How to start investing in real estate through crowdfunding?

Are you considering investing in high-value real estate but facing financial difficulties? In that case, you should pay attention to crowdfunding — it's a great opportunity to start with small amounts in residential or commercial real estate. In this article, we will explore all the nuances of this investment method.

A new perspective on real estate investments

Real estate is often considered inaccessible to most people, but this belief is outdated. While traditional investment methods require significant capital investments, with crowdfunding, you can participate in collective investments in various real estate properties.

What types of real estate can be chosen for crowdfunding investments? What regulations exist in this area? What should be considered when selecting a platform and an investment property? Who participates in this process? How will the future of crowdfunding investment change? These and many other questions will be addressed in our detailed study.

Crowdinvesting vs Crowdfunding

First of all, it is important to clarify that crowdfunding is different from crowdinvesting. Crowdfunding refers to the financing of social or creative initiatives, such as raising funds for concerts or exhibitions. In such projects, material profit is not the main goal; the focus is on the idea itself. When it comes to generating profit from collective financing, that falls under crowdinvesting.

The history and development of crowdfunding in real estate

Crowdinvesting in real estate through Real Estate Investment Trusts (REITs) began to actively develop in the United States in the 1960s when the relevant law was passed. However, serious interest in this mechanism came much later. Notably, it is in the United States that it has gained the most popularity. Nevertheless, crowdinvesting is being implemented in other countries as well; in Europe and developed regions of Asia, more than 150 organizations providing such services are already operating.

The future of crowdfunding: statistics and forecasts

If we talk about the numbers, according to reports from Polaris Market Research, the global volume of crowdfunding in real estate could reach by 2030.250.62 billion dollarsThis is an impressive growth, especially considering that in 2021 this market was only10.78 billion dollars.

Who participates in crowdfunding?

Who benefits from crowdfunding? Usually, there are three key groups behind this process:

• Sponsor— this is someone who is looking for funding for their project.
• Platform— acts as an intermediary, connecting sponsors and investors.
• Investors— they provide their funds in hopes of making a profit in the future.

It is important to understand that all participants in the process have their own goals and motivations, and the success of crowdfunding depends on their interaction.

Tips for a Successful Investment Process

It should also be noted that for successful participation in crowdfunding, it is essential to thoroughly analyze the market and the projects you plan to invest in. You need to carefully assess the risks associated with each project, as well as choose platforms with a good reputation and transparent terms.

Conclusion: Accessible investments for everyone

Thus, crowdfunding opens new horizons for individuals looking to try their hand at investing, even without significant financial resources. Crowdfunding is becoming an accessible tool for a wide audience eager to expand their financial horizons and invest in reliable and promising projects, especially in the real estate sector, where opportunities are always promising.

Don't miss the chance to be part of this exciting and dynamic market!

General information about crowdfunding in real estate

The sponsor, which can be either an individual or a management organization, controls the financing than purchases, administers and, if the need arises, sells the property. The investor contributes his or her share of capital and, as a result, receives a return based on the amount of his or her participation. The crowdfunding platform functions as an intermediary between the sponsor and the investor, facilitating their interaction.

Choosing a crowdfunding platform

When choosing a crowdfunding investment platform, it is important to pay attention to several key aspects. These platforms carefully vet projects and sponsors, as well as conduct a selection of investors to ensure that everyone meets the necessary standards. Before starting to invest on any platform, it is necessary to go through the KYC (Know Your Customer) procedure, which includes providing documents that confirm your identity.

Types of investment opportunities

The bulk of crowdinvesting platforms focus on financing commercial real estate and apartment buildings. However, there are also platforms that offer the opportunity to make money from residential rental properties. Investing in rental housing can generate income through two main ways:

• Firstly, due to the increase in prices for properties.
• Secondly, through the receipt of rent for residential premises.

Key factors when choosing a platform

When choosing a suitable crowdfunding platform for real estate investments, it is important to consider several key points:

• Investor Status.Some platforms may have accreditation requirements that imply that an individual's "net" worth must exceed one million dollars (excluding primary residence) or that their annual income must be no less than 200,000 dollars.
• The minimum amount for investment.Different platforms have different entry thresholds: in some places, you can start with as little as 10 dollars, while in other cases, the minimum amount can be 100,000 dollars.
• Investment strategies.Each platform has its own unique approach to visualization and investment strategies. Some provide access to funds, such as real estate investment trusts (REITs), while others offer direct investment opportunities. Platforms may focus on specific real estate categories and characteristics, such as debt or equity instruments.

In this article, we will introduce readers to the opinions of experts who will share their knowledge and personal experiences in the field of real estate crowdfunding.

Expert opinion

“Today, you can invest without leaving your computer, and there’s no need to interact personally with physical objects,” said Mark Bakker, who is involved in marketing at the Dutch platform Max Crowdfund. He discussed both the positive and negative aspects of real estate crowdfunding.

Advantages of crowdfunding investment

Let's start with the positive aspects. Crowdinvesting allows you to start with a small amount and invest in various real estate projects around the world. This provides an opportunity to diversify your investment portfolio, as you can invest in several properties at the same time. Investments can be made from the comfort of your own home, which eliminates the need for physical presence and asset management.

In addition, you will not have to deal with issues such as documentation, tenants and other nuances, as is the case with traditional investments. The platform itself selects the objects and organizes the processes, saving you from the need to search on your own. Also, depending on your preferences, you can choose funds for long-term or short-term investments.

Disadvantages of crowdfunding investment

But it's also important not to forget about the drawbacks. The usual expected return rarely exceeds12%In a year, which may not seem very appealing. After making a deposit, you need to wait a certain period before you can withdraw your funds. It is also important to emphasize that investors have limited opportunities to influence the decisions being made. In most cases, all decisions are made by the organizing companies.

Types of real estate funds

Mikhail Kostromin, the commercial director of Aktivo, also shared information about the various types of real estate and the investment tools that are currently popular in Russia. He highlighted four main categories of funds:

• Rental funds.Their main task is to manage residential and commercial properties, which are then rented out.
• Construction funds.These funds are used to establish new facilities that may be sold or leased in the future.
• Developer funds.They are engaged in the development of land plots and already constructed properties, including their construction, modernization, and other activities aimed at increasing their value.
• Land funds.Their main specialization is the purchase and conversion of land parcels, their surveying and change of land use category.

The largest number of available funds belongs to the rental type, which can be easily classified by property format: there are funds for residential properties, including apartments and houses, as well as commercial funds that include hotels, office and warehouse spaces, as well as retail areas.

Conclusion

Thus, crowdfunding in real estate represents an interesting and accessible opportunity for a vast number of investors who seek to earn income from their investments. Investing in such projects opens up a wide range of possibilities; however, it is important to be aware of the risks and to carefully analyze one's goals and financial capabilities.

Introduction to Real Estate Investing

To start investing in real estate, you should first determine which sector interests you: residential or commercial space. Then, you need to choose the appropriate investment fund and carefully analyze both the property itself and the management company of the fund. The next step involves acquiring shares. It's also important to understand the legal aspects, tax obligations, and the mechanisms of how investment funds operate in your country, and sometimes even in the specific region or city where you plan to invest. Depending on the situation, there may be certain nuances and important details to consider.

Regulatory authorities in Russia and other countries

In the Russian Federation, the market for collective investments in real estate is monitored by the Central Bank of the Russian Federation and the law 156-FZ "On Investment Funds." In the United Arab Emirates, there are specific regulations known as the "UAE REIT Regulations," while in the United States, the regulatory framework is based on law 86-779, along with several other legislative acts.

Crowdinvesting in Russia

When considering crowdfunding in real estate in Russia, an important point is that closed-end real estate investment funds (CEREIF) are considered the most reliable instruments. This is due to the fact that the activities of such funds are subject to strict regulation under Federal Law 156-FZ and are monitored by the Central Bank.

Types of Closed-End Investment Funds

There are two main types of real estate mutual investment funds (ZPIF).

• Exchange-traded funds- shares of which are freely traded on the stock market, and the minimum threshold for investment may start from a few thousand rubles.
• Over-the-counter funds— where shares are acquired through a management company or organization responsible for the fund. For non-qualified investors, since 2017, the minimum cost of an investment share is 300,000 rubles.

Classification of funds by type of investors

In addition, it is possible to classify funds by the type of investors, based on their goals and objectives:

• Forqualified investorsThe fund's composition can include not only real estate but also various financial assets such as stocks, bonds, futures, and both equity and borrowed funds. To become a qualified investor, one must meet certain criteria and certifications.
• Forunqualified investorsThe asset composition will be significantly limited — it will mainly consist of real estate and accessible financial instruments.

The process of registering and purchasing shares

To become a shareholder of the selected fund, an unqualified investor needs:

• Complete the registration process.
• Create an account on the investment company's website.
• Complete the verification process.
• Submit an application to purchase shares.
• Sign the contract and make payment.

After the payment is confirmed, the shares will be transferred to the investor, and this transaction will be recorded in the register.

Advantages of ZPIFN

The main advantages of closed-end real estate investment funds lie in their reliability and comfort:

• Investors receive a stable income.
• There is access to full reports on the status of the portfolio and the fund.

This approach allows investors to stay informed about all changes, ensuring a high level of transparency in their investments.

Conclusion

Thus, we see that real estate crowdfunding represents a convenient and accessible way to start investing, which can significantly broaden the horizons for those who, for various reasons, cannot afford traditional investments. For me personally, crowdfunding has been a revelation that breaks old stereotypes about the accessibility of the real estate market. The opportunity to participate in projects with minimal investments opens new horizons for investors who previously considered themselves "excluded" from the world of big money and elite real estate.

I am confident that this method will continue to evolve, adapting to market changes and offering new investment opportunities. Given the growing interest in collective investments, we are likely to see more specialized platforms providing a rich selection of both residential and commercial properties. This could become a real revolution for investment enthusiasts who wish not only to preserve but also to grow their savings.

Important aspects of choosing a crowdfunding platform

• Investor status:Some platforms require accreditation.
• Minimum investments:The entry threshold can vary.
• Investment Approach:Different platforms offer various strategies.
• Waiting period for profit:It should be noted that the results may take years to manifest.
• Risks:It's important to assess the risks and opportunities of investing.

However, just like with any other type of investment, it is important to carefully study the offered terms, conduct analysis, and understand the risks associated with each project. I urge everyone interested in crowdfunding to do their own research, compare platforms and projects, and to be cautious when making a choice.

Ultimately, crowdfunding can become the perfect intermediate step on your path to financial well-being, allowing you to participate in large investment projects when you don't yet have enough funds to make a full purchase. It opens up access to a variety of opportunities and gives everyone a chance, regardless of their financial situation. Along with the growing popularity and regulation of this field, I anticipate a bright future for this new type of investing, which demonstrates how a collective approach can lead to significant results.