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How Crowdfunding is Simplifying Property Investment

Written by Posted On Wednesday, 02 November 2016 06:09

Since the past two decades, more than ever real estate investment in the UK has become a highly attractive venture with promise of decent returns. But with a record high price-to-income ratio of 15.7 times, and lenders often demanding 25% of a property’s value, it is difficult to find the substantial funding to invest in a buy-to-let property and profit from the market.    

But crowdfunding is providing easier, more simplified alternatives to taking a share of the huge prospects in the property market. This relatively new property financing concept is creating a new excitement and shaping the way individuals find and invest in real estate, with significant rewards to both the investor and landlord or developer.

Instead of sourcing for, say £37,500 being the minimum 25% deposit for a buy-to-let mortgage on a £150,000 property, crowdfunding allows the investor invest as little as £5,000 in multiple, pre-vetted deals - along with a crowd of other investors - from the convenience of their laptop or tablet and make annual returns of up to 10%.

With the benefit of spreading resources across a variety of property portfolios, rather than pooling it into just a single property, real estate crowdfunding offers a lower risk investment opportunity compared to other property financing options.

For example, by taking advantage of some of the unique products of the best property investment company in the UK, an investor can create their own diversified portfolio in profitable pre-screened, pre-packaged property developments and buy-to-let properties as an investor. Also, as a landlord or developer, an investor can raise capital from a wide and diversified base of investors to secure more opportunities.

Crowdfunding usually offers two alternatives to investors: Equity investment and debt investment. With equity investment, every investor controls a stake or shares in the commercial or residential property, and in return, receives a part of the rental income, which is typically paid quarterly. Debt investment, on the other hand, allows each investor to contribute towards offsetting a mortgage loan. The investor gets a share of the interest on the loan as it is repaid every month or quarter.

Crowdfunding therefore offers a fabulous opportunity to raise capital quickly without having to give up equity or accumulate debts. Although it has its own risks just like every other investment option, crowdfunding hedges risks for the investor as it allows them to gain market validation before putting in their resources. 

It is also a great way to market a product or concept and test public reaction to see its investment potentials and ultimately gain client loyalty.

Investment in property comes with risks as well as the possibility of rewards.

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