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Owning a real estate business is a high-risk, high-reward investment. This is because you need a huge capital to buy a property, renovate it, and pay for all the paperwork. Due to the nature of the business, those that possess knowledge and talent but lack the funding are put at a severe disadvantage. Thankfully, this situation can be avoided through crowdfunding.
Read more to learn what crowdfunding is, the advantages it can offer to real estate investors, and a few tips on how to get crowdfunded successfully.
Peer-to-peer lending or real estate crowdfunding is the strategy where a real estate investor reaches out to individuals online or personally for a small amount of money. The money from each individual is then pooled to reach a specific amount.
Once the money reaches the target amount, the real estate investor will then use the money in a way they promised to spend it on and gain profit out of it. The individuals involved in the crowdfunding will then receive their money back plus interest as agreed.
This strategy gives a lot of talented real estate investors an opportunity to start a project or build a business without having to loan large sums of money from the bank or take a lot from their life savings. It’s also a good way to advertise your services by spreading the good word around after the project pays off.
Multiple and consecutive successful projects encourage investor loyalty, thereby giving the real estate investor an increased availability of funds. Instead of asking for a small amount of money from the individuals in the crowdfund, the real estate investor can ask for a large sum per individual because they are trustworthy to deliver profits.
The result would be that the real estate investor will no longer need to apply for a loan or take a penny from their personal assets for their future projects.
Grab the attention of your connections. First, ask who and how many people would be interested in investing on a real estate project.
Everyone is busy and skeptical. Driving action will be hard. That’s why you shouldn’t be passive. Don’t hesitate to talk or call your potential investors personally.
Once the talks begin, show them your plans, how you intend to execute the project, the opportunities, and the deal. Investors will hesitate to give you money if they have no clear idea of how they can benefit from it.
The real estate market can change. Your investment might pay off at a given timeframe or be a dud beyond that. You should observe and be able to predict any market changes to make sure that you’re able to deliver your promise no matter what. Better yet, be a master of your craft. Remember, your reputation is on the line here.
Numbers are a great deal in earning investor trust. The more accurate you can show, the better. Specificity is the key to make investors confident. Once you have made a market study, present the statistics and explain as clearly as possible. Documenting everything is a must.
Do your best to earn the trust of your funding crowd. Showcase your portfolio and the other real estate projects you have successfully completed if you have them. Once your investors give you their money, keep them updated on any progress. Deliver your promise as agreed. Ask them if they’re happy with the results. If they are, tell them to spread the good word about you.
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