Sites like GoFundMe and Kickstarter have transformed the way people raise money. Crowdfunding is a great tool for fundraising. Since each donation doesn’t need to be very large, accomplishing your goal is much simpler. The number of people that donate is what makes all the difference. This new method has revolutionized how startups, musicians, artists, and directors earn funding for their projects. Even more so, it has also hugely impacted the world of real estate investing.
Crowdfunding real estate is a way to gain many investors without requiring high dollar amounts from each one. The basic idea behind crowdfunding is that it’s easy to get a lot of people to invest small amounts. When they all work together, a campaign can quickly meet its goal. This method, when applied to real estate development, allows developers to reach new investors that they could never have reached otherwise and vice versa. Finally, real estate investing isn’t an exclusive business venture and you don’t have to be the uber-rich to start playing the game.
Before crowdfunding was an option, investing in real estate depended mostly on business connections. It was all about who you know and how much money you had. Under the Securities Act of 1933, private securities could not publicly solicit investments. Plus, the minimum threshold to invest in these deals was usually in the six-figure range. The high amount needed to invest coupled with a ban on investment solicitation made it impossible for any average investors to earn a spot in the real estate market. For developers, the pool of investors was very restricted, which made earning capital difficult.
However, everything changed in 2012 when the Jumpstart Our Business Startups Act of 2012 was passed. Now, developers are able to directly market to accredited investors. Additionally, potential investors can literally choose where to invest their money from the palm of their hand. And, they don’t have to fork up $100,000 or more to get started.
While the SEC is still reviewing a few materials, the hope is that this method of investing in real estate development will continue to thrive in the future, as well as provide great alternatives to investors.
Thanks to the fast pace at which technology changes, no market is being left untouched. Even the oldest, most traditional industries like real estate investment have had a makeover. With Internet access, you can now begin investing in the previously exclusive real estate market.
The old ways of investing meet new advancements in technology with the crowdfunding method of raising cash. While the basic steps of investing in real estate have stayed the same, the ways developers find investors and the availability to invest has changed for the better. Now, more people can participate in the fast-paced and exciting real estate industry.
Crowdfunding is such a game-changer when it comes to raising money. This is because each investor does not have to give very much to help the overall cause. While each person donates less money than real estate investors have previously done, crowdfunding offers the advantage of a bigger pool of people from which to draw funds. This means meeting goals and raising money for projects can be accomplished much easier and quicker than ever before.
While sites like Kickstarter and Indiegogo are popular crowdfunding sites, these platforms don’t offer any shares or financial ROIs. Usually, the rewards for participating come in the form of prizes or perks. While these platforms work well for other types of startups, real estate investors prefer something that will actually bring them a return on investment as well as diversify their portfolios. So, crowdfunding platforms made specifically for real estate have emerged to fill the gap.
Crowdfunded real estate investment has opened the doors for non-accredited investors. Now, you don’t need to be a billionaire to start investing. Investors can buy-in with a minimal investment and still reap the benefits.
Additionally, finding investors was nearly impossible for many developers before. Since it was illegal for developers to advertise deals or to ask for investments at all, the pool from which developers could raise funds was very limited. Today, new real estate projects can be freely advertised, making it easier to find investors.
Investing in real estate helps to diversify your portfolio in order to reduce risk. By investing a variety of industries and price points, you can better protect yourself from the natural ups and downs of the market. An advantage to investing using crowdfunding is the ability to gain access to the real estate market with a small amount of capital. Plus, investors can work in direct contact with developers and have a voice in the process. Full-service crowdfunding real estate platforms also take care of confusing paperwork to make the process less stressful. When it comes to getting started investing in real estate, crowdfunding is really the simplest and easiest way to do it.
When you invest in real estate through a crowdfunding platform, the method is as easy as it gets. Invest from your home computer, tablet or even your smartphone. Browse the site to see what deals are out there and start building your portfolio with a few clicks.
DiversyFund is a real estate crowdfunding online investment platform that connects accredited investors to borrowers with in-house vetted real estate investments. The platform provides the ease of browsing, investing, and managing investments online, anywhere, anytime. DiversyFund is your gateway to exclusive real estate investing. We simplify the process of crowdfunded real estate investments. Our committed team of dynamic real estate professionals aim to provide you with the best investment opportunities available. We have combined our extensive knowledge of real estate with our experience in asset management, consulting, investment banking and technology to revolutionize the real estate industry by making the investment process simple and accessible for you.
This article originally appeared on The Smart Investor, an online academy helping people invest smarter and make better financial decisions. Last Updated: August 6, 2019 As a real estate investor, the experience is going to be necessary to get far, but the more you know before you start, the better off you’ll be….
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