Real estate crowdfunding is a relatively new approach for making finances available to develop a property, buy it or fund a real estate project. Generally a group of investors team up to provide the equity or debt required to buy or develop such real estate. This is generally done via an online platform or an online portal that is convenient for everyone.
Crowdfunding comes across as a term used to raise donations for people in need or for some noble cause. But crowd lending is a great option to quickly raise the required equity.
Real estate seems to be a great market for those looking for crowd funding and raising capital. Especially in Canada, more than $2.6 billion in global real estate projects were crowdfunded in 2015 even though the market has evolved at a much slower rate than the U.S.
So, what exactly is driving this growth?
The massive growth of mobile and electronic transactions as well as social media adoptions and securities laws that have become more liberal, all have contributed to the growth in the real estate crowd funding concept. A recent example includes the Start up Crowd Funding Exemption. This enables project owners to raise $250000 two times annually and retail investors are allowed a maximum of $1500 per campaign.
What type of Real Estate can be crowdfunded?
In the U.S. such kind of funds has been used for residential property development mainly multi family buildings. Investors are also interested in funding renovations of real estate that is in too much despair.
Commercial real estate is also another area of interest for Crowd Funding.
Let’s also check out some of the benefits for both sellers and developers
The main benefit here is to approach and seek community support for projects that may not have received enough acceptances in the past.
Benefits for investors
Among the many benefits for investors are:
• Attractive returns
The other good part is that the investors can select their specific properties of interest.
The opportunities in this area vary in terms of risk and rewards and the commitment is always long term. The good part is that this investment is backed by the asset itself or the project that is invested in.
Debt liquidity is known to vary from six months to over five years. Equity investments have a liquidity of three to ten years.
Overall, the big boom in the real estate market is the main reason for the increasing wealth of home owners, developers and investors. Lack of capital or the skyrocketing prices are some of the reasons why many people are not yet investing. Crowd funding is becoming a great means to invest in real estate properties, projects and development plans. It opens up new opportunities for investors who are willing to purchase real estate and require a means to raise the capital. Well, it is made easy by crowd funding portals and convenient for everyone involved.
Naz Allahyari is a Vancouver Realtor & Vancouver Real Estate agent. Every type of property from New Condos, Townhomes and Houses, Feel free to Call us at 778-318-5242