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How Crowdfunding Has Changed Real Estate Investing

How Crowdfunding Has Changed Real Estate Investing
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Crowdfunding is the perfect method of raising capital and it has exploded in all the industries. It enables the investors to invest directly in people, companies, real estate without any need of an intermediary. As the strategy is benefiting all the different industries, real estate is not an exception. But, before beginning with the changes that crowdfunding has brought in the real estate market. Let us provide you a brief introduction of it.

Crowdfunding is the way of raising money through the collective efforts made by a pool of individuals. These individuals not only include the friends and family of the investors but the public also. And the capital is raised through the various crowdfunding platforms and via social media.

What a person would be doing in crowdfunding is telling people about his ideas and asking them to raise money to convert that idea into reality. People are offered rewards for raising money that can be monetary (which they will get after a specific period of time) or non-monetary (gift items, mostly given at the same time they raise money).

The crowdfunding is becoming a buzzword because it is the most effective and fast way of raising money, provided that you are doing it right. Also, the risks are less as compared to other fundraising strategies. More you become creative, more will be the profits. Now, being well aware that crowdfunding is all about, you will better understand its effects on the real estate market. So, let's start with the reformations that real estate investment has gone through due to the crowdfunding.

Before the advent of the crowdfunding, the access to private real estate deals was limited. Only those investors, who were having personal networks were able to raise capital and make deals. So, a start-up had no chances of making investments unless he is having a connection with such people. Thus, he was required to work with the firms that deal in the real estate investments. But, crowdfunding has removed all the barriers and has enabled the investors to invest in the projects they are interested in. Here are the main changes that it has brought to the real estate market.

Flexibility

Investors are enjoying the flexibility that crowdfunding has provided to them. They are no more restriction to invest in any one project. They can spread their investment amounts on as many projects they want. This has also reduced the potential risks. For an instance, even if a single project fails, the investor would have other options where he can succeed.

Exposure

Crowdfunding lets the investors get exposure to the different kinds of projects. As they are permitted to invest as little or as much they are comfortable with, they get the chance to test the waters before trying their luck in the particular one. Thus, they can get more familiar with different kinds of deals.

Speed and efficiency

It is the unprecedented speed and efficiency of the crowdfunding that will let it to stay forever. The marketplaces and the crowdfunding platforms offer more opportunities for raising capital as compared to the traditional banks and lenders. As a large crowd of people participates in the deals to raise funds, the time is lowered to a great extent. Also, this technology has enabled the investors to make the deals that are satisfactory to all the involved people.

Deals all over the globe

Property investment was a local endeavour before the arrival of crowdfunding technology, but now, you can invest money in the real estate, all over the globe. All the information that you would need to know about the project would be provided by the crowdfunding platforms. It has also enabled the investors to gain more profits through foreign currencies.

All those who wished to invest in the real estate, but remained unable due to the restrictions imposed by the traditional investment rules, now can take the help of crowdfunding to realize their dreams. However, if you are looking for some guidance to start with crowdfunding then this video is worth watching- https://www.youtube.com/watch?v=uqQJHH1aQiQ.

(This article is co-authored by AndreySokurec, owner of HomeSteadRoad.com.)

Edition: December 2016

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