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Author Topic: What is Crowdfunding and How it can alleviate Real Estate risk ?  (Read 26 times)

Offline Vinay Reddy

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  • Posts: 5
Crowdfunding:
Crowdfunding is a practice of funding a project or venture by raising small amounts of money from a large number of people.
 A group of people/investors investing on a particular idea or property or shares.
Crowdfunding makes use of the easy accessibility of vast networks of people through Social media and crowdfunding websites to bring investors and entrepreneurs together.

No one denies the Fact that, the Real estate investing is one of the best ways to make money and build wealth. There are many benefits to buying and owning properties. Though owning a rental property is a relatively safe investment, not everyone can succeed in this competitive market.

let us note, the risks involved in real estate investing,

1. Unpredictable Market.

2. Highly Location Dependent.

3. High Initial Capital.

4. low liquidity.

5. Depreciation.

6. Vacancy Risks.

Now, Let's see the Benefits of Crowdfunding in Real Estate and how the risks noted above can the minimized,

1. Diversification of Portfolio:

With the help of Crowdfunding, one can diversify his property investments just like stocks even with low capital.  By this, the risks involved in market and location of properties can be minimized.

2. Short-term and Long-term investments:

Crowdfunding platforms provide flexibility with the investment period, one can invest in a property based upon his interests. i.e. Either Short term or Long term.

3. No more lack of liquidity:

Crowdfunding platforms usually allow investors to buy and sell properties with ease on their platform. Theoretically, it is easy to sell a small portion of the property rather than the entire property.

4. Low capital:

Most of the Crowdfunding platforms allow the investors with very low minimum investments, which helps to minimize the risk of high capital investment.

5. Transparency

The key advantage that the real estate crowdfunding platforms provide over the other different kinds of real estate investments is 'transparency'. Investors may have a finite information about the unrevealed access.

6. Tax Benefits

An investment property always comes with certain benefits, including the ability to duck down the depreciation and other property maintenance expenses. It won't be possible with REIT to take advantage of tax breaks. The way in which crowdfunded investments are structured, on the other hand, grants investors the rewards without actually owning the property.

Conclusion:

Every Investment Option has its own risk factors, one has to choose accordingly. The Best Investment Option would be, the one with minimum Risks and High Returns.

 




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