Real estate crowdfunding is where individuals raise funds to invest in commercial properties. Unlike in the past where crowdfunding was allowed for particular investors such as banks, nowadays it is open to ordinary investors to raise funds and invest commercial properties of their choice. In most cases, real estate crowdfunding is designed for single-asset commercial properties. Prior to the introduction of crowdfunding, only a small group would afford to invest in a high-rise apartment community.
Crowdfunded real estate investments have the potential for huge returns, but this does not mean you should rush into this investment since there are many things you should put into consideration.
In this article, we will look at what real estate crowdfunding is and the merits and demerits you should be aware of.
What is real estate crowdfunding
Real estate crowdfunding allows individual investors to raise money and invest in single-asset commercial real estate projects.
The working of the real estate crowdfunding is very simple since the real estate company advertises for a commercial opportunity and gives room for the interested investors to raise money towards that particular project and get a share of the returns upon completion of the project.
Pros of investing in crowdfunded real estate deals
Investing in real estate via cloud crowdfunding comes with several benefits. They include:
Crowdfunding helps real estate investors to invest in commercial properties that would have been impossible if one had to rely on his own money. As a group, investors can contribute much-needed money to commence and finalize a particular project. For instance, if a commercial deal costs $100,000 it would be difficult for a single individual to raise that money but if there are 10 investors willing to contribute that money equally, everyone would be required to raise $10,000 which affordable.
Crowdfunded real estate projects allow the investors to invest in a specific property unlike REITs and real estate investment trusts that allow investors to invest in various projects. Investing in a specific property allows investors to concentrate on that project to get it right.
Real estate is a powerful investment that can generate exceptional profits. Most people who claim to be rich are real estate investors or they took part in real estate investment at some point their lives. Crowdfunded real estate projects are known to generate reasonable profits. Studies have revealed that most of these projects generate at least 15% of profits or more annually.
The discussed above is the working of the crowdfunding real estate investment along with the advantages it comes with.