Crowdfunding, a new business model, has found its way in Real Estate World minimizing financial risk.
Alexandria, VA -- (SBWIRE) -- 03/04/2014 -- The US economy downfall created a domino effect in business as a whole. Big name companies, capital and banking industry as well as the real estate were hit with a huge blow. Real Estate system for one, almost collapsed yet conceived new business structures that guarantee minimal financial loss. A new investment model is now being introduced, Real Estate Crowdfunding.
Crowdfunding in general is the collection of finance to sustain an initiative from a large pool of backers -the "crowd"-, usually made online by means of a web platform. Same concept is applied in real estate; investors can choose a project to invest their money without buying equity to a specific company. In a broader sense, investment decisions are project based.
Traditional VS Crowdfunding
By tradition, Investors may either buy stocks or bonds of a property company. They can expect returns through periodic interest from bonds or increase in market prices and stock dividend. On the other hand, crowdfunding operates where an owner offers returns on a project. It operates as a joint venture with a wide base of investors where they can choose a project based on their preference or on specific criteria. With a minimum amount of $100, investors can choose and invest on as many projects as they can easily accessible through crowdfunding online platforms. Through this concept, investment decision will be entirely project-driven where investors invest on project rather than a single company. A real estate company however cannot sell itself. It can only sell its existing projects with the merit of managing default rate track record.
Minimizes Financial Risk
Because investors can distribute their investments on several projects, financial risks are spread out. If a company or a project fails, other companies will compensate. Compared to investing in one real estate company, if the company fails, all investments go down with it.
Future of Crowdfunding
This new business concept is thought to be an irreversible trend. Its flexibility, timeline and returns plus its transaction processing time will definitely compete with traditional banking and investment companies. It is inherent that investors will chose greater financial elasticity of the new business trend over traditional banking rules and restrictions.
Real Estate Crowdfunding is projected to permeate not only in homes, condos or real estate industry but in breakthrough projects, technology driven discoveries and innovations often lacks financial funding. It is the answer to economy’s obsolescent financial system and bureaucracy.
About AJ Team Realty
AJ Team Realty is a full service, full time Real Estate Team based in Alexandria, Virginina. It has combined 20 plus years of real estate experience in providing northern Virginia buyers and sellers the best opportunity for success real estate transaction.