Real estate crowdfunding permits you to combine your money with someone else’s and invest in real estate projects. Those who are without a large bankroll could now take advantage of previously unavailable investing options. This innovative way of investing could help diversify your portfolio while also paying out potentially large profits.
Real estate crowdfunding is the most recent trend when it comes to investing. Crowdfunding sites are spread up all over the internet, offering a novel approach to making money in real estate. It is a novel method for new and seasoned investors alike to enter into a game that is normally meant for the rich.
Those investors without a large bankroll could now take advantage of previously unavailable investing options. This innovative way of investing could aid diversify your portfolio while also gaining potentially large profits.
However, it is not without risk, like is any real estate investment. It’s also more likely to end successfully if you start leading platforms like Assetmonk, one of the Indian leading crowdfunding sites.
Real Estate Crowdfunding
About two decades ago, most of the real estate investments were limited to the rich like accredited investors. While real estate crowdfunding was already flourishing, chances for non-accredited investors to invest were limited.
This has, by now, changed. In its most basic form, a real estate crowdfunding platform allows you to combine your money with some others and invest in real estate. It’s especially appealing to new investors; however, seasoned investors also go for it.
Real estate crowdfunding permits any prospective real estate mogul to begin their path with small sums of money and participate in funding much larger projects. A real estate crowdfunding platform allows investors to network with other investors and property developers and at the same time, allowing to earn a fee for consulting, management, and sales.
How does it work for Indian Investors?
For example, if a real estate developer or seasoned investor select a commercial property in one of Delhi’s elite neighborhoods – currently, this asset may be worth Rs. 10 crores, but without modern amenities. Based on market research and other requirements, the real estate developer or investor decides that if the property is developed at an overall cost of Rs.11 crores and subsequently long leased , the asset may potentially be a market worth of Rs. 20 crores in the next 6 years to 10 years.
The issue is that the developer or investor wants to raise the requisite funds to renovate and develop the building. Instead of obtaining a loan, the investor can convert this into a real estate crowdfunding prospect in which a consortium of investors or people invest individually to the project.
There are double benefits; Real estate crowdfunding provides developers with access to finance for real estate development projects and this is proved to be a viable alternative to conventional way of obtaining finance.
Via real estate crowdfunding, investors could now become stakeholders in the property that was previously impossible to acquire as individuals. It now allows them to broaden their portfolio as well.
Peer-to-peer crowdfunding is the permitted way of performing real estate crowdfunding in India. Within an informal framework, this strategy has been used for a long period of time.
How does profits from Real Estate Crowdfunding shared?
The funding required for a certain project is given by investors in exchange for a portion of any profits generated by the transaction. Profits from real estate crowdfunding will differ depending on the investment strategy chosen.
Debt or Lending-Based – As the term implies, investors will “lend” money to the organization. Investors will not receive property shares. However, they will receive a set return depending on the amount invested and the interest rate paid.
How Can investors profit from Real Estate Crowdfunding?
Low investment minimums are one of the most important advantages of real estate crowdfunding. New investors may invest as little as Rs. 25 lacs in certain situations, thanks to platforms like Assetmonk. While that amount of money would not provide you with an income to retire on, such investment options were simply not available if you were affluent.
Every real estate is not the identical, and neither are all real estate markets. Real estate crowdfunding permits investors to diversify their risk profile by participating in more markets. Do you want to put Rs. 25 lacs into ten different real estate marketplaces around the country? If you already have a portfolio, real estate crowdfunding is a great way to diversify it. However, it also implies that you do not have to put all of your eggs in one basket. Because other platforms have substantially lower minimums, you may spread your money over many investments. Real estate crowdfunding broadens real estate investors’ perspectives.
Not wanting to be a landlord
Real estate crowdfunding is an excellent place to start your investment venture if you don’t want to be a landlord. Maintaining properties and dealing with renters may be time-consuming. You may concentrate all of your efforts on maximizing your assets because you have no management duties.
Although real estate crowdfunding programs are sometimes compared to REITs, there are numerous important differences between the two ventures. Apart from the previously mentioned benefits of wider divergence, crowdsourcing offers considerably better openness and control over asset selection and placement. If you invest in a REIT (Real Estate Investment Trust) , you may be familiar with the basic sorts of assets that the REIT invests in. However, you will not be familiar with the individual properties. You may choose the markets and properties that you want to invest via real estate crowdfunding. You’ll also receive frequent property updates.
Not all investing risks are the same. Some are high-risk, high-reward investments. Real estate crowdfunding platforms provide a diversity of agreements, allowing investors to take only the amount of risk that they are comfortable with. Investors could select between lower-risk, lower-reward loan offers, and higher-risk, higher-reward equity transactions. You’re likely to find anything of interest on a real estate crowdfunding portal.
Earlier, only investors with large funds and inside contacts could access and invest in the excellent transaction flow. Since investors share their money with others on a crowdfunding platform, they may access opportunities that they would never see in other options. And, due to crowdfunded funding, they may participate in larger transactions. Real estate crowdfunding platforms, in addition to curating offers for investors, provide as much information as you wish to have on operating partners and assets as feasible.
