Crowdfunding for Real Estate: A New Path for the Investors

The crowdfunding as well as real estate markets naturally fit with each other. The crowdfunding actually makes easy access of the large networks of family, friends, and the colleagues by the social media sites that include Twitter, Facebook, and LinkedIn in order to get the word out regarding some new business as well as to attract the investors. The crowdfunding got much potential for increasing the entrepreneurship through spreading a pool of the investors from whom the funds could be collected beyond a traditional circle of the relatives, owners, and the venture capitalists.

The real estate groups are climbing aboard crowdfunding bandwagon and they are touting a lower-risk access to America’s real estate markets to the rich Americans.

The crowdfunding for real estate isn’t a completely new phenomenon. There are so many players who have already entered this field. But, each and every platform has some niche & strategy, along with several levels of the minimum investment. These are geared towards the accredited investors. These investors meet particular requirements for the net worth as well as annual income. And, the crowdfunding under JOBS Act would open this field to various small investors.

What Are Pros and Cons of the Crowdfunding for Real Estate? 

In one word, this comes with many risks for both of the sides. Both investors as well as developers of real estate could reap large financial returns from the crowdfunding, also both of these can spread the risks.

Advantages

• The investors get an access to the real estate market along with little money.
• The investors start working directly with the real estate developers.
• The investors could also select in which projects of real estate they actually want to make an investment with their capital.
• The investors have an access to the myriad projects hence choice is not an issue.

Disadvantages

• The risks of making an investment are just similar as for many real estate investors. In case the real estate market is going south then an investor would likely lose capital.
• There is also a risk of the investment default (through the developer of real estate) is high for the crowdfunding as compared to the peer-to-peer as well as direct funding of real estate investment.
• There is also a problem of lack of liquidity because an absence of the secondary market actually limits an easy access to sell opportunities for many investors.

Transparency is Significant

Nowadays, most of the real estate as well as crowdfunding platforms just allow the accredited investors in order to make an investment. The accredited investors usually are advised for investing those amounts which they are quite comfortable with, according to their whole investment portfolio.

You need to just make an investment in that offering from a sponsor whom you actually trust, and who you are confident would look out for the better interests in bad and good times.

In case an investor doesn’t figure out how their credit is being actually used, risk elements of making an investment, and the factors that influence the return on an investment, then the investor needs to seek a piece of advice from the investment adviser. There would be so many investment chances to select from, hence do not need to rush into making some sudden investment decision.

There must be some professional real estate and crowdfunding platform that could give the investors enough opportunities in order to communicate about their offering that includes making direct introductions to a sponsor of the specific property listing.

Is It Doable, How?

There must be a catalyst to launch crowdfunding for the real estate investment, along with some other kinds of the business ventures. It’s a passage of JOBS Act in the year 2012. Recently, the ability for advertisement as well as a solicit investor for the real estate investment has been restricted. JOBS Act (Title II) has changed dramatically the way the investment capital could be collected through modifying the existing rules of Regulation D, particularly those rules that pertain to how the companies could offer as well as sell securities without registering the latter.

The Bottom Line

The crowdfunding in a real estate market actually promises you to be a great revolution. This is now just taking off. It has already attracted higher levels of the interest from some serious investors. You must find an accountant who can check your financial issues.