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An Intro to Crowdfunding Real Estate: What You Need to Know


February 14, 2022 ( Newswire) Are you looking to grow your investment portfolio? Investing in real estate can be an excellent option, but it often requires a significant handful of cash upfront.

Enter the crowdfunding solution to real estate's entry fee. Crowdfunding real estate uses smaller investments, so it is better for beginners. It's also growing as a way to invest for its increased accessibility and shared risk.

Before you invest your money, you should spend some time learning the basics of crowdfunding real estate. Then, you can know if it's right for you and your portfolio.

What is real estate crowdfunding?

Real estate crowdfunding allows you to raise money from multiple smaller investments. It can be an excellent option for project managers who can't find one investor to put up all of the money they need.

The internet is the most accessible place to crowdfund anything, including real estate. However, if you frequently network with up-and-coming entrepreneurs, you could also find crowdfunding opportunities at industry events.

Crowdfunding derives some of its popularity from the freedom it gives entrepreneurs and investors to approach out-of-the-box opportunities. For example, farmland is a stable and yet uncommon investment in the real estate world. Instead of buying an entire farm, you could go in with other investors to reap a portion of the harvest. If you want to give crowdfunded agriculture a try, you could invest in a mutual fund or try investing in farmland with FarmFolio

How does it work?

A real estate crowdfunding campaign will typically have a page on a website specifically for crowdfunding. The person setting up the campaign can share project details, goals, and other information to convince people to invest.

It helps to include financial plans and other documents for investors to review. While they can decide to invest without those, you'll make a better case when you have those details.

Once a campaign gathers enough money, the person running it will buy real estate. Then, the organizer can pay the investors back as the real estate earns a profit.

Why should you crowdfund real estate?

You should crowdfund real estate to increase your funding potential. If you have relied on significant investments or loans, you may need to wait longer to obtain the money.

Crowdfunding platforms are also easy to use, and you can start right away. You don't need a ton of investing experience to set up an account and create your first campaign.

Finally, crowdfunding allows you to find investments while marketing your business. That way, you can garner more visibility, which can help your business grow.

From the investment side, crowdfunding is an excellent opportunity for beginners because of its lower buy-in and reduced risk. When you're sharing the burden with other investors, you protect yourself from extreme dips or rises in the market. 

Why shouldn't you crowdfund real estate?

When investing in real estate crowdfunding, consider that there are no guarantees. You could very well lose money, depending on the real estate market and how it changes.

Similarly, you shouldn't expect to receive gains soon. Real estate investing is a long game, so prepare to wait for many years before seeing a profit.

It can also be a risk if the person running the campaign lives in another region. If you can't review the area and its real estate market, you may invest in an area that's on the decline.

Wrap up

Real estate crowdfunding can be valuable for investors and those looking for opportunities. However, you should consider the pros and cons before spending your money.

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