The concept of raising funds from taxpayers for an initiative has been successful in the world of technology and other areas. But will it benefit the all the real estate markets? Read on to learn more about this interesting real estate crowdfunding concept and how it benefits the real estate industry in general.
Crowdfunding as an Industry
Since crowdfunding only attracts interested users into the realm of investors, the idea that is being funded usually sees victory sooner than later, unlike when other methods are employed. As an industry, it has been quite popular with businesses that are driven by consumers, offering concrete products.
Everything You Need to Know About the Crowdfunding Model
Crowdfunding aims to provide an accessible platform on the web for investors to contribute to the projects that interest them. For the real estate sector, this model would be practically the same, except that the assets that seek to raise funds would be a project or a land purchase agreement. Each investment made can be monitored or customized from the same platform so that all investors can easily access it. The best part is that you do not have to travel to other places to find a good asset to invest since everything is accessible with a few clicks of the mouse.
The Benefits of Real Estate Crowdfunding
If you are a small-scale investor, who accepts to risk large sums of money, crowdfunding in the real estate market could be an excellent option for you. The amount of capital you will have to invest in a project is always limited, and this is profitable because it can be part of a big business. As more investors come together to invest in the same project, the project is finally launched with a joint effort.
Rules for Crowdfunding Method
Because crowdfunding is such a simple concept that it involves displaying all the projects that seek financing on a website, the real estate sector could benefit immensely from it.
Many countries, however, has proposed a new set of rules for crowdfunding through various web-based platforms. According to this, only entities that are not linked to a business group with a turnover of $625000 or more could take the crowdfunding route. Also, any real estate entity that has existed for four years or more will not be able to explore this option.
Helping Stalled Projects
Currently, there are many real estate sectors that have been flooded by many projects that are incomplete and frozen due to lack of funds. Failure to pay debts has led banks to withdraw funds for such projects, and this is where crowdfunding could intervene and help.
Conclusion
The crowdfunding market in several countries has been subjected to numerous fraudulent deals, seeking to obtain money for reasons very different from those that the project claims.
Because the industry does not have laws that govern the functionality of the service, real estate crowdfunding is a rather unorganized solution for investors willing to risk their money. The only way to save the industry would be to introduce some strict rules and have a robust mechanism in place so that each transaction is well regulated.
