Crowdfunding has the promise of becoming the most reliable real estate financing tool. It is therefore essential that anyone with vested interest in real estate learn more about this financing model. Crowdfunding exists in two major types as discussed below.
This refers to a crowding funding investment whereby an investor becomes a shareholder in the real estate project. Once one has invested in the project, it will be that they have bought an equity stake in the project. This has both its downside and its upside as explained by experts from Sun West Mortgage. The upside is that the investor benefits from rental income and any price appreciation at the time of sale. On the flipside, however, if the project does not break the bank, one is second in line for payout after other investors.
In this type of crowdfunding investment, realtors at Sun West Mortgage pose that an investor effectively loans out money to a project. The investor will then receive fixed returns that are based on the amount invested and the interest on the owner’s mortgage loan. This is a less risky method of investing in a real estate project. The investor is given priority in payouts should the project fail to pay off.
Depending on one’s risk preference, crowdfunding offers a channel to invest in real estate. It is important to assess one’s risk appetite before investing.