Property crowdfunding – new way to invest your money?
The rapid expansion of the online property and finance market, new entrants and partnerships and the ever-increasing house prices contributed to the growth of the alternative, online solution called property crowdfunding.
It has taken off in a big way and gained a lot of attention recently as a new, fresh way to finance a house. Overall, it provides an opportunity to invest in a property and gain rental profits based on the ownership share. There are many platforms available such as Property Moose, Property Crowd or Property Partner etc.
First of all, the process is very easy. You simply register on one of the above-mentioned pages and invest into a chosen properties with other people. That way you become a buy-to-let landlord, but with a group of other investors. So if you find an interesting property but you cannot afford to cover all costs or you are looking for a place to invest, you may decide to go with the crowdfunding. All contributors will pay a small amount of money in exchange for a relevant property share. Sounds quite good, doesn’t it? You can become an owner of a small share of properties across the country in a very easy and straightforward way, without all that hassle when investing alone.
Also, buy-to-let investing on your own can be very time-consuming and exhausting with all the administrative and maintenance work, demanding tenants and utility bills management each month.
However, there are some serious drawbacks that must be considered before deciding on crowdfunding. Remember that you have very little control over what is actually happening in the property that you own in parts. You cannot be sure who the tenants are, how the costs are managed and charged every month.
Another thing to consider is cost. Nothing is for free, thus, you will be charged some percentage upfront by the platform for doing all investing work.
Last but not least, since you do not own the entire property you cannot just sell it. What you can do instead is trying to find a secondary market – someone who would like to buy your share. It can be problematic when you are in a hurry or in a serious need for money.
Property crowdsourcing is indeed tempting, however, it may be also very risky. Therefore, when deciding to invest, you must evaluate all pros and cons and especially if you are a ‘newbie’ in the business, you may consider other, safer options.