What is real estate crowd funding?
It is a technique in which real estate companies reach out to people through social media and other platforms and get them to invest in something like a money pool. When people invest small amounts of money, there is a large pool of finance. This is to make people accessible to different areas of business which they cannot reach otherwise. In this article Dc Fawcett reviews real estate crowdfunding and how it has altered the face of real estate investing and various problems faced on pricing a home too high.
The process of crowdfunding
Before the process of crowdfunding came into existence, people were allowed to invest through real estate investment trusts or investment companies. They could invest only based on their individual credit worth and finances. They could not enter into expensive real estate investments. But with the emergence of real estate crowd funding, they could directly invest in the business. They could directly seek investments from wealthy investors and gain access to more business ventures. It is something like a shared business.
Different modus operandi for crowdfunding
There are various crowdfunding processes
Reward based crowdfunding:
This is crowdfunding wherein people invest in exchange for rewards. The reward does not manifest in the form of cash and instead is given in the form of things.
investors make donations and this is for a charitable cause. Nothing is given to them in return.
This is something like a loan. Investors give loans to those who solicit investments from them. It is similar to a mortgage where a certain interest rate is offered.
In this type of crowd funding, investors will have a share in the profits made through the investments. Their share depends on their equity, i.e. the worth of the money that they have invested.
Trends in crowdfunding
Higher capitals are important for crowdfunding growth
Real estate crowdfunds want capital only from certified investors. Due to this lack of competition, people who want to invest small amounts can enter easily. But if a crowfund has maximum number of investors who deposit only small amounts, it has to solicit a higher number of investors. Compare people who invest amounts of $30,000 and $50000 to people who make down payments of 30 million and 50 million. These prestigious amounts will result in higher growth and credit for the crowdfund. Thus crowdfund owners must solicit from institutional funders rather than small funders. This awareness has led to the emergence of higher capital investments for crowd funding.
Merging the crowd funding industry as a complete entity will result in projecting the most successful crowdfunding marketplaces in an outstanding fashion. Not all the marketplaces will emerge as powerful crowfunding organizations. The emergence will depend on factors such as technology and application of statistics for underwriting. These top key players can be upraised to a much higher level through unification
This is crowdfunding and its various trends as reviewed by Dc Fawcett. With time, crowd funding is going to grow in popularity. So, read not just this article but a lot more on crowdfunding and start investing.