Global fintech and funding innovation ecosystem

Real Estate Crowdfunding: Advice for Investors

March 13, 2023

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Real estate has long been considered a solid and relatively stable investment option, but it can also be an expensive, complex undertaking. That said, with the colossal rise of financial technology, coupled with the democratization of investment opportunities via crowdfunding, investing in real estate is now more accessible than ever.

Real estate crowdfunding represents innovative and exciting investment opportunities for more and more seasoned and aspiring investors to get in on. From security, commercial alarm systems and protocols, to the latest tech innovations, here’s a breakdown of some of the key real estate crowdfunding elements to get your head around when navigating this sector as an investor.

Financial technology

The financial technology (fintech) industry has played a major role in the growth of real estate crowdfunding. Platforms such as Roofstock and Fundrise have made it possible for investors to pool their funds and invest in real estate projects that would previously have been virtually impossible for them to access. These platforms also provide investors with in-depth market information, analysis, and tools that make real estate investing a significantly more transparent and efficient process.

Tip: Research and choose only reputable platforms that can demonstrate a strong track record in real estate crowdfunding.

Innovation

Progress is always dependent upon innovation, and the real estate sector has seen no shortage of it in recent years, with new and innovative technologies and concepts playing a key role in the success of real estate crowdfunding. Startups such as RealtyMogul and Cadre have leveraged both artificial intelligence (AI) and blockchain technology to deliver substantially more sophisticated investment options. By utilizing data-driven insights and machine-learning algorithms, companies like these are positioned to offer investors a far more personalized investment experience and improved investment returns.

Tip: When considering investing in companies that utilize innovative technologies, do your due diligence to fully understand the potential risks associated with the investment.

Small business and entrepreneurship

Real estate crowdfunding also provides a simplified avenue for small businesses and entrepreneurs to access capital. Platforms like GroundFloor and PatchofLand are making it supremely easier for developers and small businesses to raise funds from a diverse collection of investors. These fundamental shifts in investment trends have helped to level the playing field, giving smaller players a real chance to compete in the property market.

Tip: Invest in projects with a solid business plan, and stick with teams that demonstrate expertise in real estate development.

Digital identity

The concept of digital identity has become an increasingly important aspect of the world of real estate crowdfunding. Investors must verify their identities to comply with regulations and to ensure the security of their own investments. Platforms such as RealCrowd and CrowdStreet have developed sophisticated verification processes that make it easier for investors to participate in crowdfunding projects.

Tip: Go with a platform that prioritizes security and features a robust identity verification process to ensure investment safety.

AR/VR and the metaverse

Augmented Reality (AR), Virtual Reality (VR), and the metaverse all have the potential to transform the way investors participate in real estate crowdfunding. These cutting-edge technologies can provide investors with a more immersive experience, allowing them to explore virtual properties and (otherwise inaccessible) investment opportunities. Companies like VR Global and Rendever are already utilizing these technologies, providing investors with a highly engaging, interactive experience.

Tip: When considering investing in companies that leverage these technologies, keep in mind that this is a relatively new field, and the associated risks may be higher.

Startups to scale-ups

Real estate crowdfunding provides a pathway for startups to quickly become scale-ups. Companies such as RoofStock and Fundrise began as small startups and have since grown into multi-million dollar enterprises.

Tip: More and more startups now have the potential to transition quickly into scale-ups, but remember that it’s still riskier to invest in early-stage companies, so do your due diligence.

Peer-to-peer finance

Peer-to-peer finance has become a key component of real estate crowdfunding. Platforms like LendingHome and PeerStreet give investors access to opportunities to lend money to developers and borrowers, significantly reducing the barriers to entry for investors and providing an additional finance source for developers.

Tip: Stick to platforms with a solid track record in peer-to-peer lending and consider diversifying your investments across multiple projects.

Blockchain

Blockchain technology is transforming the real estate industry as we speak, by providing a secure and transparent way to conduct transactions. Companies like Propy and Harbor utilize blockchain technologies to streamline the process of buying and selling property; blockchain tech and smart contracts help companies like these to significantly reduce the time and cost associated with many real estate transactions.

Tip: Blockchain is tipped to revolutionize the industry, so any company that is utilizing it effectively is worth serious consideration.

Artificial Intelligence (AI)

Artificial Intelligence (AI) has also played a key role in the growth of real estate crowdfunding, with companies like RoofStock and Cadre utilizing AI for data analysis and investment opportunity insights. By leveraging big data analysis into market trends, historical data, and more, better predictions can be made regarding future market movements, and otherwise-overlooked investment opportunities can be uncovered.

Tip: When considering investing in companies that utilize AI technology, carefully analyze their algorithms and data sources to ensure reliability.

Security and governance

Platforms must comply with regulations and ensure the security of their investor’s funds. Companies like CrowdStreet and Fundrise have developed robust security and governance protocols to ensure the protection of investor funds and sensitive data.

Tip: Always opt for reputable platforms with a good history of security and watertight protocols in place to protect your investments.

Insurtech

Insurance technologies (Insurtech) have been transforming the Insurance Industry in recent years, and the innovative products in this space are also providing property investors with increased peace of mind. Companies such as PeerStreet and RoofStock offer insurance policies to protect investments and investor funds, thus reducing some of the risks associated with real estate investing.

Tip: As with any insurance policy, always read the policy terms, conditions, and fine print carefully before making any decisions.

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The future is now

Never before have we been living in the midst of such a transformational time, with technological advances revolutionizing industries and creating new ways to invest. Real estate crowdfunding is one such innovation, leveraging fintech, blockchain, AI, and more to bring about unprecedented access to investment and funding opportunities.

Investors must do their due diligence and research any platform and investment opportunity they consider. Still, any investor attempting to navigate the world of real estate without embracing all that real estate crowdfunding has to offer will soon be left eating the dust of those that do.


NCFA Jan 2018 resize - Real Estate Crowdfunding: Advice for InvestorsThe National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org

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