Crowdfunding brings together a network of real estate investors and entrepreneurs to finance new real estate business ventures. For those who do not know what crowdfunding is, it is now opening new doors for investors. By using small amounts of capital from the many individuals in their network through social media and crowdfunding websites instead of using the usual venture capitalists, investors now have the opportunity to increase entrepreneurship and their success in real estate:
Traditionally, investors and real estate entrepreneurs used venture capitalists or a circle of owners to begin investing. Crowdfunding expands these options and makes investing much easier. Through crowdfunding sites such as iFunding, Realty Mogul, CrowdStreet, or Fundrise, investors are able to build a large network of individuals to talk about new business ventures in the real estate market. Peer-to-peer lending is also done between friends, family and colleagues through social media site. As the network grows, the stronger the new investment becomes.
Investments made through crowdfunding takes many individuals giving their share. Because it requires a network of people, the risk is much lower. No matter how high or low their income may be, an investor or entrepreneur can take part in it. With so many people involved, the risk depends on the amount the investor decides to contribute. Through crowdfunding, small investors can reap big rewards. Small amounts of money can give smaller investors more access to the real estate market. Developers and investors have seen the significant benefits of crowdfunding.
Although crowdfunding can lead to major investments and new business ventures with minimal risk, there is still a chance to lose money if something goes wrong. Even if the investment was small, there is still a risk that the investor or developer will lose out on their contribution. There is also less easy access in opportunities to sell for investors due to the absence of a secondary market which leads to a lack in liquidity. These risks and setbacks don’t take away from the incredible opportunities crowdfunding gives to investors and developers.
To start crowdfunding and begin reaping the benefits of this kind of investing, choose a firm with a solid foundation. The firm should be staying around for a long time and well-capitalized. Make sure to do research on the crowdfunding company to be assured they are capitalized. Investors must look over every platform to be sure they are making the right investment. Start on one of the multiple crowdfunding websites and begin the research from there.