International Real Estate Crowdfunding Sites

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How Does Crowdfunding Real Estate Work?

Making investments in real estate is like having a permanent life insurance policy that you do not pay premiums for.

This is because apart from diversifying your portfolio in various types of investments - Nationwide and creating a long-term money income source, property investments are powerful and stable which means that they are immune to inflation while being able to grow in value steadily.

They also allow you to leverage in order to purchase more massive investments, and most importantly, have substantial tax benefits. All the above factors are a prerequisite for an excellent investment.

Investing in real estate, however, is no cakewalk.

Why crowdfunding is good for real estate

More often than not, most investors find themselves having money but not finding deals or having a good deal but having no cash. Over the past three years, however, two new concepts known as real estate crowdfunding and peer to peer lending has revolutionized how property investments are done, and with great success.

Read also: International Peer to Peer Lending Sites

Crowdfunding is a means of generating capital through the collective effort of a large pool of people via crowdfunding platforms. In the past, raising capital meant approaching a small group of wealthy investors such as banks with your business plan so you could get funds. This approach meant that you had to really impress these investors for you to get the funding.

In crowdfunding, however, all you need to do is pitch your idea on the crowdfunding platforms that has thousands of people willing to invest in viable business ideas. The take is that you can reach many people while using minimal resources and having a higher chance of getting investors.

Real estate crowdfunding, similarly, works under the same principle in that it involves multiple investors pooling their funds in a real estate project. However, this type of crowdfunding is different in the way investments are made, the level of risk involved, and the potential returns that the investor stands to enjoy.

Real estate crowdfunding worldwide firms are connected to investors via an online platform. This platform enables a potential investor to view the pre-screened commercial, residential, and mixed-use properties while being able to see what is going on in every step of the investment process.

Should i invest in crowdfunded real estate loans?

In previous years, only accredited investors could take part in this venture. The reason for setting this standard was that the above group of individuals was assumed to have the requisite resources, knowledge, and experience to manage their money.

However, changes to Crowdfunding legislation gave birth to crowdfunding real estate and now, non-accredited investors can take part in these projects.

Benefits of real estate crowdfunding to investors are:

  • 1. Access

    Before the changes in legislation regarding property investment, getting approval for a legitimate property loan with a buy-in of less than $20000 was unheard of. Real estate crowdfunding has ushered in a new era of a diverse group of investors.

    This means that today’s investors can get access to the property market with little amounts of money.

  • 2. Control

    Nowadays, the real estate market is more democratized. This means that no institution can filter loan opportunities for you; you choose and vet options by yourself.

    Additionally, you can work with real estate developers directly and have an opinion on the process.

Benefits of crowdfunding real estate to borrowers are:

  • 1. Money is raised in a shorter time

    Traditionally, one would have to wait for months for the bank to approve your loan. To acquire real estate crowdfunding, however, only takes weeks.

  • 2. Lower costs

    As opposed to banks, crowdfunding platforms do not have the high overhead costs associated with the former.

  • 3. Flexibility

    Real estate crowdfunding platforms allow you a diverse list of properties, investors, and financing options to choose from.

Read also: Peer to Peer Lending Vs Stocks

2 ways to invest in real estate crowdfunding platform

To invest in crowdfunding property deals, you can do so by either making equity investments or debt investments.

  • Equity Investments

    Here, the investor provides funds for the project and in turn, is given an equity stake in the property. The returns come in the form of a slice of the rental income produced by the property. Typically, investors receive dividends on a quarterly basis.

  • Debt Investments

    This is the alternative to equity investments. It involves investing in the mortgage loan of a specific property. The income generated is based on the interest on your principal. These payouts usually are done on a monthly or quarterly basis.

What are the real estate crowdfunding returns?

Concerning money earned, equity investments are more likely to give you higher returns. This is because the profitability of a crowdfunding debt investment is determined and limited by interest rates on the loan.

Consequently, there is a higher degree of risk associated with equity investments and they have a more extended holding period. This means that equity investors are typically paid last.

Debt investments, on the other hand, have steady returns which allow you to predict your payout and when you are to receive it.

Additionally, debt investments have shorter holding times and less risk.

Which are the best international real estate crowdfunding platforms?

  • Crowdestate is a platform that offers real estate loans (residential and commercial) and for business. For some loans the interest payment is made monthly, but there are also loans with the total payment at the end of the period.

    Crowdestate is always going at the same pace and quality as ever. Their default rate is still at an incredible zero, due to their strict selection process of borrowers and developers. They expand their portfolio to include business loans, mortgages and a secondary market. Therefore, you do not receive interest only annually, but also monthly, depending on the project itself.

  • EstateGuru is a portal from the Baltic States, specifically from Estonia. There are rather fewer loans that are secured by real estate. Investors on the platform have not yet experienced a loss of money as a result of defaults, but it is important to note that this is a young portal.

    According to statistics, the average LTV is around 60% and the average amount of the loan is EUR 160,000. The Estateguru platform currently have more than 10,000 investors who have invested more than 40 million euros with a very nice average yield of 12.5% p

  • Bulkestate is a Latvian platform specializing in real estate crowdfunding. The minimus investment is 50 euros and is open to both businesses and individuals.

    Bulkestate offers property investment through P2P loans. The platform's goal is to make investing in real estate easy, secure and transparent, offering two products on their marketplace. One is a crowdlending platform where you as an investor can borrow money to real estate developers, and the other is the opportunity to buy apartments by property developers at below market price.

    The platform lures with an average return of over 14% and the fact that the average projects are only mortgaged by 50%. Bulkestate is aimed at all investors who would like to invest in real estate projects or who are interested in buying apartments abroad either for rent, resale or for personal use.

Real Estate Crowdfunding Platforms: What to Look For

While looking for the right real estate crowdfunding platform for non-accredited investors, it can be easy to get lost in the myriad of options available to you. Here is a detailed guide on selecting the best platform.

  • 1. Check whether the site is just a listing service platform.

    There are websites that serve no other purpose apart from listing services. Ideally, you want a platform that acts as dealer-broker. Also, only choose a platform that has prior experience handling your kind of investment.

  • 2. Check how long the site has been available.

    Real estate ventures are typically long-term investments. This is why you need a platform that has been there for a longer period with a robust venture capital backing.

  • 3. Check how the site conducts due diligence.

    This implies the kind of documentation that they collect for potential deals. Does the site ask companies to provide indemnities or liabilities in the event that something goes wrong?

  • 4. Customer service quality

    Does the platform have someone readily available to answer your queries?

Read also: How to Lend Through P2P Lending Platforms

Where is the future of commercial real estate financing and investments?

Getting the financing for a real-estate project from crowd investing, or being able to invest in one has become more democratized and easier than ever. Real estate equity crowdfunding could be your ticket to investment success.

Etiquetado en: crowdfunding
I like to take risks, That's how I make money. But they are calculated risks.

Comentarios

  • Invitado
    Fossin Godfrey Miércoles, 12 Junio 2019

    I am in Cameroon,and a commercial real estate broker,,can somebody suggest to me platforms that can invest in real estate ventures in sub saharan Africa,Cameroon.

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Invitado Domingo, 17 Noviembre 2019