Crowdfunding is whereby a group of investors collect their money in one common pool for investing in a common goal.
The group of investors can be family members, neighbours as well as several institutions.
What stands out the most in the present day crowdfunding as compared to the traditional or olden day collective investment in real estate is the platform through which transactions are made. Online transactions have become more prevalent in the present day and it can bring people together without being in the same room.
With the rapid growth in technology, investors can research more on an investment interest, and perform every sense of the transaction including signing and funds transfer as well as monitor how their investments are performing on investor dashboards.
Crowdfunding companies have made it easier for investors to do due diligence on investment options since they provide shortlisted pre-curated investments.
As a result of Title III of the JOBS act, bank less business finance industry is eagerly waiting on non-accredited crowdfunding, but this method had already kicked off in the real estate industry.
Every transaction is reviewed as an in house requirement. Every variable is thoroughly scrutinized including then outlay, statistics in the market, the quality of the market and how it has been performing. The reputation and financial status of the investment company is also analyzed.
A thorough background check of the investment company is carried out. So as to assure the crowdfunding investors, the criminal and credit records of the investment company is also checked.
There is no success guarantee or risk free guarantee from any crowdfunding company, and as such, curation has become very popular and critical in crowdfunding as a protection strategy for investors.
A reliable company will only work with allies who have a proven track record of financial success and credibility in the real estate. They usually have a great deal of experience in the field and have therefore become experts in it.
With crowdfunding real estate, you can choose from two options
Investment in equity, which work in the same way as buying stocks in a company. With this option, the investors share the rental income and any proceeds that come from the sale of a property.
You can access loans that have real estate as collateral.
The equity investments provide the investors with a cash flow that comes from renting out the property which is mostly paid on quarterly terms. On the other hand, the loans provide a steady and consistent income on a monthly basis without too much hustle.
Either way, the investors receive communication of the performance of their investment every quarter of the year and once a year, they get the tax documents.
More individuals willing to invest in real estate have this opportunity through crowdfunding. They also get the opportunity to access real estate investments that have been pre-vetted, a luxury that has not always been available. Investors can also now make small part payment, something that was not acceptable in the past.
With crowdfunding investors can make some passive income without necessary doing all the work of dealing with tenants, blocked drainage etc.