Believe it or not, real estate crowdfunding has been around for decades and has been openly available to retail investors too. Many banks and mortgage providers even offer borrowing solutions that allow up to four people to purchase a house or property. A few examples of banks offering joint mortgage services would be Barclays, NatWest, and Santander.
In the modern market, however, real estate crowdfunding has evolved considerably further than four people pitching in together to buy a property. When you engage in crowdfunding for real estate ownership and development, the risk is spread across multiple investors. Besides, the threshold levels are typically lower than when you purchase real estate as an individual.
Real estate crowdfunding platforms allow retail investors to contribute to a pot of money that is then borrowed by real estate developers or those seeking to buy a property. This is done in a traditional loan/mortgage fashion where the platform charges an interest rate to the borrower and passes on the profits (interest) to investors.
It is similar to other crowdfunding solutions. But with real estate crowdfunding, there is a tangible asset involved, which mitigates risk significantly.
How Has COVID-19 Affected the Property Market?
Currently, one of the key market drivers for real estate crowdfunding is COVID-19. This is for several reasons.
Firstly, property markets have so far weathered the COVID-19 storm fairly well. This is due in part to a property shortage and a high demand across European markets. With strict lockdowns and civil liberties removed across many countries, people are seeking to buy holiday property in countries like Spain and Italy. According to the market research by EvoEstate, it is estimated that 75% of Italian real estate investment is made by overseas investors.
Secondly, amid growing populations in European countries, the housing shortage is fuelling a big surge in real estate investment. This creates large and profitable real estate markets in the areas.
Lastly, the rate of late payment was significantly lower than expected, even when the industry was shut down during the height of the pandemic. EvoEstate reported that they had only 2% late payments across their entire real estate portfolio, which meant that investors were not left out of pocket in the midst of financial hardship.
Given that investment across other industries and especially the stock markets is so volatile at the moment, real estate crowdfunding is seen as a safe haven in the post-COVID-19 world.
Is Real Estate Crowdfunding Globally Accessible?
The answer is yes. The number of crowdfunding platforms in the real estate niche has gone from almost nothing (2 in 2012) to 52 in 2017. And year on year this figure is increasing exponentially.
With returns as high as 13% annually, there are many real estate crowdfunding platforms that are competing for investors, and plenty of developers seeing such platforms as a fantastic financial solution.
Real estate crowdfunding platforms can be accessible in the same way as any other money-service website. Generally, you need to:
- sign up at the platform;
- activate your account using one of the possible methods (e.g. via email);
- verify your identity to comply with KYC/AML policies;
- make a deposit in the currency of your choice;
- choose a loan or project and fund it.
The beauty of this investment method is in the opportunity to finance not only local real estate projects. You can cooperate with project originators from other countries. This has become possible due to real estate aggregator platforms. And with financial institutions facilitating transactions across borders, you can be anywhere in the world and take advantage of real estate crowdfunding. It means that, without a doubt, this investment option is now globally accessible.
In the European and UK market, real estate crowdfunding platforms are highly regulated. This adds an additional layer of protection for investors — especially compared to the private rental and commercial rental markets.
How to Choose a Real Estate Crowdfunding Platform?
There are many things to consider when making an investment decision. Some of them are your appetite for risk, the amount you can invest, and how much you are looking to get in return. With real estate crowdfunding, there are other things to consider too.
Is the platform you’re looking to use reputable? Does it have a good track history? Is it independently verified as a safe crowdfunding platform?
EvoEstate is a world-leading real estate crowdfunding aggregator that provides the following benefits to investors:
- Low minimum investment. You can start investing from €50;
- No fees. EvoEstate itself doesn’t apply any fees — the commissions are charged by project originators;
- Ability to spread risk. You can invest across a range of real estate projects from 19+ partner platforms;
- Clear investment details. Each project undergoes risk rating by by 10 criterias. When choosing a project, you see its detailed characteristics;
- Complete control of your investment. Client money is stored in a separate account and can be withdrawn on demand. Investors can also liquidate their portfolio on a secondary market.
These make EvoEstate easy to invest with and see the return from the outset.
Is This Form of Investment Right for You?
This is something that you will need to decide for yourself. Platforms like EvoEstate provide a wealth of information and also offer comparative insight for this investment method against other real estate investments. If you want to see how crowdfunding investment compares against REITs or buy-to-let mortgages, they provide all the information upfront.
They even highlight the risks of each respective investment type to really help you understand what is involved and what returns you can reasonably expect.
Every year, real estate crowdfunding grows in popularity. This is especially true today with a European-wide demand for property and plenty of developers looking to raise funds to build it. It is certainly a promising market to watch at the moment.