Real estate crowdfunding is revolutionizing the way of financing large real estate development projects. With a multitude of investors and lenders, from ordinary investors to high net worth individuals and corporations, these projects easily get the capital they need. When it comes to buy-to-rent and buy-to-sell projects, crowdfunding can be used for various functions such as land acquisition, unit renovation, facility outfitting, and more. Also, the amazing thing about real estate crowdfunding is that investors get the desired return on their investment, either through dividends or in full after a successful deal. This model levels the playing field for traditional and non-traditional developers by giving them a platform to access funding from multiple sources at once.
What is real estate crowdfunding?
Crowdfunding has revolutionized the investment and real estate industry in recent years, providing easy access to resources to develop valuable projects. It allows a large number of people to collectively contribute to a single project or company, making traditional ways of raising capital obsolete and even obsolete. To facilitate this process, several Real Estate Crowdfunding (REC) platforms have been created to connect real estate owners with potential investors.
Furthermore, there are two types of REC platforms available depending on the investor’s preferences: equity-based investments and credit-based investments. With equity-based platforms, taxpayers can receive a share of the income generated by the property when it is rented or sold, while loan-based platforms allow users to borrow money to cover mortgage payments, with returns at regular interest intervals. Due to its many advantages and benefits for users, crowdfunding is now a popular way for real estate financiers, entrepreneurs, and other business owners to raise capital from a growing number of backers.
Average offer in real estate crowdfunding
Knowing the average deal size for real estate crowdfunding projects is critical when considering starting a business in the industry. This figure provides marketers with an invaluable tool that can be used to accurately measure and analyze market capacity, facilitating proper business planning. The typical range raised by a real estate crowdfunding project is $500,000 to $4 million or more, though this usually represents a smaller portion of the value of the larger project, which could be in the tens of millions, from $1 million. to $50 million.
How to start a real estate crowdfunding platform?
There are 2 main ways to create a real estate crowdfunding platform. Build your custom platform from scratch or use a standard out-of-the-box solution.
Custom development
Although it is an expensive option, custom development stands out and serves as a long-term opportunity. This statement is based on the multitude of benefits associated with it. For projects that span longer time frames and therefore require specific features, custom development gives you the opportunity to create unique features, control projects, and easily integrate with external APIs. Creating a personalized user experience tailored to the target audience ensures user experience specification and product quality.
A custom platform is one such option that can be expanded as needed. Custom development can be a fruitful solution for companies seeking flexibility in terms of product design and direction, and enhances their real estate crowdfunding platform needs.
SaaS
SaaS can be a winning solution for companies looking to launch a real estate crowdfunding platform on a tight budget and schedule. But keep in mind that Software as a Service is a kind of subscription service provider. At the same time, its offer includes a ready-to-use software platform.
SaaS offerings allow companies to test their ideas without incurring expensive development fees. Companies that purchase SaaS for a real estate crowdfunding platform can build their platform quickly and efficiently. The only downside to SaaS is that it comes with limited features.
However, those who want to enjoy additional features will need the help of an expert developer to build a platform from scratch. In short, SaaS is the ideal choice for companies looking to quickly and affordably set up a real estate crowdfunding platform.
Examples of real estate crowdfunding platforms
When it comes to real estate crowdfunding platforms, knowledge is power. Gaining insight into how successful real estate crowdfunding sites are structured and what strategies they use to keep the business running smoothly is key to accelerating your progress.
Multiple Heritage
EquityMultiple is changing the game for commercial real estate financing, providing unparalleled access to high-quality investment opportunities. With $131 million in assets under management and $1 billion in total business value, it’s no wonder why this leading crowdfunding platform is making such a splash in the market. Accredited investors can choose from options such as preferred equity, syndicated debt and common equity with terms ranging from 6 months to 5 years with an annual return of 6-12%. The minimum trading target is set at $500,000, while the minimum investment amount is only $10,000. The platform has experienced consistent 100% year-over-year growth since its inception.
fundraising
Fundrise is a great platform for those interested in investing in commercial real estate who are not accredited investors, with a minimum investment of $500 and only requires you to be 18 years old and live in the US (sadly no international opportunities right now), Fundrise gives everyone the ability to get involved in a variety of investments, from senior secured debt and mezzanine debt to preferred stock, all while focusing on projects with 1-3 year maturities. Also, its passive investing concept means you don’t have to sacrifice your spare time trying to research potential investments, as all options are pre-selected and tailored to your investment profile.
shojin
Shojin is a great example of a real estate crowdfunding platform that capitalized on the growing demand for such services and ultimately reaped the rewards. In 2019, the platform was acquired by SmartLands, a security token company. It shows that even small companies like Shojin can attract the attention of big players in the world of finance, an achievement that likely helped inspire other crowdfunding entrepreneurs.
PeerStreet
It is an online marketplace for accredited investors. Using PeerStreet, accredited investors and high-quality private real estate loans. This platform has many advantages and can be an ideal platform for real estate crowdfunding. Furthermore, PeerStreet comes with a unique offer among real estate investment platforms and diversification in various parameters.
One of the most explicit examples of PeerStreet is the risk of low interest rates, mainly because the loans are for a maximum term of 36 months. Although it has these advantages, studies in 2022 show that its total distribution to investors exceeded $280 million; however, the average annual return was 6.49%.
Conclusion
The demand for crowdfunding platforms for real estate projects continues to grow. Given this, it is obvious that the interest of investors will grow in proportion to the size of the niche. With the help of companies like Jatapp.co, you can develop your own crowdfunding platform and gain recognition. However, not everything depends on the developers, legal issues are also important, and the idea and implementation is one of the parts of success, even if it is essential.
Categories: How to
Source: HIS Education