Real Estate crowdfunding is not a new concept. Crowdfunding sprung into the mainstream in 2012 when Congress passed the JOBS Act. Prior to 2012 crowdfunding was popular for decades in Third World countries where banks were fewer and far between but business still needed to be conducted.
What is Crowdfunding?
Crowdfunding is a way of raising money without going through traditional banks. Similar to peer to peer (P2P) lending, crowdfunding works when investors pool their money with the intent to provide investment capital.
Used for both small business as well as personal purposes, crowdfunding websites make it easy to connect investors with new investment opportunities.
Real Estate Crowdfunding
With the introduction of crowdfunding platforms, online real estate investment has never been easier. As an investor, you can purchase a “share” of a real estate mortgage or loan.
Popular crowdfunding websites include:
Crowdfunding makes it easy for an investor to capitalize on investments in commercial or residential real estate without paying large sums of money.
Real estate offers unique advantages to the investor beyond a typical P2P loan. It offers the investor income, appreciation and tax benefits.
Real Estate Crowdfunding Categories
- Debt Deals – Your funds are being borrowed with the understanding borrowers will repay the loan with interest.
- Equity Deals – This type of crowdfunding vehicle puts investors in an indirect ownership position. This allows the investor to participate in the property’s excess cash flow as well as any appreciation that happens when the property is sold.
The P2P lending landscape has offered investors another option for diversifying retirement savings. Online platforms are making the world of real estate investing more accessible to investors who otherwise may not have enough capital in assets to work in this space. When choosing a platform, be sure the organization is transparent, attentive and able to declare a strong case for any offer. InvestorJunkie has put together a wonderful crowdfunding comparison chart for those interested in learning about the growing real estate crowdfunding industry.