Most of us believe that the reason people who would like to invest in real estate do not is due to a lack of affordability. There are other factors that may not be as obvious. Geography, investing experience, and education are also limiting factors to the coveted real estate market. The very fact that real estate crowdfunding has reduced the impact of these factors is reason enough to believe it will continue to grow in the near future.
These are 5 reasons you can expect real estate crowdfunding to become one of the largest growth areas in investing over the next 5 years.
- Changing the Trend
Currently, 85 of the wealthiest people in the world have the same wealth as 3.5 billion of those with the least wealth. In an area of investment like real estate which has long been considered an option that was open to members of the ‘rich boys club’ and not those who were considered “average”, there are more people who have reason to want a change to this fact than those who want it to stay the same. As it is, only 85 people are getting the benefits of the lucrative investment market while 3.5 billion sit back and wish they could do the same.
Crowd investing in real estate passes the opportunity to the many. Lowering the amount of the required investment by pooling their money together gives the majority an opportunity to make some serious profits. That type of majority with a solution at-hand is not likely to drop the reins and go back to the old-fashion system of only letting the wealthiest individuals into the loop.
- Nowhere to Go but Up
Many critics and enthusiasts alike have talked about the number of websites offering real estate crowdfunding online and the minimal number of opportunities listed on them. The majority of these are enthusiasts because they realize how far the industry has already come. The idea of crowd investing in real estate caught fire after the JOBS Act was signed into law, giving small businesses more opportunities to invest. Considering the progress that has been made since that time, the investment market is truly phenomenal. New websites such as Crowdventure.com continue to open up and the process is constantly being improved to make it more secure and diverse.
- The Internet
Many people believe that without the Internet, crowd sourcing real properties would never have had a chance. The websites where the investments are offered are a key feature of the projects. As a result, people from all over the country can invest in real estate projects from anywhere else in the country. They don’t have to limit themselves to the new mall on the other side of town.
The Internet increases the project volume and the number of crowd members who can come together to invest. The system may not be perfect yet, but it is growing. Many believe that the next 5 years will be all the time needed for real estate crowdfunding to reach full growth.
- Investing in the Community
Crowdfunding real estate allows people to invest in properties all over the country. In the future, it will be easier to invest in those that are close to home. People like the idea of playing a role in the improvement of their environment and their community. They will also have a role in the way the projects they invest in will progress. Crowdfunding lets investors track their projects in real-time and have more of an impact on how it progresses.
- A Safer Alternative
As The News Funnel points out, 2008 wasn’t that long ago and we all remember the collapse of the economy. We also remember that Wall Street played a big role in the loss.
When investors started looking for safer investment alternatives, a large number of them turned to real estate. Not only does real estate contribute to a diversified portfolio, it also produces solid returns in comparison to other investment markets. Real estate crowdfunding offers you the best of both worlds. It gives you a safer way to invest in real estate while still allowing you to reap the rewards.
In many ways, the potential of real estate crowdfunding to reach exponential growth over the next five years is based on supply and demand. Real estate is an investment area that everyone wants to be involved in, even if to a smaller degree than large-scale investors. Crowdfunding greatly reduces the risk, giving investors the features that matter most to them. As a result, a large number of people want to take advantage of the crowdfunding format. The increased demand for more websites and better terms will push the format forward with the changes to drive more investors forward.
The Growth in Diversity of Crowd Investing in Real Estate
Not only is real estate crowdfunding expected to experience phenomenal growth in the next five years, but the diversity of projects it encompasses is also expected to see an increase. Residents of communities can invest in projects to tear down old buildings and re-build structures or homes that will make an important contribution. Lower-income investors are also expected to have more opportunities to compete with traditional real estate investors which will finally democratize real estate investing.
Matthew is the founder and CEO of Crowdventure.com, a real estate crowdfunding platform.