Crowdfunding has been a hit in recent years. In the field of real estate investing it is frequently used. What's new on the market, however, is so-called crowd-owning, which combines the advantages of micro-investing, crowdfunding, and genuine ownership of real estate.
Before
Investing in real estate was done by purchasing an entire property; the process was complicated, often linked to loan financing, and transaction costs were high.
Now
You can invest from small amounts and simply, using micro-investing platforms. At the same time, thanks to the principle of co-ownership, you can also use the properties yourself.
Crowd-funding
The crowdfunding system has proven itself in the past as ideal for charitable projects, or for supporting newly emerging projects or companies. It is a way of raising financial resources for projects or investments from a large number of small contributors.
The same principle of crowdfunding has recently begun to be applied to the field of real estate financing. More precisely, to as-yet unrealized development projects or investment or business ventures. This needs to be kept in mind before investing through these platforms. The platform operator merely connects the developers seeking funding on one side and small investors on the other.
It therefore depends on a good selection of those seeking funding, so that unnecessarily high risk doesn't arise for investors due to the project ultimately not being completed or successfully operated, thereby also devaluing the investment itself.
An enormous advantage of these platforms is that they have allowed people to invest in real estate from small amounts and with absolutely minimal transaction costs.
Crowd-owning
A new real estate investment trend that takes the best of crowdfunding and enriches it with the advantages of genuine ownership of real estate is called crowdowning. In short, it is the co-ownership of already-functioning properties by several people.
Small investors are protected from the unnecessary operational burden associated with owning a physical property, and thanks to investing from small amounts, they can in this case too very easily diversify their own investment portfolio. As with crowdfunding, these investors are also not denied the right to the profit that the investment generates, whether in the form of ongoing rental of the property or thanks to its overall appreciation upon sale at the end of the investment horizon.
At the same time, this system also involves the platform operator in the whole process, who directly participates in the investment and shares the risks and returns together with the small investors. In the case of crowdowning, safety guarantees thus come into play from the first to the last step of holding the investment, and the risk is thereby reduced to a minimum.
The level of appreciation of such an investment therefore depends primarily on the choice of the location in which it is situated. Holiday properties in attractive and stable locations that offer the potential for long-term growth in value thus appear ideal. It is necessary to examine current and future demand in the given market, which allows us to predict the profitability of the investment. And the property itself also needs to be thoroughly vetted – its condition, its potential for short-term and long-term rental, and the length of the active season.
The active season will also interest investors for a purely pragmatic reason of their own use. Crowdowning of real estate, after all, brings an enormous advantage over crowdfunding. Investors actually become co-owners of the property, and therefore they can also use it themselves under favourable conditions, for example for their own holiday.
Crowd-owning
A new real estate investment trend that takes the best of crowdfunding and enriches it with the advantages of genuine ownership of real estate is called crowdowning. In short, it is the co-ownership of already-functioning properties by several people.
Small investors are protected from the unnecessary operational burden associated with owning a physical property, and thanks to investing from small amounts, they can in this case too very easily diversify their own investment portfolio. As with crowdfunding, these investors are also not denied the right to the profit that the investment generates, whether in the form of ongoing rental of the property or thanks to its overall appreciation upon sale at the end of the investment horizon.
At the same time, this system also involves the platform operator in the whole process, who directly participates in the investment and shares the risks and returns together with the small investors. In the case of crowdowning, safety guarantees thus come into play from the first to the last step of holding the investment, and the risk is thereby reduced to a minimum.
The level of appreciation of such an investment therefore depends primarily on the choice of the location in which it is situated. Holiday properties in attractive and stable locations that offer the potential for long-term growth in value thus appear ideal. It is necessary to examine current and future demand in the given market, which allows us to predict the profitability of the investment. And the property itself also needs to be thoroughly vetted – its condition, its potential for short-term and long-term rental, and the length of the active season.
The active season will also interest investors for a purely pragmatic reason of their own use. Crowdowning of real estate, after all, brings an enormous advantage over crowdfunding. Investors actually become co-owners of the property, and therefore they can also use it themselves under favourable conditions, for example for their own holiday.
A comparison of different ways
of investing in real estate
|
Crowd-OWNING
Micro-investing in real estate ownership
Investbay combines the best of crowd-funding and ownership of physical real estate: the certainty of ownership with the ability to invest in small amounts |
Ownership of physical real estate
Once the clear choice for an investor's portfolio, but one that brings a number of worries - with operation, with the size of a one-off investment, with diversification, and so on. |
Crowd-FUNDING
Micro-investing in loans secured by real estate
A good choice for passive investors who, however, are aware of the higher degree of risk associated with debt financing through crowd-funding. |
|
|---|---|---|---|
| Option of micro-investments | yes | no | yes |
| Return horizon | 5+ years | 10+ years | 5+ years |
| Annual appreciation | 5% and more | 5% and more | 5-10 % |
| Protection against hyperinflation | yes | yes | some |
| Level of risk | low | medium | medium |
| Liquidity | medium | low | medium |
| Option to use the property for recreation | yes | yes | no |
| Decision-making about the property's operation | yes | yes | no |
What is crowd-owning?
In short – co-ownership. Together with other (micro)investors, you own a property that brings you a return. The return is then divided exactly according to the size of the investment. You therefore don't have to spend millions in order to be able to invest in attractive properties.
Wow, this article is so great that I just have to share it right away.
