A relatively new type of investment is real estate crowdfunding or collective Real Estate Foundation. Which is generating much higher yields than traditional instruments.
What is crowdfunding?
Crowdfunding is a collaborative project financing mechanism that is based on the idea that it is easier to ask a small amount from many people than a large amount from a few people; especially when the result of this collective funding will be beneficial to all involved.
In general terms, crowdfunding (also known as crowd-funding, financing or anchoring group) is in the form of a fundraising campaign with a short period of time (between 30 and 90 days) in which a person or business requesting economic support on the part of your community to overcome a major obstacle to their capabilities, or offer a product with a high risk, but with great long-term returns.
Despite popular belief, crowdfunding is not something new or fundamentally requires the internet to exist. Today’s platforms facilitate the anchoring process; however, fundraising campaigns have always existed. For example, this is how the Red Cross is financed.
What is real estate crowdfunding?
This is a unique and fairly new method of real estate investment. Through technology platforms many people can invest in specific real estate projects whose developers generally seek loans. The platforms examine buyers and projects to make sure they are legitimate before presenting them to investors.
What types of real estate crowdfunding exist?
There are two basic types of real estate crowdfunding: debt or equity investment.
Investing in debt seems strange, but it means that you are investing in a loan of a property and you are receiving interest payments as the loan is repaid.
Investing in capital means that you are investing directly in a property and receiving a portion of the property, in which case you will generally receive a portion of the income or profits generated by the property.
Investing in a crowdfunding project will probably have minimal investment. In addition, you will invest in individual projects you choose (rather than a diversified collection), which makes the success or failure of an individual property a little more important.