For those who want to invest in the property sector but don't have the capital to compete with the big boys, real estate crowdfunding may be just what they are looking for. Over the last decade, the collaborative economy has been making inroads with cost-effective solutions for all kinds of situations. Within your sector, this has translated into new systems of ownership.
What is real estate crowdfunding and how does it work?
The expression crowdfunding comes from the union of the English terms crowd and funding. For years it has been used by freelancers and artists to finance and produce their work independently, but nowadays it may be extended to practically any field, including real estate.
As I'm sure you've seen in your day-to-day life, buying and selling property in Spain has transcended the functional decades ago and has become one of the safest investments. However, one of the main barriers to entry into this system is the initial outlay. We all want to put our money to work, but few of us have the capital to invest in property development.
What is the solution? Crowdfunding specific to our sector. For those who want to invest in land, there are several online platforms and companies dedicated to bringing together small and medium-sized investors. In this way, instead of having to dedicate a large amount, they can start investing with small sums.
What is the investment process?
This type of investment is already having an impact on the performance of the sector, so you may be interested to know more about how it works. You will be interested to know more about how it works. Through platforms that are exclusively dedicated to this topic, promoters and investors come together. Normally, the project to be carried out is published on a website, as well as the amount of money needed and the expected profitability. money needed and the expected profitability.
A technical report is also presented in which the work to be carried out and the budgeted costs are explained in detail. Please note that investments can be for the construction of new buildings or the refurbishment of existing premises and blocks. Once the necessary funds have been raised to carry out the project, a limited company will be created with all the participants.
So when do you get the benefits of your investment? Well, the most common scenario is that the financed homes and premises will be for sale. Therefore, once the building work is completed and owners have been found, the investors get their investment back together with the profitability. This is typically about 5 years and a gross return of 70 %. At the moment of cashing out, the partnership and the relationship between all entities and persons involved in the project is dissolved.
What are the main real estate crowdfunding platforms?
One of the difficulties in finding this type of investment is to know where you have to go to find the ideal projects. you have to go to find the ideal projects. It is important that the intermediary is a trustworthy company that offers guarantees to recover the money. These are the platforms dedicated to real estate crowdfunding that meet all the requirements:
It is the largest marketplace platform that helps investors to obtain loans with mortgage guarantees throughout Europe. This means that you can access a wider offer than the platforms that work exclusively in Spain. You can invest from 50 euros and its average profitability is over 12%. Another very interesting aspect is that its historical record of failed investments is practically non-existent.
This is one of the most popular companies on the peninsula. The minimum investment is also 50 euros, although they recommend investing larger amounts to achieve good results. One of its main advantages is the possibility of choosing between investment or savings. With the former you will have to wait for the project to be liquidated to obtain your profitability, but with the latter you will be able to withdraw your money at any time.
It is perfect for those who want to invest in flats and tourist properties. To select the best properties to invest in, they use a big data tool that takes into account information from portals such as AirBNB or Booking and optimises decision-making. In this case, the profitability will come from the money earned month by month with the rent, as well as the profits generated when the properties are sold.
What you should know about real estate crowdfunding
Do you think investing in crowdfunding for real estate has a future? Do you doubt how it will influence your business? Here we answer some of the most common questions.
How do you get started with this type of investment?
Once you have decided how much money you want to put in, all you have to do is select the platform whose philosophy most closely resembles the idea you have in mind. Then all you have to do is register and sign up and accept the terms and conditions. Normally you will have to transfer the money to an account of the intermediaries to fund your profile. After this step, all you have to do is select the projects you want to participate in.
Is it a safe investment?
All investments carry a risk, so it is not advisable to allocate money to crowdfunding that you cannot afford to do without. However, as you know, the real estate sector offers many guarantees and it is very difficult for your project to depreciate. There are also platforms that offer extra security systems, such as mortgage guarantees.
Are you going to have to make decisions about the project?
Even if you are one of the members of a limited company and have experience in the sector, this does not give you the right to act as administrator. A management company will be appointed and will be in charge of decisions, payments, etc.
How will it affect your business?
As this is a financing system, you will not necessarily notice the difference. The companies that are formed for this type of investment work just like the rest.
In short, real estate crowdfunding is a trend in the real estate market. Now that you know how it works and its advantages, you will be able to offer a more complete service to your clients.