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Today, there are several real estate investment options accessible, ranging from traditional real estate investment to real estate crowdfunding. And it’s quite natural to feel overwhelmed and unclear about where to put your money. Real estate crowdfunding brings together a group of investors to pool their resources for a single project. The investor will work alone in a traditional real estate investment. Let us see which investment is worth the time and money for Indian investors.
How Do Real Estate Crowdfunding Investments Work?
Multiple investors can combine their resources and engage in a wide range of real estate projects, from single-family homes to major commercial enterprises, through real estate crowdfunding. Investors may readily locate and invest in these projects by using real estate crowdfunding platforms. So investors earn a portion of the profits according to their investment. This method makes it easier and more economical for investors to diversify their portfolios and profit from the potential rewards of real estate investing.
Also, read What is Crowdfunding | How Crowdfunding Works.
How Does Traditional Real Estate Investment Work?
Acquiring a property with the purpose of leasing it out or selling it for a profit is the traditional method of real estate investing. Investors often require significant upfront funds to acquire the property, and they are responsible for all elements of the investment, like locating tenants, running the property, and managing any necessary repairs or upkeep. Traditional real estate investment can be successful. But it also takes a substantial amount of time, effort, and money.
Real Estate Crowdfunding Vs Traditional Real Estate Investment
| Real Estate Crowdfunding | Traditional Real Estate Investment | |
| Accessibility | Yes | Not really |
| Diversification | Yes | No |
| Transparency | Yes | No |
| Risk | Yes | Yes |
| Liquidity | Yes | No |
| Fees | Yes, low fees | Yes, high fees |
| Control | Not really | Yes |
| Hassle | Yes, less hassle | Yes, more hassle |
| Research by investors | No, research gets done by the platform | Yes, investors need to research |
| Global opportunities Access | Yes | No |
Let us read about this more in detail below.
1. Accessibility
Real estate crowdfunding investments enable smaller investors to join in real estate investing with RS. 25 lacs via alternative investment platforms like Assetmonk. Traditional real estate investing often necessitates a bigger initial investment. Crowdfunding platforms also provide investors with a more accessible and user-friendly experience.
2. Diversification
Real estate crowdfunding enables investors to diversify their portfolios by investing in several properties with smaller sums of money. Investing in a single property is common in traditional real estate investing. It is dangerous if the property does not perform as predicted.
3. Transparency
Real estate crowdfunding platforms provide investors with full information about the property. They also provide details regarding investment opportunities. It ensures openness in the investing process. Traditional real estate investment might be more opaque, with investors having lesser information at their disposal.
4. Risk
Real estate crowdfunding carries hazards. However, real estate crowdfunding platforms frequently include additional risk mitigation measures, such as due diligence and underwriting, to assist investors to reduce risk.
5. Liquidity
Traditional real estate investing usually entails a long-term commitment, with investors keeping the property for several years. Real estate crowdfunding systems frequently provide greater liquidity. Thus, it allows investors to sell their shares to a third party or leave the transaction with greater ease.
6. Fees
Because of decreased overhead expenses, real estate crowdfunding platforms frequently charge lower fees than traditional real estate investing. Traditional real estate investing might come with greater expenses, such as property management and real estate agent charges.
7. Command
Traditional real estate investment gives investors more control over their money since they can make decisions regarding the property and how it is managed. The choices are made by the platform and its management team. So, real estate crowdfunding investors frequently have less control.
8. Hassle
Real estate crowdfunding investors have more time for themselves because they do not have to manage and control their properties personally. It is an excellent passive investing strategy that requires little work and few obligations. A traditional real estate investment investor must manage the real estate asset on a regular basis, locate renters, resolve maintenance concerns, undertake some renovation, and do a variety of other chores.
9. Research
In traditional real estate investment, you must not only investigate the real estate property you wish to invest in. You must also thoroughly examine the local real estate market, its trends, historical history, and current price variations. Real estate crowdfunding provides investors with access to ready-made projects that are frequently provided by a reliable third party and managed by a local real estate firm. These two parties often compare pricing, study the real estate market, and then select the best offer. As you can see, they cover the majority of the processes that a typical real estate investor would need to complete on their own.
10. Global opportunities Access
Real estate crowdfunding makes it considerably easier and simpler to invest in various countries. As a consequence, investors may select the real estate markets that appear to have the greatest potential. The main advantage is that they do not have to invest in their own domestic market, which may lose territory to other nations. When using a traditional real estate investment plan, it is more difficult to invest in real estate located in other nations since you have specific geographic limits in dealing with any local concerns.
Bottom Line
Real estate crowdfunding Vs. conventional real estate investment should be determined by your unique aims and financial circumstances. Traditional real estate investment may be the way to go if you have a considerable amount of wealth and are ready to take on additional responsibilities. Real estate crowdfunding may be a better option if you have limited cash and want a hands-off approach. Before making a decision, it is critical to perform extensive study and analyze your options.
Assetmonk is one of the most innovative alternative investment platforms. You may invest in alternative investment options such as real estate on a budget. We make alternative assets, such as real estate, more accessible. Reach out to us right away!
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Target Keyword: Real Estate Crowdfunding
FAQs
Q1. What is the most profitable type of real estate investment?
A. Commercial real estate is the most profitable real estate investment.
Q2. Is real estate crowdfunding legal in India?
A. Through the SEBI (Alternative Investment Funds) Regulations, 2012, the Securities and Exchange Board of India (SEBI) governs crowdfunding in India.
Q3. What are at least 3 types of real estate investments?
A. The three types of real estate investments are residential real estate, commercial real estate, and land.
Q4. Which is a disadvantage of direct real estate investments?
A. One of the most fundamental drawbacks of direct investing is that it demands a large amount of time and work to be successful. You must deal with tenant problems, maintenance crises, and your obligation if any accidents occur on the property.
Q5. Is real estate the least risky investment?
A. Real estate is typically seen as a low-risk investment when compared to other investment forms such as stocks, annuities, and cryptocurrency.
