by Dmitry Tsyplakov, CEO/Product manager of Fincase
Yesterday, when we heard the word «investor», we imagined a gray-haired man in a black suit riding a limousine to the stock exchange, but today these are young people who made a couple of clicks on the phone. The reason for the paradigm shift is technological progress and the development of crowdfunding platforms.
What is crowdfunding? It’s when you do not buy an entire house for 10 million dollars, but become one of many co-owners and receive your percentage proportional to your investment.
Crowdfunding works through special applications – platforms. And if earlier someone who meets certain financial parameters could register for such a platform, now any person can participate in financing. You have to understand that a crowdfunding platform is not just a site with a million questionable ads. It is a high-tech product fighting for its reputation. These are companies that work with big data to find the best deals for their users. These are companies that collect, analyze and store an incredible amount of information on each object and user in order to make it as safe as possible.
Crowdfunding in real estate is new business area, so it does not have a single work scenario. On the one hand, this is a big disadvantage – there are too many unpredictable moments which makes it difficult to navigate for a beginner. On the other hand, there is a variety of platforms. It is easier for someone to give money and get only profit, for someone it is important to understand the whole process in detail and be aware of what is happening. Someone is ready to immediately invest 25,000 dollars, while others only 500.
Top. 5 Crowdfunding platforms.
For example, the DiversyFund service is just for those who have very small capital. The platform does not take commissions, and the minimum investment is possible from $ 500. This application does not act as a broker, but develops its own properties. Hence, minus the limitations and impossibility of urgent withdrawal of funds. At the same time, the platform offers quite interesting income – from 11% to 18%, depending on the specific setting.
Another interesting platform for so-called non-accredited investors with capital less than $ 1 million and income less than 200,000 per year is Fundrise. The commission is only 1%, and the investment threshold is from $ 1000. A nice bonus of the platform is a clear mobile application. So you can familiarize yourself with new offers at any time and quickly invest in the most interesting ones for you. Annual income ranges from 8.7% to 12.4%, depending on the amount of investment.
For conservative investors who want to minimize the risk as much as possible and be confident that they will enter into a reliable deal, RealtyMogul will work. The company thoroughly checks every property item presented on the platform. They only work with a proven track record and experience in asset management. The minimum investment is $ 5,000, which can bring from 4.5% to 8% of annual income. Many people point out the minus of this service in various commissions associated with each specific transaction, but as a rule, they are considered from 1% to 1.5%.
For more serious investors, the EquityMultiple service will be of interest. Its disadvantage is that it only works with accredited users. If you have enough funds, then you will be amazed at the abundance of interesting offers, not only equity investments, but also debt ones. The service is almost entirely funded by commercial real estate. At the same time, the commission for debt transactions is 0.5%, and for all others it is calculated individually. The minimum investment is $ 10,000. The platform itself is quite simple and friendly for use, so it will be easy for a beginner to understand it.
For those who are not chasing quick profits, the CrowdStreet platform is suitable. It is impossible to withdraw money ahead of schedule, but the innovative approach gives direct access to a proven range of real estate investments. A platform with a chatbot and institutional quality add convenience and reliability to the service. At first glance, it may seem like a repulsive investment minimum of $ 25,000, but on the other hand, you can get income up to 26.4% per annum.
And these are just some of the most popular in the United States. As you can see, the variety is amazing. But the only thing that unites all these services is that not only millionaires can be real estate investors, but also those who have very small savings that should work, and not be kept in the bank. Let me remind you that crowdfunding will not help to totally avoid risks, get rid of the next crisis related to the real estate market. In addition, the offers themselves are in their reputation and strive to offer reliable deals. Whether investing through crowdfunding is right for you is up to everyone, but before answering this question you need to understand, are you ready to be an investor at all?