Real estate crowdfunding is a comparatively new model of crowdfunding that is gaining more and more popularity with every passing day. Real estate is potentially a vulnerable domain that has risks associated with it. But, when pursued in the right way, it also has the potential of giving you high returns on your investment. Therefore, before you take the plunge, it is always advisable to look at all the factors, gauge the pros and cons of real estate crowdfunding and only then foray into the same. The article here, shall talk about the perks of a real estate crowdfunding model, but shall also equally enlighten you about the possible disadvantages of the same. It is better to be wary of every possible risk and potential gains before jumping in the market unprepared.
An Introduction to Real Estate Crowdfunding:
Real estate crowdfunding is similar to the process of crowdfunding for any other business venture, except for the fact that this model is quite a new one. If one were looking for a working definition of what real estate crowdfunding is, it is the process that allows investors of all scale to invest in real estate or commercial properties, mostly through an intermediary. A developer of a single-asset commercial property appeals to the masses through public platforms for funds to get the project started, and people from all walks of life can then invest in the same in whatever amount they can. This allows for the money to be raised very quickly and gets the project rolling on the floor soon. Based on the revenue garnered by these projects over a period of time, the investors can receive a percentage of the profits or even act as a shareholder of the entire project. This type of crowdfunding is quite a lucrative deal that mutually benefits the real estate developer as well as the parties that invested in the project.
Advantages of Real Estate Crowdfunding:
Real estate crowdfunding comes with several advantages, and we are going to shed some light on those perks in this section of the article.
You Get to Invest In Properties that Might Otherwise Have Remained Inaccessible-
The primary advantage of real estate crowdfunding is the fact that it allows you to invest up and close in commercial properties that might have otherwise remained out of your grasp. These are big deals, and you get to penetrate the industry without any pre-fixed criteria, and you can understand the dynamics better if you read more.
You Are Entitled to the Profits from the Project
The real estate project that you invest in makes you a shareholder of the same, and you are entitled to the profits that the project accrues over time. This is an advantage that is not something you can brush aside. The profits that these real estate projects generate are usually not a figure that you can ignore, and therefore, has a siren call to it.
It Allows You to Invest in Properties Without Worrying About Maintaining the Properties-
Real estate crowdfunding allows you to invest in commercial properties and enjoy the returns on the investment without having to worry about the maintenance of the same. You do not have to take care of the condition of the property, nor do you have to pay for damages because the real estate developer shall tend to those factors.
A Word of Caution:
Real estate crowdfunding comes in with several advantages, but it also has its share of disadvantages that you must be careful of. The greatest drawback of real estate crowdfunding is that they cannot be sold instantly to obtain the money in case of an emergency. You have to give it a period of at least three years before you can make liquid money out of it.
It is essential that one weighs in the advantages and disadvantages of the real estate crowdfunding model, and only then venture into this area. Jumping into the market without any knowledge whatsoever can lead to devastating losses and mental trauma. Therefore, it is essential that you gauge the positives and the negatives of this domain and only then decide whether you would want to be a part of this investment or not.