How Crowdfunding Is Changing the Game for Real Estate Investing

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For a long time, real estate investing has been an opportunity only available to the elites.  Those who had the capital and the connections could access a range of property deals that simply weren’t possible for anyone else.  You would need a lot of money to put down upfront, or access to large credit lines in order to make the necessary quantum to sign any real estate deals.  As a result, a rift occurred between those who could benefit from property appreciation, and those who couldn’t.

This is all changing thanks to a new business model that opens that world wide open.

Crowdfunding refers to a collaborative project where a large number of people contribute small amounts of money towards a common goal.  Instead of having one investor putting in 100% of the investment, you can have thousands of people putting in a small fraction of the total investment.  When this happens, each individual investor owns a fraction of whatever is being invested in and can benefit from its appreciation without needing to front all the capital themselves.

This model has proven very successful in a range of equity scenarios and its magic is now being brought to real estate through platforms like Stake which allows individual investors to crowdfund property in a way that simply wasn’t possible before.  Here’s why real estate crowdfunding is such a game-changer:


Democratizes investment opportunities. 

With crowdfunding, you and I can be a part of very complex and sophisticated real estate deals that previously were completely out of our reach.  Our fractional ownership can be directly in the debt or equity of the property and we can access the same sorts of deals that the rich are able to utilize to boost their returns.


Diversification. 

Instead of throwing all of your eggs into one basket, you can take smaller stakes in a number of different properties which affords you the opportunity to accomplish some diversification in your real estate portfolio without having to lay down the vast amounts of capital that would previously have been needed to achieve this.


Opens up a new funding mechanism for developers. 

On the other side of the transaction, developers are excited by what’s happening in the space because it’s opening up a whole new pool of investors, which is increasing the chances of their deals finding the needed funding to get off the ground.  With more confidence in these sorts of alternative funding platforms, developers can take on more interesting projects and push the boundaries of what is possible with real estate in general.

The future is bright when it comes to real estate crowdfunding and as more individual investors are drawn into the asset class, we’re likely to see a number of new innovations to make things more efficient and more palatable to the individual investor.  Those hallowed walls are being broken down, slowly but surely, and this is not a trend that is going to slow down any time soon.

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