Is Real Estate Crowdfunding Safe For You?
Real Estate is one of the most cost-efficient, long term passive income-generating options. The real estate crowdfunding platform is a modern-day investment idea that aims at challenging and transforming the traditional real estate investment mindset.
Most countries, for a very long time, did not permit small investors to invest in large or commercial real estate properties, but with changing time and technology, the investment world is opening up to independent investors, crowdfunding real estate investment is a blaring example of this subtle transformation.
What is crowdfunding?
Crowdfunding is a form of investment and practice where many people come together and pool their assets to fund a project or venture. In this way, even individual investors or people who do not hold the capacity to initiate fully funded projects can invest their small shares.
The main types of crowdfunding in India are
- Equity Crowdfunding
Equity crowdfunding is simply raising capital for investment, from the crowd meaning investors by selling securities ( shares, convertible notes, debt, revenue shares) in a private company.
- Reward-based Crowdfunding
Reward-based crowdfunding is people raising funds for a company or project through donations with the expectation of receiving non-financial rewards only. These may include goods and services in the future.
- Debt Crowdfunding
This is also known as peer-to-peer lending or crowdlending. It combines the concept of crowdfunding and lending as a group of people do come together to invest, but they lend it, once you pay back your loan money with interest, it is distributed among the crowd.
What is crowdfunding real estate investing?
Real estate crowdfunding,an equity based crowdfunding option, is a process of investing in real estate projects along with many other individual investors. This is done by collecting money from multiple investors to invest in one real estate project or commercial purchase. Crowdfunding does not require one investor or firm to pay a large sum of money, instead, several small investors come together to make larger purchases with only their laptops or mobile. The one reason why crowdfunding is gaining such high repute in the investment world is that it lets individual investors own a share of the property that they are investing in.
Real Estate Crowdfunding in India
With the advancement and growing success of western companies in India, the demand for real estate crowdfunding markets is also growing very rapidly.
This has led to the advancement of several real estate crowdfunding platforms which can be used by individual investors to earn more on their passive income and also provide capital for large real estate projects.
The crowdfunding platforms are designed for ease of access, transparency in transactions etc. Taking a smaller sum of money from many people and using that money for capital formation.
While this is a relatively newer idea for real estate investors in India, our investors have become more mature. Moreover, as more and more companies start setting up more crowdfunding platforms this concept will gain more acceptance and momentum, it can soon become a mainstream investment option in India.
Assetmonk is a crowdfunding platform in India, through our company you can enjoy many real estate opportunities in India at a return of 14-21 %. It ensures great customer care services along with a professional advisory body to help you with your investment.
Should You Invest Through Real Estate Crowdfunding Platforms?
Being a new and lesser-explored investment option in the Indian market, real estate crowdfunding is usually met with a lot of apprehension from investors due to a lack of information regarding the same. To understand if this is a good option for you, we have listed a few points below.
- Earn a passive income
Real Estate crowdfunding allows individual investors to put their idle cash to use to generate a constant and passive income. In real estate crowdfunding investment investors are promised a fixed return at regular intervals. As the developers pay a fixed interest on the invested funds, and since the investment is made at a fixed interval, you can enjoy a regular cash flow of passive income.
- Make small investments
If you want to invest in real estate projects but lack the capital or experience to do so, then crowdfunding real investment may be the best option for you. You can invest however little capital you have and make real estate purchases.
- Lower risks
Small scale or individual investors are always faced with the fear of losing their hard-earned savings, and so they refrain from investing in larger projects and blocking their money in real estate. Therefore you must always invest through reliable platforms, also with new guidelines coming up, investment transactions are becoming safer.
- Diversify your investment portfolio
As you only require a crowdfunding platform to invest in, you can invest in any real estate project from any part of the world and diversify your portfolio in terms of geography as well as industries.
- Increased sources of funding for borrowers
Real Estate Crowdfunding platforms are also very beneficial for borrowers, as they do not have to rely on one investor or shareholder, instead they can generate a fund with the help of multiple investors, thus giving the borrower some autonomy over their project.
- Save your time
With this investment, you as an investor will only have to pool your funds and reap a passive income. The maintenance of the project will be undertaken by the borrowing party.
While real estate crowdfunding allows investors to experience real estate investments without having to set aside large sums of money or worry about maintenance etc, there can be some risks that you need to watch out for before making your first investment.
- Limitations on due diligence
Most crowdfunding platforms directly target individual investors, and most individual investors lack the expertise, knowledge and experience of investing.
Even if you have the expertise, you can never know everything about the local market, demand and future of the project you are investing in.
- Risk of the property going in loss and non-completion of the project
While this investment option is very profitable, the company can still go under losses and the investors may have to suffer. Moreover, there is a probability that the investor may not complete the project and leave it midway, or keep stalling. So it is suggested that you invest through companies that follow consumer safety guidelines issued by the Securities and Exchange Board of India.
What To Look For In A Real Estate Crowdfunding Platform?
Real Estate Crowdfunding is a great way of generating a passive income only as long as the safety of your money is assured. As an investor, you must have complete clarity of the process and only go for a company that promises transaction transparency and the best customer services. What is very important is that the company is good to the customer throughout the investment journey till the very end. To ensure the best customer services it is good to talk to or get reviews from old investors who have been in touch with the company. It is also very important to do your research before investing and choose your investment project after great deliberation.
Also before investing, check the platform’s capital backing, also make sure that the company is credible with good records.
In conclusion, Real estate crowdfunding like any other passive income generating option can be very risky and also very safe depending on the amount of research you conduct and the platform you plan to connect with. Crowdfunding is a budding idea with a great scope of income generation in India and individual investors can reap heavy profits from this opportunity by investing in reliable projects firms and sticking to the guidelines issued by the government.
- What are the pros and cons of crowdfunding?
Real estate crowdfunding comes with many perks such as portfolio diversification and online accessibility.
It is an easy way of generating a passive income, also when you invest through crowdfunding platforms, you can diversify your portfolio geographically as well.
On the downside, crowdfunding means you will not have any control over the project you are investing in and the company can go under losses and you can lose your money.