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Five Reasons Why Real Estate Crowdfunding Has Only Just Begun

In the past few years, one of the buzzwords you’ve probably heard over and over is “crowdfunding.” Being a buzzword, it’s easy to write off this kind of thing as little more than a trend. Depending on the industry it’s applied to, this could be the case. However, if you are too quick to judge, you could miss the potential represented by real estate crowdfunding. If you need a bit of convincing, consider the following reasons this new kind of investing is only getting started.

Revenues Will More Than Double This Year

It’s generally a pretty good sign for an industry when you hear that it’s about to have a record year. This is especially true when it’s going to more than double its numbers from the year prior. Such is the case with real estate crowdfunding. Analysts believe that the market is going to go from $1 billion in 2014 to over $2.5 billion this year.

Now that alone is a reason to be optimistic. However, try to remember the last time anything like this happened in an industry as old as real estate. Seeing huge surges like this isn’t completely uncommon in brand new industries, as you see in the technology sector. We’re not talking about a new kind of app, though, or type of social media platform. Instead, we’re talking about one of the oldest forms of business in the Western world and a new innovation is going to do twice as much revenue this coming year.

Of course, this kind of crowdfunding isn’t showing any signs of slowing down. There’s little reason to think that the coming years won’t be just as impressive.

Options Abound

Despite how new this type of investing is, there are already all kinds of platforms for interested parties to turn to. In fact, at the time of this writing, that list is getting closer and closer to a solid 100 options.

Not all of these will be here next year or in the years to come, obviously. Still, that’s a solid list to choose from now and that much competition is only going to make for a healthier industry in the long run.

Furthermore, as with any new market, you can expect that more and more will come along as the industry matures. What doesn’t work will get left behind while new platforms come along taking advantage of what has been shown to serve customers best.

People Want New Investment Opportunities

You could be forgiven for holding on tightly to your money after the recession. Even though it’s often described as a housing collapse, plenty of markets were hit. Now that we seem to be in the clear, it seems like a lot of people aren’t willing to part with their hard-earned money.

This isn’t necessarily true though. Instead, it might be more accurate to say that people don’t want to get burned. Unless you’re a professional, investing in stocks is never a safe bet, far from it actually. Even if you put your money with a broker, though, there are many reasons to think you’ll end up regretting it. Not even a mutual fund can save you from the volatility of the stock market.

Still, people know they need to invest their money. Leaving it in a savings account is begging for inflation to chew through it.

Aside from the recession, the real estate market has always provided sound opportunities. Anyone who held onto their properties through the economic downturn is most likely now glad they did so. Unless you have a small fortune lying around, though, trying to get in on the action has historically been impossible.

Thanks to crowdfunding, a whole new socioeconomic class can enjoy the benefits of investing in real estate without worrying about unnecessary risks. The people wanted this kind of alternative and the market came through.

Crowdfunding Equals Speed

While the digital age has come with a number of advantages, it’s tough to argue that all these new gadgets and platforms haven’t decreased our ability to pay attention. Say what you will about that, the majority of people don’t want to sit around and wait for results. We can stream entire movies through our phones with a tap of the screen, for crying out loud!

This is yet another advantage that will keep crowdfunding on an upward trend for the foreseeable future. If you’ve ever tried to go through an REIT (Real Estate Investment Trust), you are already acquainted with how slow moving the process is. There’s no guarantee it will even work out for you in the end.

With crowdfunding, you get swift results. The entire activity of investing has been streamlined, so the moment you wish to invest, you’re halfway there.

Even Residential Homes Work with Crowdfunding

At this point, crowdfunding has predominantly been a tool for raising funds in relation to commercial ventures. All over the world, people have put up new apartment complexes and shopping centers with the help of crowdfunding platforms.

That’s not to say that crowdfunding won’t soon be having an effect on the residential markets though. Already, many homeowners have learned that it’s much easier to find individual investors in their American dream than going to a bank and trying to crawl through the bureaucracy of securing a loan at a snail’s pace (to say nothing of the kinds of additional fees you could face).

Mortgage loan origination is a trillion dollar market and that’s not going to be a number you see going down anytime soon. The population is only growing and those who need homes will move in lockstep with it.

If crowdfunding for residential home purcashes even snags a fraction of that business, that will be huge. It will represent the biggest disruption to that industry in decades. On top of that, it will most likely create much happier homeowners as well as a whole new breed of investor.

While you should always be cautious about where you put your money, real estate crowdfunding has already proven it represents a great opportunity. Chances are there will be many more reasons to love this type of investment in the near future too.

Matthew Sullivan

Image: Shutterstock


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