Why Crowdfunding is better than the Bank
Posted on: 23 June 2016 by Crowd Lords
Ever wanted the sturdy returns of being a buy-to-let investor, but found the hands-on approach of performing a landlords duties somewhat stressful?
You have to put down a huge lump sum, and find the ideal areas for growth and rental income as well as keeping your property tenanted and maintained. This is where equity crowdfunding comes in. Real estate crowdfunding is a new route to get into property investment, with minimum effort and for as little as £1,000.
The rapid growth of alternative finance methods over the past few years should show the viability of this new way of becoming an investor. Crowdfunding platforms for UK properties such as CrowdLords have successfully funded projects and have provided a good return to investors. But it’s not without its risks and potential complications. Read on for a few pros and cons of equity crowdfunding.
You have to compare crowdfunded real estate ventures with the next best option, REITs (Real Estate Investment Trusts). Dissimilar to REITs, real estate crowdfunding gives you the ability to deign precisely which properties you’d like to show or hide in your portfolio. When investing in a REIT, you’re essentially investing in a potentially vast array of properties, which can be very difficult for the individual shareholder to analyze. In direct contrast to this, when investing in a crowdfunding campaign, your money is going exactly where you aim it, one property at a time.
The obvious risks of property investment are still present in real estate crowdfunding. The risk of house prices dropping and rental yields falling, meaning you’d get less back than you’d hoped. As ever with investment, higher risk can create higher returns. Returns of 10% annually are common, which is far more than you can expect to earn in an ISA or standard interest savings account.
This is still the riskiest part of the property market. House prices have been rising steadily over the past few years but there are genuine concerns and fears over the real possibility of another drop, and even if things do continue to play out the way they have been doing, the complications of affordability, with the added pressure on banks to control overheated parts of the market, like London, avoiding further potential ‘bubble territories’ are worth looking at thoroughly.
While you don’t have to concern yourself with the expenditures and complications that arise from performing the role of landlord, such as maintaining the property and making sure it’s tenanted, you have no control over who rents the property, or how it’s managed, like you would with regular buy-to-lets.
Real estate crowd funding has made property investment available to the masses, democratizing the income producing property market. Just like any other investment opening, however, there are potential risks and disadvantages that can mean this isn’t for everybody.
Investment in property comes with risks as well as the possibility of rewards.
For more information visit here https://www.crowdlords.com/full-risk-disclosure
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