Whether you’ve been following the growth of real estate crowdfunding or not, you might be surprised by some of the numbers below, which give a unique perspective on this exciting industry.
That’s the number Fundrise just announced they received from Renren, a technology firm from China, amongst other investors. Now, there is absolutely nothing new about China acquiring real estate in America. They’ve actually been doing it aggressively for years.
This number is important, though, for two reasons. First, there’s the fact that it shows how much more money is potentially sitting over in China that can now play a role in our economy thanks to real estate crowdfunding. It’s no secret that China is very, very wealthy and few would argue that this country could use as much of their money as possible.
However, let’s think about all the other foreign investors out there too. Southeast Asia is full of them, but Europe isn’t necessarily lacking at the moment (well, except for Greece, of course).
Although there is no shortage of investors right here in America who are excited about the opportunities made possible by real estate crowdfunding, we’re just a small fraction of the world. Our economy could explode when we start opening more doors to foreign investors.
On the other end of the spectrum, $100 is how little you need to begin enjoying the benefits of real estate crowdfunding. Will it make you a millionaire overnight? No, but neither will putting that $100 anywhere else or even investing $100,000 somewhere. What it will do is help a whole generation of new investors get their feet wet.
Right now, most people save money through a 401(k) or some similar investment vehicle, usually offered to them by their employer. Unfortunately, a lot of people learn the hard way that a 401(k) isn’t the silver bullet we’ve been raised to believe it is and it most likely won’t provide enough to retire on.
That doesn’t mean that you should go ditch your 401(k), but think about the effects of putting $100 away every month for a real estate crowdfunding deal. While you absolutely have to exercise due diligence before making any kind of investment, as long as you do, that tiny sum could turn into a small fortune.
Let’s say that half of those investments turn out to produce 10% annual, a relatively conservative estimate. That’s only an extra $60 a year. However, if that keeps happening year after year, you’d net $3,300 after a decade. Again, that’s if the conservative estimate turns out to be correct and you never decide to up your investment or take your returns and use them to reinvest.
This is how much the Hard Rock Hotel raised back in September. In return, they offered a 15% stake. That’s not a bad investment opportunity if you had the money lying around, but for those of us who don’t, there’s still good news.
The Hard Rock Hotel deal helped put real estate crowdfunding on the map. It showed that although it could work for those of us who only have an extra $100 a month, it was powerful enough to fuel huge, corporate investments as well.
That’s an important realization to make because it shows real estate crowdfunding is more than just some trend. It’s more than just a way for the average Joe to put away a couple hundred dollars every year. What we’re seeing is that this is such a market disruptor it may actually completely do away with the old system, once and for all. Would anyone miss it?
Last anyone took a count, that’s the number of crowdfunding real estate platforms around the world right now. Some have also suggested that this number is most likely growing by 10 platforms every single month. Yet, it doesn’t appear as though we’re getting anywhere near market saturation. If anything, it could be years before we hit the ceiling for number of platforms out there.
This is definitely a good thing too. Right now, what this market needs is more options to help figure out the best possible way to approach something as new and powerful as real estate crowdfunding.
We’re also seeing a lot of diversity too. There are platforms that specialize in equity-based deals, those that only do debt-based investments, those that are strictly for apartments, etc. Specialization is also a vital part of keeping a new market like this thriving and it doesn’t appear as though we’ll be lacking for it anytime soon.
That’s the highest a deal can be for in order for non-accredited investors to take part without the help of an accredited sponsor. This is where someone can put skin in the game for just $100. It’s also a growing sector in the industry, which explains why so many platforms are trying to get non-accredited investors’ attention. While deals for non-accredited investors definitely take more time to put together, in the end, it’s worth it to those who organize them.
According to a report put out last year by Massolution, this is the percentage of real estate crowdfunding deals that were for debt deals in 2014. 18.5% were for equity-based securities.
Although the former generally means greater potential for returns, that number probably tells us that people aren’t ready to take on too much risk with this new form of investing. A lot of that may have to do with the public’s perception of the real estate industry in light of the recent recession.
Whatever the case, it means that people most likely won’t be losing their shirts because they see real estate crowdfunding as easy money. Instead, it would seem most investors are taking their time and acting with caution.
That’s how much the market has grown in just one year. There’s no centralized tally for what the actual number is the entire industry represents, but it’s well into the 11 digits by now and not slowing down.
If you haven’t yet begun exploring the world of real estate crowdfunding, hopefully the above helps put into perspective the amazing opportunities that await you.
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