Crowdfunding and the property industry are perfect matches. In short, crowdfunding uses the simple accessibility of large networks of acquaintances, family, and colleagues via social media platforms such as Facebook, Twitter, and LinkedIn to spread the word about a new company and draw investors. Crowdfunding has the ability to level up entrepreneurship by widening the group of investors from whom funds can be collected outside the conventional circle of owners, relatives and venture capitalists.
This is where property crowd pooling sites shine: they connect these two universes.
Two groups are interested in this business model: the investors and the property developers. Let’s glimpse at the benefits that both of them can gain from.
Investors are the main ingredient for the property crowdfunding platform as they are the fuel for this type of enterprise. Thus, by following this investment strategy, they have lots of advantages as compared to the conventional one. The key benefits are as follows:
- Investment democratization: it encourages anyone to place an investment, regardless of their economic disposal..
- Wide choice of ventures to invest in: investors can mitigate risk by investing in distinct chances that may vary based on the kind of projects, the city in which they are found in, and even by state.
- You don’t have to be a property pro: investors do not need to know the sector in detail because they can count on the pros in property crowdfunding. They pick various kinds of ventures in order to reduce the possible risk to investors.
- Diversification equals less risk: just as any other venture, even those in property crowdfunding are not without risk. But, they can be reduced by expanding into various chances.
- Reduction of bureaucratic procedures: obviously, the time is shorter relative to conventional investments, since investments are placed digitally. Moreover, the crowdfunding site is responsible for mediation between the bureaucratic procedures and the registration of users.
Benefits for property developers
The investors’ counterparts are real estate developers. You may not know this, but there are actually lots of advantages to utilizing a property crowd pooling website for property developers. Some of them are:
- Complementary and/or alternative to a bank: crowdfunding platforms in real estate are an alternative to conventional financial institutions because they are more versatile and quicker when talking about applying for a loan. On the other side, they’re complementary to conventional methods of raising money, too, since usually the money that property developers are seeking to finance their ventures doesn’t derive from the fund raising.
- Marketing and communication: visibility is important for venture developers who wish to finance their projects. Actually, when they apply for a loan at a property crowdfunding site, they indirectly inquire about an advertisement. Indeed, they have a marketing department at their disposal that operates in order to make them more popular and recognizable in a large range of media outlets.
- A quicker way to raise capital: financing a project via a crowdfunding real estate platform is definitely less time-sucking than doing so via other methods. The pace at which capital is raised is due to the fact that such platforms are based on an online business model that also contributes to an increase in capital.
- Gaining a larger consumer base: this last argument applies to the second one. Thanks to the publicity that project developers receive when marketed by the property crowdfunding platform’s marketing department, they also achieve a broader customer base.
At the beginning of this post, we stated that investors and real estate developers are the actors involved in this process, but it would be incorrect to list just the couple of them. What needs to be counted in is the property platform, which is, in reality, the star of this business model, the connection between investors and the property developer.