To date, though, most crowdfunding investment sites have focused on peer-to-peer lending opportunities or speculative start-up company investing.The lending opportunities often offer continuous interest payments, but usually revolve around making unsecured loans providing lower interest rates to borrowers than might otherwise be available on their credit cards.The speculative investments, on the other hand, typically offer no immediate cash flow at all; rather, all of an investors chips are placed on future appreciation of the asset. These are among the most risky types of investments, and usually only people who are closely involved with the high technology world are in a position to make educated bets on such early-stage investments. Real estate investing offers investors a chance to have it all ongoing cash flow and, with equity investments, participation in potential appreciation.Crowdfunding sites offer investors a chance to participate in rental payments from various types of real properties hard assets that wont disappear if (for example) a companys product turns out to be a dud.This can occur via loans based on real estate, or equity stakes in properties that are already up and running in either case, providing an investor with regular cash on cash returns.These recurring cash distributions can occur either through the receipt of loan payments or through preferred payouts on equity investments.
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The Democratization of Real Estate Investing
After REITs were introduced in 1960, broader individual participation in commercial real estate became somewhat more accessible; but most REITs operate as holders of pools of assets, and it has remained difficult for smaller investors to participate in syndications of individual projects.Sponsors of specific real estate projects have continued to seek financing from larger investment groups partly to avoid property management maryland having to deal with individualized reports and inquiries from large numbers of investors. Only recently has communications technology and its facilitation of crowdfunding enabled smaller investors to participate more broadly in specific real estate investments. The internet has made possible wide access to news, information, products – and real estate investments. Through online platforms like Realty Mogul , people can now review real estate investment projects at their convenience say, sitting with their laptop or tablet at the kitchen table at 10pm, after the kids have been put to bed.Previously, introductions to these opportunities might have required specially arranged meetings with attorneys, bankers or financial advisers that is, if the person had such connections at all.The ability of smaller investors to conveniently access deal flow directly has enabled vast numbers of run-of-the-mill investors to invest in larger or higher-level real estate projects than ever before. Just as such opportunities had been generally more difficult to access, they were also often still limited to institutions or persons of very substantial wealth.A project syndicator seeking $2 million in equity wouldnt typically concern himself with contributions of $10,000 or $20,000; rather, he would search for investors able to contribute ten times those amounts, in order to simplify his task of managing investor updates and distributions during the life of the project.Technology, however, has enabled large numbers of unrelated investors to pool their contributions and make a significant investment through a single legal entity keeping things easy for syndicators while broadening the source of potential investors. The illiquidity of most real estate investments has also contributed to investors often receiving only infrequent reports on a projects status. The internet, though, makes it easy to access centralized information, and crowdfunding sites allow investors to do status checks and review project updates on a 24/7 basis.This in turn permits the investment to be more transparent, enhancing investor trust and thus creating a virtuous circle whereby the investor base is increasingly broadened.
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