Retail Finance (Crowdfunding)
Many Americans are literally obsessed with the idea of getting a fortune right away. Fast enrichment for most residents of the United States is the realization of the American dream. One of the most successful types of investments in the United States is investment in real estate. Many people want to buy a house and watch how its market price increases every year. Landlords make money on tenants. TV constantly tell stories about people who buy houses in pursuit of instant profit.
Moreover, the purchase of part of the property is no longer the only option for investing in real estate. Crowdfunding/retail finance, in this area, is another way to diversify your investment portfolio, often – for lower upfront costs. This method allows you to invest in large investments in real estate. Crowdfunding has defined as an opportunity to access deals that are not available to individual investors.
What platform to choose?
How this contribution is used depends on the platform through which people decide to invest. Some crowdfunding platforms independently buy and manage real estate, while others take collective money and provide it to other real estate investors. The type of return on investment depends on the platform.
Some platforms (such as Fundrise) work with various funds. Others allow you to choose specific projects for investment by the users themselves. At the same time, there are dozens of real estate crowdfunding services in the United States, and each of them has its pros and cons.
Why is it so popular in the USA?
Real estate crowdfunding has gained popularity in the US thanks to the law (JuJOBS), which entered into force in 2012. According to the document, changes were adopted in the methods of attracting investment capital. This allowed the promotion of investment opportunities. In addition, the law eased restrictions on the circle of persons who are able to register securities. In fact, this law gave crowdfunding firms a green light for direct marketing in social networks and other online space.
However, American experts are confident that today crowdfunding is at the stage of its inception. Firms are mking mistakes, platforms are adapting to investor needs, and citizens themselves are exploring new opportunities that are expanding every day.
The difference from REIT
Despite the fact that online crowdfunding is a fairly new phenomenon, the investment in large-scale real estate projects has not been new for a long time. REIT has existed since the 1960s. These are companies that buy and manage profitable residential and non-residential property through collective investment. It can be both residential apartments, and warehouse and office premises, shopping centers, hospitals and hotels.
REIT involves long-term investments. The average annual income will be over 9%. The benefit on open investments on crowdfunding platforms was about 14.7%, and the number of completed transactions on average was 14.6%.
How much to spend and when to expect a return?
It will not work to make a profit without investments. Paying for a crowdfunding platform is the first thing you have to fork out for. At the same time, prices for services of various platforms vary. For example, CrowdStreet requires a minimum investment of $10,000 for 36 months. Fundrise allows you to start at $500, but at the same time, charges a commission of 1% per year.
As for the speed to get profit, specialists cool the impatient Americans trying to reach the American dream. If a person is just starting to engage in crowdfunding in real estate, then he should understand that most investments are designed for a period of at least one year, and sometimes five years or more. Sometimes you can sell the investment earlier, but ,in this case, you will have to incur losses.