Real estate crowdfunding is revolutionizing the way of financing large real estate projects. With a plethora of investors and lenders, ranging from ordinary investors to high net worth individuals and corporations, these projects easily get the capital they need. In terms of buy-to-let and buy-to-sell projects, crowdfunding can be used for a variety of functions, such as land acquisition, unit renovation, facility provision, and more. Also, what is amazing about real estate crowdfunding is that investors get the desired returns on their investment, either through dividends or in full after a successful deal close. This model is leveling the playing field for traditional and non-traditional developers by giving them a platform to access funding from multiple sources at once.
What is Real Estate Crowdfunding?
Crowdfunding has revolutionized the real estate and investment industries in recent years, providing easy access to resources to develop worthwhile projects. It allows a large number of people to collectively contribute to a single project or company, making traditional ways of raising capital obsolete and even obsolete. To facilitate this process, several Real Estate Crowdfunding (REC) platforms have been created to put owners in contact with potential investors.
Furthermore, there are two types of REC platforms available depending on the investor’s preference: equity-based and loan-based investments. With equity-based platforms, taxpayers can earn a share of the income generated by the property when it is rented or sold, while loan-based platforms allow users to lend money to cover mortgage payments, with returns at regular interest intervals. Due to its many benefits and user convenience, crowdfunding is now a popular way for real estate financiers, entrepreneurs, and other business owners to raise capital from an ever-expanding pool of backers.
The Middle Deal in Real Estate Crowdfunding
Knowing the average deal size of real estate crowdfunding projects is key when considering starting a business in the industry. This figure provides marketers with an invaluable tool that can be used to accurately measure and analyze market capacity, making it easier for them to properly plan their business. The typical range raised by a real estate crowdfunding project starts from $500,000 up to $4 million or more, though this typically represents a smaller portion of the larger project’s value, which could run into the tens of millions, starting at $1 million. up to $50 million. .
How to start a real estate crowdfunding platform?
There are 2 main ways to create a real estate crowdfunding platform. You can build your custom platform from scratch or use a standard ready-made solution.
Custom development
While it is an expensive option, custom development stands out and serves as a long-term opportunity. This statement is based on a plethora of benefits associated with it. For projects that consume longer timeframes and therefore require specific features, custom development gives you the opportunity to create unique features, control projects, and easily integrate with external APIs. Creating custom UX tailored to specific target audiences ensures user experience specification and product quality.
A custom platform is one such possibility that can be expanded as needed. Custom development can be a fruitful solution for companies seeking flexibility in terms of product design and direction, and enhances their real estate crowdfunding platform needs.
SaaS
SaaS can be a winning solution for companies looking to launch a real estate crowdfunding platform while on a tight budget and time frame. But keep in mind that Software as a Service is the type of subscription service provider. At the same time, its offerings include a ready-to-use software platform.
SaaS offerings allow companies to test their ideas without paying expensive development fees. Companies that purchase SaaS for a real estate crowdfunding platform can quickly and efficiently build their platform. The only downside to SaaS is that it comes with limited features.
However, those who wish to enjoy additional features will require the assistance of a trained developer to build the platform from scratch. Simply put, SaaS is an ideal choice for companies that want to quickly and affordably set up a real estate crowdfunding platform.
Examples of Real Estate Crowdfunding Platforms
When it comes to real estate crowdfunding platforms, knowledge is power. Gaining insight into how successful real estate crowdfunding websites are structured and what strategies they are using to keep your business running smoothly is key to accelerating your own progress.
Multiple Heritage
EquityMultiple is changing the game for commercial real estate financing, providing unparalleled access to high-quality investment opportunities. With $131 million in assets under management and $1 billion in total deal value, it’s no wonder why this leading crowdfunding platform is making such a splash in the market. Accredited investors can choose from options such as preferred stock, syndicated debt, and common stock with terms from 6 months to 5 years with an annual yield of 6-12%. The minimum deal goal is set at a minimum of $500,000, while the minimum investment amount is just $10,000. The platform has experienced a consistent 100% year-over-year growth since its inception.
fundraising
Fundrise is a great platform for those interested in investing in commercial real estate who are not accredited investors, with a minimum investment of $500 and only requires you to be 18 years old and a US resident (sadly, there is no international opportunities at this time), Fundrise gives everyone the ability to get involved in a variety of investments, from senior secured debt and mezzanine debt to preferred stock, all while focusing on projects with terms ranging from 1 to 3 years. Plus, their passive investing concept means you don’t have to sacrifice any of your free time trying to research potential investments, as all options are pre-screened and tailored to your investment profile.
shojin
Shojin is a prime example of a real estate crowdfunding platform that has taken advantage of the growing demand for such services and ultimately reaped the rewards. The platform was acquired by SmartLands, a security token issuing company, in 2019. This shows that even small-scale companies like Shojin can attract the attention of big players in the world of finance, an achievement that has probably helped inspire other crowdfunding entrepreneurs. .
PeerStreet
It is an online marketplace for accredited investors. Using PeerStreet, accredited investors and high-quality private real estate loans. This platform is advantageous in many ways and can be an ideal platform for real estate crowdfunding. Furthermore, PeerStreet comes with a unique offer among real estate investment platforms and diversification in various parameters.
One of the most explicit examples of PeerStreet is the risk of low interest rates, which is mainly due to the fact that the loans have a maximum term of 36 months. While it has these advantages, 2022 studies show that total investor distributions exceeded $280 million; however, the average annual return was 6.49%.
Conclusion
The demand for crowdfunding platforms for real estate projects continues to grow. In this context, it is obvious that the interest of investors will increase in proportion to the size of the niche. With the help of companies like Jatapp.co, you can develop your own crowdfunding platform and gain recognition. However, not everything depends on the developers, legal issues are also important, and the idea and implementation is one of the parts of success, although integral.
Read More Author: Janvi Panthri Senior Writer, Editor
Categories: How to
Source: vtt.edu.vn