Crowdfunding is a financing alternative that has taken the real estate industry by storm. Nevertheless, it is very important for people interested in participating in the industry to learn some of the existing opportunities and challenges in crowdfunding.
1. There is great diversity in terms of investment options.
2. The industry is growing bigger every day with no indication of slowing down anytime soon.
This is evidenced by the ever increasing number of real estate crowdfunding platforms being formed in the country and the number of participants joining them. Crowdfunding has unlocked the property investing industry for many people who had been previously locked out due to high minimum investment amounts and endless paperwork, among other barriers. The impact is felt both at the state and national levels.
3. Access to the real estate market has become more flexible.
Crowdfunding has made it possible for people to invest in real estate with as little as $100 – something that one could have never imagined in the past. It is also not mandatory for the investors to have prior experience in real estate, therefore anyone can participate.
4. Investors have more control.
Real estate crowdfunding investors are allowed to track the progress of their investments and make decisions on when to sell their shares depending on the market situations.
5. Accredited investors are still needed.
This will not change until the Jumpstart Our Business Startups (JOBS) Act is approved in totality. However, some regulations in the JOBS Act have been proposed and passed such as Title I, Title II, Title III and Title IV, which allow non-accredited investors to participate in property crowdfunding.
6. It is not guaranteed that every deal will pay off as expected.
Real estate crowdfunding deals are just like any other form of investment that may not perform as predicted. This means that every deal should be comprehensively scrutinized before putting money into it, and in most cases the investment should be an amount you can afford to lose.
7. There is a lack of secondary markets.
A particular level of liquidity is lacking in the property crowdfunding market due to the lack of secondary markets. It is important for investors to understand this essential lack and take responsibility of the risk. There are already firms that address this concern like QuickLiquidity.
By understanding these opportunities & challenges, it becomes easier to make your property crowdfunding investments profitable.
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