Crowdfunding in Real Estate

In this new age of social media crowdfunding has become a common practice for many people. To some crowdfunding may be a new terminology. So what exactly is crowdfunding?

May 9, 2021 - 14:10

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Crowdfunding is the exercise of setting up a fund for a business project by raising small amounts of money from a number of people. This is usually done over social media and the internet. A good example of this is the GoGetFunding website.

Crowdfunding has also found its way into real estate investing, and even though it is a new practice within the industry it is slowly picking up steam and more and more people are turning to it as a form of investing.

How it Works

So how exactly does crowdfunding work within the real estate sector? In a case where a person saves money so as to buy or invest in a real estate property but due to the high inflation of real estate prices he finds out in the end that they are not able to purchase that property, what does one do?

At such a point the best thing to do will be to get in touch with a real estate crowdfunding group that buys a property and breaks the property into small shares. From this point, an individual can buy as many shares as they can afford.

Other people will also be able to buy as many shares as they can and collectively, you will all have invested in that property and in extension, you will all own that property. The property at hand will be rented and all the money collected will then be distributed to all those who invested in the property according to the money you put into that particular investment.

Examples of real estate crowdfunding websites include Fundrise, Crowdstreet, Peerstreet, RealtyMogul, EquityMultiple.

Within the real estate industry, this is a new venture that few people have undertaken and many others are yet to grasp the concept in its entirety. Also, there may be risks and benefits involved and therefore, one should tread with caution as these are unchartered waters.