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How Crowdfunding Will Change Real Estate Investing Forever

Crowdfunding has already made an impact on the way traditional investing works. However, for most of us, when we think of crowdfunding, we think of people who want to produce a movie, create a new app, or otherwise invent a consumer product. As it turns out, though, this form of investing can work for all kinds of opportunities, including real estate. Here is how crowdfunding will completely change the way real estate works forever.

Access Will Be a Click Away

Traditionally, if you wanted access to a real estate investment opportunity, you only had a handful of options and none of them were very attractive to the average investor. You could go through a stock exchange, of course, but most people these days are, understandably, a bit cautious about putting money on the market. Private equity funds exist, but you usually need the right connections to find your way to that type of opportunity. Lastly, you could try to get a loan from your bank or some other lender in order to go into real estate investing on your own, but this method is always fraught with potential dangers.

Now, thanks to crowdfunding, you can become an investor with little more than a click. No longer do you need the right connections, just an Internet connection, to become a player on the real estate market.

The Investment Process Is Streamlined

Even if you had the money and/or connections, you’d be in for a laborious process before your money would ever hit the market. This is why so many people from the traditional world of real estate investing welcome crowdfunding with open arms. They’re just as sick of jumping through hoops as the rest of us.

With crowdfunding, those days are coming to an end. In the past, investing in real estate meant getting the project idea first, checking to ensure your investment would be in compliance with regulations or other guidelines provided by the exchange or bank you may be using and then finally putting money into the opportunity. This may sound simple, but the entire process could easily take months.

The new way things work is much simpler. You read through or listen to a project proposal and decide if you want to invest. That’s really all there is to it. It’s whoever is in charge of the platform to ensure that investment regulations are followed. Literally, all you need to do is come up with the money.

Anyone Can Afford the Minimum Investment Amounts

Another barrier of entry the vast majority of us have had to deal with when it came to real estate investing is the minimum amount needed to get a project off the ground. Most people who enter real estate investment simply save up, purchase a property and then rent it out. Usually, this is a small, one-family residence.

This still took a good amount of cash though, leaving the rest of us wondering how we could somehow get in on a property of our own. Once again, crowdfunding is here to save the day.

No longer do you have to listen to a fund manager or broker when it comes to mandatory minimum amounts. There are already crowdfunding platforms that will allow you to begin investing in real estate for as little as $10,000 if you are an accredited investor.

Commercial Properties Are Now a Reality for Most Investors

There’s also no reason to stop at residential rental properties anymore, though those are definitely attractive options. Commercial properties are now fair game too. Unlike residential opportunities, commercial ventures usually mean equity investments, which could pay you dividends for the rest of your life. In this way, they function more like a traditional stock. While that definitely comes with a lot more risk than simply lending money to a borrower like a bank, many would argue that your commercial property investment is going to be far more sound than buying shares in a company.

Smaller Fees

The total fees you’re charged for your investment will depend on the opportunity in question. However, the fact that crowdfunding can bring in so many people and because it largely targets those without large sums of cash lying around, you can expect fees as small as 1% in many cases.

Generally, with traditional real estate investment opportunities, you’re looking at much bigger entry fees. Just dealing with all the regulations alone can grind on your budget, to say nothing of the fact that most brokers and security dealers can afford to pass those costs on to customers because they only need so many to lock in an investment.

Greater Opportunities for Property Owners

With all the excitement surrounding real estate crowdfunding and how it can make you money, it’s easy to forget about property owners. Those who want to build properties or buy their own are also going to benefit greatly from this new kind of investing.

Whether you want to build a home, buy one or simply make some money by investing in a property, crowdfunding works for everyone, regardless of your budget. Above are just some of the ways this unique investment approach will change real estate for good.

Matthew Sullivan


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