What Potential Does Crowdfunding Offer In Real Estate?
Posted by macrocrowd on March 25th, 2015
Higher net returns
The traditional process of bank lending for real estate finance has always had many middlemen. This is a factor that is blamed for high expenses that cut into the earnings of investors.
Contrary to bank-financed real estate, crowdfunding platforms interact directly with borrowers and lenders by acting as the sole middleman. The result is a system that cuts out brokerage fees, investment fees, and other fees that have always reduced net earnings for real estate investors.
In any investment, diversification is the number one rule to reducing risks. Without the opportunity to invest in multiple projects, conventional real estate financing, at least for individuals has been very risky.
The one benefit that crowdfunding brings to individual as well as large institution investors is the opportunity to spread risk by investing smaller amounts in several real estate projects.
Crowdfunding platforms also reduce investor risks further by screening all borrower proposals to retain only the best investments real estate opportunities for lenders.
Intensive borrower vetting is rarely a benefit that traditional real estate transactions offer to investors.
Crowdfunding offers opportunity for international investments
Despite being interested in being a lender in real estate, opportunities in the local market may not meet your investment interests and goals.
Before the popularization of crowdfunding, many potential investors were limited to community projects that offered little in the way of returns or risk intensity for daring investors.
What online crowdfunding platforms have done is to offer these investors a point of access to larger, high and low risk, international investment opportunities that have for a long time been a reserve for the very wealthy.
Today, nearly every real estate investment group that is run on a crowdfunding plan can connect you to a variety of overseas real estate projects beyond the local project offerings.
Access to finance for continuing developments
It is not uncommon to find stalled real estate projects whose developers have failed to acquire funds for continuing development.
The concept of crowdfunding has and continues to be a relief for many developers whose potentially lucrative projects face the risk of delay due to lack of funds.
Any c that pools funds through crowdfunding is your best chance at boosting cash flows especially where unforseen expenses have depleted your development budget.
Noteworthy however is that crowdfunding lenders tend to prefer commercial developments such as malls that have potential for high rent rates and superior purchase values.