Real estate investment traditionally was the domain of the wealthy. And it makes sense as well, for it takes a lot of money to set up a building. However, this domain is now being opened for investors from all walks of life, i.e. people who don’t have sufficient funds to construct a penthouse or an office building on their own, but can easily share the cost with other investors. This is what crowdfunding, the new face of real estate investment, is all about. Now, a much wider pool of investors have the opportunity to enter the real estate industry.
Crowdfunding, or funding by the masses, is not a new concept. However, it has recently been discussed and implemented as a subject and mode of finance in its own right. The internet can be credited for giving crowdfunding the current mold that it follows. Crowdfunding, for real estate or otherwise, is a great way of spreading the risk of a project over a number of investors. Notable examples of this concept are found in the arts and entertainment industry, where fans, for example, contribute as little as $10 to help their favorite artists produce an album or a movie.
Of course, the system changes a bit when it comes to property funding. For instance, while a band can offer free copies of their album or concert tickets to fans who put in their money in the project, crowdfunded real estate involves returns on investment. On a real estate crowdfunding platform, a property investment is broken up into smaller ‘portions’ and this where the everyday investor can get the chance to finance a property. So for example, a villa worth AED 3,500,000 can be accessible by investors who can afford a minimum investment of AED 1,500. This gives a chance to over 2000 investors to finance real estate and get returns as high as 14%.
Before moving on, you should remember that like any investment, a crowdfunded real estate project has its risks. That is why you can never say with 100% certainty beforehand whether an investment is sound or not. What you can do is exercise due diligence, i.e. do your homework before investing. Only put your money in deals that are underwritten by experts and with crowdfunding websites that have a record of providing substantial returns on real estate that people purchased through them. In addition, the platform you use should also enable you to review each investment you make, answer your questions via webinars, and monitor the fundraising process at each stage.
Real estate crowdfunding enables people to join their neighbors to invest in development projects in their communities. This is beneficial because residents of a community now have the power of actually taking part in the development process. And since they themselves are the end users, they can enhance the quality of each real estate project as well.
If you also want to join the property market, create your crowdfunding account today.