In 2016, the real estate crowdfunding industry has grown to an astounding $3.5 billion. Experts agree that by 2025, the value will go beyond $300 billion. It might seem like an outrageous amount, but the numbers are justified. The main “culprit” is the internet. Online, the real estate industry is booming. Real estate is a global market that recently became unstoppable. Whether you’re investing in properly to keep, or you want to invest to rent/sell, the first thing you must have in mind is that land is a precious asset with benefits like no other form of investment. CONTINUE READING…..
The trends change annually, meaning that it’s important to know what shapes and refines the industry. Real estate crowdfunding is an area all investors should want to know more about. Here are some of this year’s emerging trends.
Institutional capital takes the spotlight
During the various growth cycles of the real estate crowdfunding industry the core focus has switched in the direction of accredited investors, who hold about 70% of the US’s private wealth. However they only account for 2.5% of the nation’s households. There’s a low barrier linked to real estate crowdfunding, and it mostly related to investors aiming to invest in properties but without spending a lot of money. Sadly, there aren’t that many participants available.
A individual investor may only have about $100,000 available to invest in property, whereas an institutional investor can bring as much as $50 million to the table. That’s why the latter type is a lot more attractive. Crowdfunding platforms with a focus on real estate understand that shifting to institutional capital brings core benefits. Their desire is to boost growth and service the supply. Market lending platforms such as SoFI, Lending Club and Prosper started aiming at the retail arena. But they turned to institutions due to scaling capabilities and enhanced liquidity permitted by institutional capital resources.
Institutional investors become a fundamental part of retail
Crowdfunding platforms eager to make the transition from dealing with retail exclusively to working with institutional investors as well have become aware that past performance and track record have a key role in the equation. For what’s left of 2017, these platforms are expected to grow because they have the potential to diversify their capital by including institutional capital. Taking the plunge is a move that must be done with extreme care. For example, 90% of Prosper’s capital belongs to institutions. In 2016, when institutions started withdrawing from certain investments, the volume of loans dropped significantly. At that point, the company was forced to adopt a new approach to grab the attention of retail investors willing to invest.
Crowdfunding platforms should focus on creating a solid database of individual investors, whereas at the same time implementing hardcore underwriting standards to guarantee deal quality. Afterwards, they should move forward and add include institutional capital to the mix so that the result is a stable, diversified capital base.
Exponential growth of foreign investing in real estate
Insane amounts of money are boosting the real estate market in the US. The surprising factor is that the cash increase happens due to international investments in property pertaining to the crowdfunding space. The Guardian argues that the Chinese have poured an average of $110 billion in real estate over the past 5 years. The amount is set to reach $220 billion by 2022. Due to foreign investments in the US, we can assume that some of that money will pertain to real estate crowdfunding. Economists argue that the growth has happened because of the international economic instability. Also, there’s a constant need foreign investors have, which are mostly aimed at exporting their investments into the US.
There’s a crystal clear sign that millennials are ditching conventional investments in exchange for newer, better, and more innovative alternative. Real estate might seem like an old-school field. But it’s a branch that spans many different sub-categories. We’ve gotten used to AirBnB’s title: the world’s larger real estate company, even though the company doesn’t own any physical estate, meaning that things are changing in this industry. So why wouldn’t you look for villas for sale in Turkey, for example, and expand your investment reach. Real estate crowdfunding has tremendous potential, and all investors should do is take a risk to see what happens.
June 7, 2017