Investing in Income-Based Real Estate Projects Via Crowdfunding

Investing in Income-Based Real Estate Projects Via Crowdfunding

Taking the typical real estate project from ‘just a property’ to a value-creating asset can be a daunting task that often requires significant financial investment. The same can be said when constructing a new property. Sourcing funds almost always presents a major bottleneck.

The good news, however, is that like most problems, there’s a way out. While loans and mortgages present viable outlets to sourcing funds, there’s a more practical, proactive and self-sustaining approach. One that requires little or no commitment, provides added flexibility and benefits all involved parties; say hello to crowdfunding.

Providing value to both homeowners and investors

For homeowners who have a viable property, crowdfunding provides an alternative avenue to funds that can be used to transform the property into one that generates revenue. Here’s how it works. Once a property is identified as a market fit, homeowners are allowed (under Title III of the JOBS Act) to distribute equity shares in the property commensurate to its value. In return for their. equity, the crowd provides the funds required to kick off and complete the next phase of development as specified by the owner.

On completion of development, participants of the crowdfunding drive share rental profits with the property owner in direct relationship to the value of shares each person owns in the property. When the homeowner is simply repurposing the house for sale (flipping), any change in the value of the property is translated to all parties based on the equity distribution.

Crowdfunding is a win-win for everyone

The crowdfunding setup provides a win-win best case scenario for all involved parties. As an investor, you’re granted the opportunity to create a viable revenue stream from the lively real estate market. When you consider the fact that this can be achieved with a modest investment and at a significantly lower risk quotient, it becomes a particularly irresistible offer. Property owners can now progress their properties to the next level with the only requirement being a cut of profits delivered to the crowd who backed their project.

Crowdfunding for new projects

Developers also find that crowdfunding provides a competitive outlet to reaching their construction targets. All it takes is a stellar development idea with demonstrable viability and a well-articulated roadmap. As was the case with homeowners and their crowdfunding community, the business plan for new projects is relatively simple. Once an idea is presented, backers who buy into the vision and projected returns of the developer would take up stake (as equity) in the concept.

In return, they provide funding which will be used to complete the project. On project completion and after eventual monetization, the developer shares the accrued profits with the crowd. This setup allows investors with limited knowledge or expertise in the real estate market the opportunity to make handsome returns. For the developer, there couldn’t be any better financing option – crowdfunding takes the risk and difficulties associated with other financing options and replaces it with convenience and certified peace of mind of setting your own terms.

EquityDoor – bridging the gap

EquityDoor provides the online portal where this revolutionary collaboration between developers and willing investors takes place. It is a level playing field where the emphasis is on matching individuals who share the same vision and goals as it relates to the real estate market.

Transparency, accountability, and credibility govern the affairs of this next-gen real estate hub with the ultimate goal being to derive open and fair value for both divides of the real estate market.