WHAT IS CROWDFUNDING IN REAL ESTATE FINANCING?
Crowdfunding is one of the new ways to distinguish your financial assets. It is a way by which real estate investors raise their capital and one of the great ways to grow your wealth and get started in the real estate business.
Crowdfunding is not a traditional way of raising capital, however, one should understand that it is a powerful way of financing your real estate project.
WHAT IS REAL ESTATE CROWDFUNDING?
Crowdfunding is a means by which owners of businesses raise money by reaching out to a large number of investors who contribute a small amount each. What makes crowdfunding different from other means of raising funds is that crowdfunding is done online. Some of the online platforms include crowdfunding websites and social media sites like Facebook or Twitter.
BENEFIT OF CROWDFUNDING
Getting the necessary funding to finance your deal can be challenging for someone just starting the real estate journey. For many investors, crowdfunding has been an optional way of financing deals. These are some advantages associated with crowdfunding.
1 . Crowdfunding gives you access to capital.
Crowdfunding provides a real estate investor with easy access to capital without going through the stress of getting a loan from a financial institution. This virtual way of raising funds can be used for personal, familial, business, and real estate investing. The benefit investors derive from this is that it keeps their personal credit-free and available for other uses while keeping their credit scores intact.
2 . Crowdfunding is an excellent marketing tool
Besides benefiting financially from crowdfunding, it is a great marketing tool for owners of businesses to promote their brands. By using social media platforms, Real estate investors can promote the fundraiser campaign. It also gives them the chance to grow their network quickly. The crowdfunding platform can be a great marketing tool if you provide a package that makes you credible and exhibits some of your past projects and the returns you earned from them.
3 . Way to gain receive valuable feedback
Crowdfunding offers businesses to monitor the comments left by users and also pay heed to some inputs from those with experience in the industry. Responding to users opens up a connection to build new contacts. It can also be a learning curve for you.
DISADVANTAGES OF CROWDFUNDING
Although crowdfunding seems to be an attractive means of financing your deals, there are some disadvantages associated with it. Some of the challenges include;
- Investors hesitate to entrust their investment in the hands of an unfamiliar borrower. Some fear the risk of losing their investment and will need a lot of convincing before they agree to invest in your business
- Also, the rate of return is not immediate. Most investors will have to wait for up to 5 years before earning some return.
- Last but not least, investors cannot decide which property they are investing in, which means that there is a lack of control.
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