Since we all know that capital is still considered one of the main obstacles when joining real estate investments simply because you have not yet generated any interest for a loan, it simply does not allow you to raise any funds as a startup. Luckily for us, sites for real estate investing have opened the doors to further real estate investment opportunities.
Real estate crowdfunding continues to be a competitive and ever-evolving industry according to Forbes, rising to an estimated $3.5 billion in 2016. By 2025, it is anticipated that the crowdfunding industry as a whole will be estimated at more than $300 billion and that online real estate markets will capitalize on that exponential growth.
So let’s go over how crowdfunding works.
What is Crowdfunding?
Crowdfunding is a way to finance your new idea, using small amounts of money from a large number of people. It is usually achieved through social media and crowdfunding platforms to put together businesspeople and major investors.
Platforms are just as good as how you use them, and if used correctly along with a solid business plan from the best marketing agencies for crowdfunding this can be a powerful duet to use in your business.
The primary place to create momentum, adopters, and supporters
A strong and noticeable crowdfunding campaign will provide support and social evidence that is invaluable in paving the path forward. By the stage that potential buyers display interest for the goods or services of your startup, you have generated social proof — showing other people that you believe in what you’re doing. As early adopters vet and get tied to your thought, others would be forced to adhere to the same trend. Virtual evidence is translated into a footing — whether it’s a large number of supporters, pre-requests, or media consideration — which is important when you compete toward various financial specialists.
Your original adopters and future backers of the brand are those people who drive the social proof of the product. They are the people who trust your story, object, or service, enough to stake their cash on their lifetime and long-term achievement. Such early adopters are vital to the accomplishment of your crowdfunding campaign and are likely to share your ideas even after the case, convincing people around them that it’s worth it.
Doubles as a media attention and marketing campaign
Public Relations (PR) will raise awareness about your efforts and entrepreneurs will be proactive about your startup’s growth. It can come in the form of a post on a popular forum, news website, or print publication, which is an excellent method of attracting supporters outside your own network.
A decent mention of Twitter or blog post can generate a powerful snowball impact, bringing you in contact with major investors that you probably haven’t come across in general. Fruitful crowdfunding is a good way to generate curiosity on the part of potential investors whether they read it online or learned it from their friends.
And now here are this year’s Top 7 Real Estate Crowdfunding Platforms:
Founded in 2010, Fundrise is one of the leaders on the crowdfunding space for online real estate. This platform offers consumers and investors the ability to profit for only a few hundred dollars ($500 for an initial investment) from real estate offerings.
Last 2015 Fundrise also launched an online Real Estate Investment Trust (eREIT) to make investments in commercial real estate open to most investors. It is like investing in an ETF or in a mutual fund.
When you sign up on the website, you can invest either in one of the three Main Portfolio plans, or in the Starter Portfolio, which is low-minimum. Whatever you choose, your money will be invested in an allocated array of eFunds and eREITs consisting of United States-wide private real estate properties. You will collect your payouts in two different ways-either by (1) quarterly dividend payments or (2) asset value appreciation at the end of the investment period of your asset.
Realty Mogul is an online marketplace for real estate money, created by Jilliene Helman and Justin Hughes. Started in 2013, Developing an online crowdfunding website is their goal in creating this platform to alter and challenge the conventional real estate funding.
The Realty Mogul network reports more than 130,000 supporters, lenders, and investors as reported, and is managed by a group of professionals with a combination of banking, real estate, and technology expertise. It has received funding for over 350 real estate properties, with advances of over $280 million.
Realty Mogul launched a MogulREIT which would contend with the eREITs of Fundrise. A MogulREIT’s advantages are (1) no accreditation is needed, (2) more expansion at a lower level than capital allocation in individual assets, and (3) generally lower investment prerequisites than private placement.
CrowdStreet has one of the highest and most diverse market offerings, and specializes in investment in commercial real estate (CRE). Some of the positive points about CrowdStreet’s relationship is that it enables the speculator to directly interact with the mediator, as opposed to putting itself in the center of all communication.
Sources on Crowdstreet work with mediators and then make them available on their website. Also note that the consumer also needs to shell out the costs and remuneration paid by the external service, which varies from deal to deal.
Patch Of Land
Patch of Land is a Peer-to-Real-Estate lending platform that connects licensed and institutional investors seeking high-yield, short-term, asset-collateralized investment to lenders seeking more timely and reliable sources of financing to rehabilitate properties across America.
Their aim is to solve the issue of inefficient, fragmented, and opaque private real estate financing by leveraging technology and data-driven processes to establish accountability and effectively fund borrowers’ projects with real estate projects that traditional lenders typically bypass.
As per PoL analysis by InvestorJunkie, Patch of Land’s lending platform fulfills its mission to reduce costs and improve the productivity of authorizing and financing such transactions. If you’re looking to invest with attractive yields in short-term debt then PoL may be right for you.
RealtyShares is an investment network for real estate that offers investors direct access to quality investment opportunities, and the opportunity to raise capital for real estate operators. Their goal is to link the capital to opportunity from the relationships they build with real estate sponsors to the service they offer to their investors. Through their experience, technology, and data they see opportunity in providing value and productivity to real estate investors and operators.
Real Crowd, like CrowdStreet, is focused on assets related to commercial real estate (CRE). It offers both equity and debt transactions, as well as single and multi-property portfolios. They don’t charge clients an extra fee because they make their money by paying the sponsor. They’re also one of the few places that have raised their output in this sector since last year.
Fund The Flip
Fund The Flip operates in residential debt investments (also called hard-money loans or fix-and-flip loans), along with a bit of multifamily and business debt histories. They have every platform’s lowest LTV (loan to values) (higher values bear more risk than lower ones).
Fund The Flip lends cash to lenders and sells portions of those loans to investors who share in the benefit (or loss) afterwards. The borrower usually buys the house and renovates it with a view to selling it at a higher price. Finally, Fund The Flip is extremely straightforward and has a low default best-of-breed score.
Investing in real estate can be described as a vast wetland, it doesn’t come with a map and the path to riches is always winding. That being said, there are things you can do to position yourself in the right direction and to ensure that you have the greatest chance of success. Hearing experts, partnering with good crowdfunding companies such as Crowdcreate to better handle it and finding the right investors is a great place to start. Diversifying your investments, getting to know your market, setting a timetable and budget and treating your investments as your own business. There are also other ideas out there so before listening to other people do your own homework.