Crowdfunding and real estate go well together like cookies and cream if you ask me. As we all know capital is still considered one of the biggest barriers when entering real estate investments simply because you haven’t created any value yet to collateralized a loan, it doesn’t allow you to borrow any funds as a startup. Luckily for us, real estate crowdfunding platforms have opened its doors towards more opportunity for real estate investments.
According to Forbes, real estate crowdfunding continues to be a dynamic and ever-evolving industry, growing to an estimated $3.5 billion in 2016. By 2025, the crowdfunding industry as a whole is anticipated to be valued at more than $300 billion and online real estate marketplaces are primed to capitalize on that explosive growth.
So let’s go over on how Crowdfunding works.
What is Crowdfunding?
Crowdfunding is a way of financing your new business venture using small amounts of capital from a large number of individuals. This is commonly done through social media and crowdfunding websites to bring entrepreneurs and big investors together.
Platforms are just as good as how you use them, and if used correctly along with a solid business strategy from the best crowdfunding marketing agenciesthis can be a powerful duo to use in your business.
Advantages of Crowdfunding
The primary place to build traction, adopters, and advocates
A solid and visible crowdfunding effort can give approval and social proof that is indispensable in paving your way ahead. At the point when potential clients show enthusiasm for your startup’s product or services, you’ve created social proof — showing other individuals that you have confidence in what you’re doing. When early adopters vet and become tied up with your thought, others are bound to stick to this same pattern. Social proof is converted into footing — regardless of whether it’s an extensive number of sponsor, pre-requests, or media consideration — that is precious as you pitch to different financial specialists.
Your initial adopters and potential brand advocates are those people that power your idea’s social proof. They’re the people who have confidence in your story, item, or service, enough to stake their cash on its life span and long haul achievement. These early adopters are critical to the achievement of your crowdfunding effort and even after the event, they likely share your ideas, informing people around them that it is valuable.
Doubles as media exposure and marketing effort
Public Relations (PR) will create more awareness on your efforts and entrepreneurs will be watchful for the growth of your startup. This can come in the form of a story on a popular blog, news website, or print publication, and is an incredible method to acquire supporters outside of your own network.
A decent Twitter mention or blog post can create a powerful snowball effect, putting you in touch with major investors you probably won’t have generally come to. Fruitful crowdfunding is a good way to spark new investor’s interest whether they are reading it online or heard from their community.
Established in 2010, Fundrise is one of the pioneers in the online real estate crowdfunding space. This platform gives users and investors the chance to benefit from real estate offerings for only a few hundred dollars ($500 for an initial investment).
Fundrise also introduced electronic Real Estate Investment Trust (eREIT) last 2015 to make investing in commercial real estate available to the majority of investors. It’s like you’re investing to an ETF or mutual fund.
As you sign up in the platform, you’ll invest either in one of the three Core Portfolio plans or in the low-minimum Starter Portfolio. Whatever you choose, your money will be invested in an allocated assortment of eFunds and eREITs consisting of private real estate assets located across the United States. You can receive your payouts in 2 different ways — either by (1) quarterly dividend distributions or (2) appreciation in asset value at the end of your asset’s investment term.
Realty Mogul is an online real estate capital marketplace platform founded by Jilliene Helman and Justin Hughes. Began in 2013, To change and disrupt the traditional real estate funding by building an online crowdfunding website is their aim in creating this platform.
The Realty Mogul platform claims more than 130,000 sponsors, borrowers, and investors as per writing, and is staffed by a group of experts who have a mix of experience in finance, real estate, and technology. It has given financing for more than 350 real estate properties, with advances totaling more than $280 million.
Realty Mogul introduced a MogulREIT to compete with Fundrise’s eREITs. The advantages of a MogulREIT is (1) no accreditation is required, (2) more broadening at a lower sum required than putting resources into individual properties, and (3) normally lower investment prerequisite than a private placement.
CrowdStreet has one of the largest and most diverse selections in the business and specializes in commercial real estate (CRE) investments. One of the good points in partnering CrowdStreet is that it enables the speculator to collaborate specifically with the mediator, as opposed to placing itself in the middle of all communication.
Crowdstreet sources deals from mediators, and then makes those available on its website. Just note that the client still needs to pay expenses and remuneration charged by the outside support, which change from deal to deal.
Patch of Land is a Peer-to-Real-Estate lending marketplace that matches accredited and institutional investors seeking high-yield, short-term, asset-collateralized investments to borrowers seeking more timely and consistent sources of funding for rehabbing properties across America.
Their goal is to solve the problem of inefficient, fragmented, and opaque real estate private lending by using technology and data-driven processes to create transparency and to efficiently underwrite projects for borrowers with real estate projects that are routinely bypassed by traditional lenders.
As per InvestorJunkie review about PoL, Patch of Land’s lending platform achieves their mission to reduce the cost and increase the efficiency of getting these deals approved and funded. If you’re looking to invest in short-term debt with generous yields, then PoL may be right for you.
RealtyShares is a real estate investment platform that gives investors direct access to quality investment opportunities and real estate operators the ability to raise capital. From the partnerships they develop with real estate sponsors to the service they deliver to their investors, their mission is to connect capital to opportunity. They see potential in delivering value and efficiency to real estate investors and operators through their expertise, technology, and data.
Real Crowd, just like CrowdStreet, is focusing on Commercial Real Estate (CRE) assets. It offers both equity and debt deals, as well as both single property investments and multi-property assets. Because they make their money by charging the sponsor, they don’t charge clients an extra fee. They’re also one of the few sites in this business that increased their volume since last year.
Fund That Flip works in residential debt investments (also called hard money loans or fix-and-flip loans), alongside a little background of multifamily and business debt. They have the lowest LTV (loan to values) of any platform (higher values have more risk than the lower).
Fund That Flip credits cash to borrowers and afterward sells pieces of those loans to investors who share in the profit (or loss). Typically the borrower is purchasing the house and renovating it with the purpose of selling it at a higher price. Lastly, Fund That Flip has great straightforwardness and a best-of-breed low default rate.
Real estate investing can be imagined as a vast wetland and usually, it doesn’t come with a guide, and the road to riches is often winding. That being said, there are things you can do to put yourself in the correct way and guarantee your best possibilities for progress. Listening to professionals, working with good crowdfunding agencies like Crowdcreate to manage it correctly and finding the right investors is a great place to start. Diversifying your investments, get to know your market, set a budget and a timeline, and treat your investments like it’s your own business. There are many other tips out there so do your own homework before listening to other people.