Crowdfunding has been gaining more attention these past few years thanks to sites like Kickstarter and real estate crowdfunding is no different. Nonetheless, it is still a relatively new term on the Malaysian market and locals have been questioning the benefits of this venture.
Here are 8 reasons to consider Property Crowdfunding:
- Low minimum investments – Buying a property generally requires a large amount of money. In the past, a minimum of RM50, 000 was needed before one could even consider investing but now, thanks to crowdfunding, as little as RM5, 000 is needed. The ever-increasing cost of living is making this a more viable option right now – unless one has a few thousands to spare.
- Portfolio diversification – Crowdfunding allows investors, both, novice and veteran, to obtain this diversification geographically and through property types. Having a wide ranging portfolio varies one’s risk profile investments-wise. i.e. A diverse portfolio decreases one’s risk in comparison to investing in a single property or property class. Like the old saying goes – don’t put all your eggs in one basket.Quoting Mellody Hobson, president of Ariel Investments, “Diversity makes everything better!” The Modern Portfolio Theory backs this up by hypothesizing that diversification is the key to optimal returns.
- Geographic diversification – Traditional real estate investing tends to limit one to one’s geographical area. However, the evolution of technology has connected the world on a virtual level, sharing information across continents in seconds. As crowdfunded deals are done online, investors are able to access information, compare choices, form a conclusion and complete a transaction in one sitting. Imagine sitting in your living room in KL and investing in properties in Paris!
- Fully curated and qualified properties – Time is money so why waste precious time researching, interviewing relevant parties, and getting feedback from trusted peers. Real estate crowdfunding sites do the grunt work for potential investors by meticulously curating every property featured on their site, providing quality real estate choices at one’s fingertips.
- Debt Free – It sounds too good to be true but in this case it actually is true – real estate crowdfunding does not involve debts or loans. Because of this one would have minimal risk associated with money markets such as the increase in interest rates, a common issue in traditional real estate investments as it tends to affect yields.
- Returns on investment with minimal hassle – Shareholders will receive distributions from their investment (provided that the property is leased and the tenant pays the rent) every quarter. These distributions reflect the rent paid by the tenants of the relevant property. The returns are paid once fees and expenses related to the property are deducted. Therefore, an investor’s role is solely to provide the money before sitting back and watching the profits roll in.
- No property management hassles – Let’s be honest here, the glamour of being able to say that you own a property is overshadowed by the details of being a landlord what with property maintenance every now and then as well as rent collection. Not everyone would have the time to spare for this.That is where the beauty of real estate crowdfunding comes in. It allows one to invest in properties while leaving the management of said property to the agents.
- Invest in your community – Give back to your community by helping to strengthen it. Real estate crowdfunding allows one to invest in one’s own backyard. This venture has been known to help local residents connect with each other as well as with community organisations and other stakeholders through their direct investments in local real estate.
Every investment comes with its own risks and real estate crowdfunding is no different. There is no guarantee of a return but one thing that one can rely on is the way this venture has undeniably changed the way capital can be raised for all parties involved.
Stay tuned with the sharedworth.com/blog for more up-to-date tips and guides on buying and selling Real Estate in Malaysia.