Are you in the know? The whats and hows of crowdfunding

People can have access to multiple properties with minimal risks

Crowdfunding would be good for investors to invest in real estate without putting out a large sum or taking too big of a risk. Andrey_Popov/Shutterstock

There are different ways investors find funds for the properties they want to invest in. One way is through crowdfunding. US-based Bay Property Management Group describes crowdfunding as a way for investors to solicit money through online fundraisings in order to help them fund a new property. This is mostly done because real estate generally has large down payments.

Why to try crowdfunding

Max Crowdfund, an international crowdfunding platform, touches on the benefits of real estate crowdfunding, namely that this method lets investors have access to more property than they would have if they did not crowdfund. The larger down payments would be much easier to afford, as well. Crowdfunding also allows investors to spread their chances between multiple properties so, if one does well, not everything will be affected all at once.

Essentially, crowdfunding would be good for investors to invest in real estate without putting out a large sum or taking too big of a risk. They get to have access to more properties and more opportunities.

More: Identifying real estate investment opportunities post-pandemic

What you need to know before crowdfunding

  • US-based real estate brokerage Home Bay noted that there are different platforms for crowdfunding that may appeal to different types of investors. Whether it be for moderate to low-risk investments or those focused on commercial real estate projects, there are many platforms that cater to different types of investments.
  • Borrowers would need to go over all the guidelines of each website they visit. This is to protect the integrity of investments. Rules are given to both investors and borrowers to not allow a financial slip up or a scam to happen between the two parties.
  • Flippers would need to know that even investors have to make money. Borrowers pay higher interest rates than they would with traditional funding despite its quick process. These higher interest rates are divided between investors. However, if there was house flipping done, borrowers would only pay the high rate for a shorter time period , and the loan and investors can only be paid off once the flipped property is sold.

The Property Report editors wrote this article. For more information, email: [email protected].