential downturns in the market.
Property investment is not easy and requires experience and expertise across all stages of the property cycle. Reputable real estate crowdfunding platforms will boast a track record of successful investments and competitive returns, delivered by seasoned real estate professionals. Investors should always conduct their own due diligence but can take comfort knowing that opportunities have a higher propensity for profit with a lower exposure to risk.
Real estate crowdfunding platforms will nearly always offer fully-managed opportunities. As well as benefitting from the research and due diligence that should have been applied in selecting the properties for investment, investors will not have to spend their own time and resources managing the properties, finding and managing tenants, taking care of any legal issues or the sale of the properties if applicable.
Depending on how quickly it takes to complete, crowdfunding is potentially one of the quickest ways in which property investors can get their money working for them. In many cases properties have been forward-purchased and may even have tenants already in place, meaning rental returns can be paid in as little as a month.