7 REASONS CROWDFUNDING IS MORE PROFITABLE THAN TRADITIONAL METHODS OF INVESTING
Real estate as an investment choice, provides one of the most lucrative options as it offers stable investment returns in the long run. Unlike the stock and bonds market, the real estate market isn’t prone to huge minute-minute fluctuation, thus ensuring more stability and also reduced risk.
Traditionally, the real estate investment process was carried out by an individual who pays the entire amount to acquire the property. By doing so, the individual acquires sole ownership of the property. If you are planning to invest through the traditional method, you may invest either with the help of money saved by you or most commonly through loans. However, real estate investments are capital intensive and can affect your financial position for the very long term.
The emergence of crowdfunding options has eased the burden of real estate investment as now you can invest and sell your properties more easily than before. Crowdfunding is an investment method whereby two or more people pool in small funds to finance a large real estate property. This article will provide you with 7 main reasons why crowdfunding is an excellent alternative to traditional investment.
Crowdfunding Vs. Traditional Investment Method
There are many reasons why crowdfunding is preferred as an investment method over the traditional method. It has made real estate a more accessible and profitable method of investing than before. It has also relieved the investors of investing stress as you can start investing with lower capital with crowdfunding. Let’s discuss 7 main reasons why it is preferred:
Earlier, the traditional real estate market was considered to be a closed book that was inaccessible for non-institutional investors. Several factors prevented people from investing in real estate and this includes high cost, administrative and management issues, geographical constraints, etc.
With the growth in technology and its application in real estate, realty assets are becoming a more convenient option for investment. It has also enabled remote real estate investing options and has eliminated geographical constraints. Investing through these options has also made real estate cheaper than before due to innovative modules like fractional ownership and crowdfunding. Thus the real estate market has become more accessible now, thanks to crowdfunding platforms.
The traditional real estate investment was previously considered to be tiresome as it involved lengthy paper-works and several legal requirements. By investing through crowdfunding platforms like Assetmonk, you can eliminate this lengthy procedure as investing is made hassle-free through online processes.
Lower capital requirements
Traditionally real estate was considered to be a costly investment as it requires investors to furnishing the capital all by themselves. This has led people to hesitate a little before investing in real estate assets as it can be a large financial burden. This is not the case anymore, with the help of crowdfunding platforms, real estate has become a lower capital investment option.
Another viable option for lower real estate investment is the REITs (Real Estate Investment Trust). However, it is not considered ideal as the investor has little control over the property that is chosen for investing. While investing through REITs there is also a chance that you may not know how to manage the property as well. Crowdfunding platforms on the other hand allow you to select the property and start investing with a little amount.
Also Read: A Beginner’s Guide To Investing In REITs
Currently, the crowdfunding market is estimated to be a 2.6 billion dollar market worldwide. It has made real estate accessible to non-accredited investors without large funds to start their investment. By investing through crowdfunding platforms, you are not able to invest in diverse locations as well.
Option to diversify
The crowdfunding platforms such as Assetmonk have enabled investors to invest in properties in different parts of India. By investing through crowdfunding options, you can invest anywhere in the world and open yourself to exciting offers and newer opportunities for capital gains. Crowdfunding has thus been instrumental in eliminating currency risk and helps in diversifying your portfolio. These factors combined with the lower investment costs provide investors with a long-term stable return.
Real estate has been a local business for those traditional investors. For investing in a real estate property, the investors preferred locations that they are familiar with and are physically accessible. This is no longer the case as online investment platforms allow investors to check for properties in and out of India by providing them with all the necessary information about the market condition and regulations. This global aspect added to the real estate sector through crowdfunding platforms is expected to boost the demand for real estate assets in the future as innovation and transcontinental reach is the new trend in the real estate sector around the world.
The crowdfunding platforms have also reduced the burden of administration and management of the property. The investors using crowdfunding platforms only need to consider different locations and assess them based on their profitability as the remaining administrative and management-related issues are handled by the online platform. Thus now, investment is made easier than before and does not require the investor to have years of expertise in the real estate sector.
By investing through crowdfunding options you can not only eliminate the heavy paperwork but also reduce the cost of investment by eliminating middlemen and solicitors. You can also eliminate the heavy cost of maintaining the property by investing through crowdfunding platforms. Since real estate crowdfunding is carried out online, you can now invest in properties with just a few clicks and need not worry about the maintenance of the property as the platform shall carry them out for you.
Speed and efficiency
Traditionally, a real estate investment would only be completed after months as it involved a large amount of money and heavy paperwork. This long time frame has been reduced by the real estate crowdfunding platforms drastically as the entire transaction is carried out online. As already mentioned, the heavy paperwork had made real estate investments a plague and with the emergence of online platforms which provide you with all-encompassing services and even the transaction portion of a property, investing has become more speedy and efficient.
Ease in Investment through technology
The development in mobile technology has also impacted the real estate sector. Most of the online property brokers have started having a mobile version of their websites and have also started developing specialized apps to make them more accessible and simple for the users. Forbes magazine has stated that such initiatives taken by the brokers have fundamentally changed the way people are buying and selling properties as it is now easier to access the market information. It has thus increased mobility in real estate transactions.
Why is Crowdfunding preferred over traditional investments?
It’s important to remember that when we decide to invest, whether in real estate or something else, we must always have some knowledge and never invest in products that are too complicated for us to fully comprehend. In the case of real estate crowdfunding, the benefits of this investing method above traditional real estate investments must be considered:
Accessibility for small investors:
It allows large investors and persons with minimal financial resources to participate in real estate since it allows you to spend as little as $1,000, depending on the type of project.
Choosing the right sort of property to invest in:
This reduces risk by allowing you to do various projects and real estate items (marketing of new houses, buying properties to renovate for resale or rent, and so on), as well as for various demographics and even in different countries.
Return words that are appealing:
Short-term investments and timeframes for producing benefits, which can range from one year to no more than five years, unless in extraordinary circumstances.
You don’t have to be an expert in real estate to participate:
You don’t need to be a real estate specialist to invest in real estate since crowdfunding platforms have professionals that choose and assess different projects to reduce investment risks.
The investor selects each asset for investment:
When investing in real estate through crowdfunding, the investor chooses which type of investment to make, as opposed to what happens when investment funds or companies invest in real estate, where the Management Bodies of these organisations select investment projects.
Each of the enterprises in which it invests is self-contained, reducing investment risks.
Alternative to bank funding for promoters:
For developers, it provides a more flexible and speedier alternative to bank financing, allowing them to fund a variety of projects.
Diversification Reduces Risk:
Diversification reduces risk. Real estate crowdfunding, like any other sort of investment, carries dangers. However, the ability to diversify and the fact that investments are always based on a tangible object help to mitigate these risks.
The emergence of crowdfunding has changed the face of the real estate industry as it has completely changed how real estate investments are made. Earlier, real estate property was considered an expensive investment option. However, it is not the case anymore. Real estate has become a more viable option for investment and has reduced the financial burden on investors. Earlier investors were also worried about real estate is an illiquid asset that could not be sold easily in case of any financial emergencies. With the emergence of crowdfunding methods, real estate has become liquid as you can easily sell your share in the property and still earn a good profit. Compared to traditional investing methods, crowdfunding transactions are more systematic and effective as they are carried out online.
Assetmonk is a wealth-tech platform pertaining to real estate investments offering investment assistance in cities like Hyderabad, Chennai, and Bangalore. The properties offered have a high expected yield of IRR up to 21%. Visit our website for more details.
Reasons why crowdfunding is better than traditional investing FAQ's:
Real estate investment refers to the purchase of the property to earn a regular income rather than just using it as a primary residence. It includes the purchase of land, buildings, infrastructure, etc. It includes any tangible property which is immovable but transferable.
You can invest in India either through traditional methods or through modern investment options such as crowdfunding. By investing through traditional methods, you can gain complete ownership of the property but it can be a huge financial burden on the investor. It also limits the investor’s scope of investing in several locations. On the other hand methods like crowdfunding have made real estate investments more easy and convenient as now you can invest with smaller funds. It enables geographical diversification of your investments as well.
Yes, it is considered to be one of the best investment options in India. The real estate sector in India is considered stable and has even attracted foreign investors. Since Indian currency is cheap, several NRIs prefer investing in India. Since India is a developing country, the cost of the property is currently lower and will increase in the future.