From the last Global Crowdfunding Market report published by Crowd Valley, real estate crowdfunding emerged as one of the main trends worldwide. As the image on the left shows, in Q1 2014, real estate was the asset type whose demand by Crowd Valley’s potential clients has increased the most compared to previous quarters, passing from 19% in Q4 2013 to 30% in the first quarter of the present year.
This impressive growth of real estate crowdfunding was also recently confirmed by the crowdfunding research department of the University of California at Berkeley, which defined it as the “hottest sector” at the moment. The Wall Street Journal has calculated that real estate crowdfunding platforms in the US have already raised more than “$ 135 million in debt and equity for real-estate deals”. Even though the phenomenon is much more spread in the USA, where the total market value of publicly traded real-estate investment trusts is over $700 billion, Crowd Valley observed an increase in the demand for real estate crowdfunding platforms also in other countries.
Why is real estate crowdfunding so hot? First, real estate crowdfunding has a big advantage compared to, for example, private companies crowdfunding: it is a tangible asset, easier to evaluate than startups, as no very specific skill is required and just by visiting the property one can fairly enough assess its value. Second, it provides a collateral to the investment, which makes it a more appealing investment to more risk-averse investors. Third, it is easy to build a diversified investment portfolio, just by participating in deals located in different cities around the world. For example, Crowdbaron, a real estate crowdfunding platform, part of the Grow VC Group, allows its users to easily invest in properties from all around the world.
Deals listed on real estate crowdfunding platforms are various enough to attract different profiles of investors. However most of the platforms are targeting accredited investors and high net worth individuals. As soon as national regulations for securities crowdfunding become effective, we expect a further increase in real estate crowdfunding, as anyone will be able to invest even small amounts into real estate development. Whether real estate crowdfunding will substitute completely offline real estate investments is something we will only find out with time, but, as Crowd Valley already mentioned in other occasions, crowdfunding brings along to existing sectors, such as real estate, a unique possibility to revolutionize their businesses, by increasing their cost-efficiency and transparency.
References
Simon, R. & Brown, E. (2014). Real-Estate Sector Moves Crowdfunding Beyond the Trinkets. WSJ.com
Why is real estate crowdfunding so hot? First, real estate crowdfunding has a big advantage compared to, for example, private companies crowdfunding: it is a tangible asset, easier to evaluate than startups, as no very specific skill is required and just by visiting the property one can fairly enough assess its value. Second, it provides a collateral to the investment, which makes it a more appealing investment to more risk-averse investors. Third, it is easy to build a diversified investment portfolio, just by participating in deals located in different cities around the world. For example, Crowdbaron, a real estate crowdfunding platform, part of the Grow VC Group, allows its users to easily invest in properties from all around the world.
Deals listed on real estate crowdfunding platforms are various enough to attract different profiles of investors. However most of the platforms are targeting accredited investors and high net worth individuals. As soon as national regulations for securities crowdfunding become effective, we expect a further increase in real estate crowdfunding, as anyone will be able to invest even small amounts into real estate development. Whether real estate crowdfunding will substitute completely offline real estate investments is something we will only find out with time, but, as Crowd Valley already mentioned in other occasions, crowdfunding brings along to existing sectors, such as real estate, a unique possibility to revolutionize their businesses, by increasing their cost-efficiency and transparency.
References
Simon, R. & Brown, E. (2014). Real-Estate Sector Moves Crowdfunding Beyond the Trinkets. WSJ.com
About the author - Irene Tordera
Born and raised in Milan, Italy, Irene is an International Business graduate, with a strong interest for innovative ideas that can simplify our lives.
During her studies, she co-founded an online community for sportspeople and worked in marketing positions at Ogilvy & Mather Advertising and at the European Business Angel Network, in Brussels. She is a passionate blogger about crowdfunding and the startup ecosystem.
Born and raised in Milan, Italy, Irene is an International Business graduate, with a strong interest for innovative ideas that can simplify our lives.
During her studies, she co-founded an online community for sportspeople and worked in marketing positions at Ogilvy & Mather Advertising and at the European Business Angel Network, in Brussels. She is a passionate blogger about crowdfunding and the startup ecosystem.
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