It is only in recent years that the concept of crowdfunding has made its way into real estate lexicon. While most folks are familiar with the use of crowdfunding for philanthropic causes and individual entrepreneurial campaigns, they don’t always associate real estate investment and crowdfunding in the same sentence. addy is looking to change that perception by providing an easily accessible platform for investors to put their money into real estate – in whatever amount they can afford.
Achieve High Capital Investments
According to Investopedia, “crowdfunding” refers to “the use of small amounts of capital from a large number of individuals to finance a new business venture.” In a high-priced market such as Vancouver, the amount of capital needed to purchase or construct a multi-family housing unit is staggering and beyond the reach of most people. Crowdfunding allows multiple individuals to invest in property at a price point they are comfortable with and, at the same time, reduce the risk that comes with any investment since the risk is spread across the “crowd”.
If you are wondering how the process works in the real world – let’s take a closer look. There are fundamentally 3 basic roles in the real estate crowdfunding process – (1) the sponsor, (2) the platform and (3) the investor.
1. The Sponsor
The sponsor is the person or group of people with the real estate experience, knowledge and acumen to identify properties with investment potential, develop a plan to add value to the property, coordinate and supervise the development and construction phase and arrange for the eventual sale and distribution of profits. The sponsor is the professional who will be responsible for everything from due diligence to financial analysis to hiring contractors and paying the bills. Most investors are not real estate pros and have neither the time nor the interest in attending to these full-time tasks. The beauty of crowdfunded real estate investment is that someone else is doing the heavy lifting while you relax until it’s time to reap rewards.
2. The Platform
A crowdfunding platform such as addy is the digital marketplace where sponsors can display investment opportunities to potential investors. Did you ever dream of investing in waterfront property in an up and coming neighbourhood in the city that you believe holds tremendous growth potential? Perhaps you have, but lacked the time and capital needed to launch such a project. A digital platform like addy offers entry into a world once thought off limits. A crowdfunded platform assembles and makes available to investors all the hard work of the sponsors in choosing and developing quality properties.
3. The Investor
Last, and most importantly, crowdfunding needs investors – like you! With addy, you can realize that dream of investing in waterfront property with just a click of a mouse or a tap on your phone. Through more traditional real estate investments such as REITs (Real Estate Investment Trusts), investor dollars are spread across many properties in various asset classes. It’s hard to even tell for sure where your money goes. In a crowdfunded investment, investors are usually focused on a single property. This allows investors to target properties in their own backyards or neighbourhoods in need of revitalization – wherever your interests lie.
Crowdfunded websites are essentially an online meeting space for sponsors and investors. addy and other crowdfunding platforms have expanded the pool of real estate investors beyond developers and venture capitalists with millions at their disposal. With only a few dollars and an internet connection, you can become a real estate investor. Who knows? With a little luck, you may be pitching your own projects as a sponsor in just a few years.
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2 thoughts on “What is Real Estate Crowdfunding?”
Just curious who is responsible for insurance and liability
Each property is different, be sure to read the Offering Memorandum (OM) for the property you are interested in. The General Partner arranges the insurance for each property. addy members are not liable for anything past their investment.