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Crowdfunding is Enabling International Investors to Creep into U.S. Real Estate Market

While the real estate market in the United States certainly might cool down from time to time, it never really grows cold. In the same vein, international investors have always been moderately interested in the U.S. real estate market for that very reason, but the barriers to entry have often precluded them from doing so to any noticeable effect. With the opening up of a global economy, however, and the advent of crowdfunding platforms, international investors are increasingly creeping into the American market in record numbers, and this shows no signs of slowing down.

Forecasting the Crowdfunding Trend

Recent estimates put the real estate crowdfunding phenomenon as being one that is quickly approaching a $2.5 billion industry. Within the past year alone, the money invested into projects listed on a variety of real estate crowdfunding platforms broke the $1 billion mark for the first time ever, representing over a 150 percent increase in year on year numbers. These are not just massive projects that are being funded either, as real estate crowdfunding platforms routinely make possible ventures of lest than $100,000. Of course many are much larger in scope as well, with some now approaching the $25 million mark. North America continues to be the largest volume region in the world, with nearly 60 percent of the crowdfunding projects being located there. With so many projects on offer, many at great values in markets that are seen to be sizzling, international investors are jumping on board in record numbers.

 

It is estimated that the market for these projects in North America will continue to grow, potentially reaching just under $1.50 billion this current year. This is the funding volume that will be run exclusively through crowdfunding platforms, meaning that many projects will be targeted by international investors. Some will see this investing medium as a way to purchase a second home, or an investment home, while others will view at as a much larger portion of their overall main investment portfolio. Whatever the reason might be, the industry is primed to grow on the heels of the international investor.

Global Real Estate Deals Are Now Easier Than Ever

In the past, it was often difficult to execute international real estate transactions. Not only were they cost prohibitive (and still are in many respects) to the average international investor, but it also was difficult to learn about projects in a timely manner that could allow for timely consideration of the opportunity in the first place. In essence, international real estate deals were reserved for the ultra wealthy individual, or institutional investment firm. Real estate crowdfunding platforms, however, have changed this concept and turned it on its head.

Many investors, both domestically and abroad, have grown frustrated with existing bank options for their investment dollars. Many individuals the world over have been looking for new capital options whereby they could sink their money in and expect a decent return, understanding that nothing is guaranteed. The reality is that real estate crowdfunding today is not just available for large investors, but nearly anyone with a desire to invest even a small amount of money in the U.S. market. In this respect, global real estate deals have just come a bit closer to home. Projects can be researched online, complete with a detailed prospectus, by which an investor can quickly decipher many hundreds of potential opportunities before deciding on the one or two that they would like to invest in. Money transfers can then be arranged, with complete disclosures issued online, and the deal settled in record time. All of this, and more, is now possible with the advancement of online real estate crowdfunding platforms. As roughly 60% of such projects in the world are located in the United States, it is of no surprise that international investors are increasingly becoming interested in pouring hundreds of millions of dollars annually into this market alone.

Cross Border Deals Made Possible With Global Real Estate Platforms

Many might wonder how a real estate deal could plausibly be completed without physically setting foot in the country where the property is to be built. Recent reports have indicated a rise in this very type of activity, as cross border deals are becoming increasingly popular throughout the world, primarily due to increasing technological advances that have evolved into global real estate platforms. Not only had this enabled investors across Europe and Asia to begin to buy a stake in projects located just a few countries away, it has also allowed them to access arguably the largest real estate market in the world, which is that of the United States.

We have to remember that the concept of crowdfunding has been around for quite some time. There have been numerous reasons why people from all walks have life have pooled their money together to purchase stock in something that is bigger than they could ever really hope to accomplish on their own. This concept, then, was a perfect fit for the real estate market, particularly as the price of land and property has skyrocketed globally in recent years. Small scale investors that had once hoped to enter the U.S. market quickly found themselves locked out due to high prices and prohibitive lending options. Crowdfunding was well poised to fill this niche, and it has done so marvelously.

 

In recent years, crowdfunding platforms have increasingly shifted their focus internationally to tap into a new source of capital that is ready to come and make an impact. This sector is likely to continue to grow in the coming years. The number of projects is ripe for the picking, and there is an opportunity for large amounts of small investors to enter into a real estate market that is thousands of miles from their home. While there are certainly risks to consider, this is yet another investment vehicle that is beginning to transcend borders as a global crowdfunding platform becomes perfected and more accessible to everyone.

Matthew Sullivan

Matthew is the founder and CEO of Crowdventure.com @thecrowdventure

Image by Shutterstock

 

 

 

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