Property Crowdfunding: The Basics

Property Crowdfunding: The Basics
September 28, 2016 Brickowner

While property crowdfunding is a hot topic right now, it can sometimes seem confusing at first glance, especially if it’s not explained well. So we wanted to answer some of the straightforward questions you might have.

What is crowdfunding?

Crowdfunding is a way of allowing a group of people to fund something together. It’s become hugely popular in recent years due to sites like Kickstarter, Indiegogo or Gofundme. Usually, creators pitch how much money it would take to make their project and offer ‘rewards’ for each level of funding. For example, if the project was a film, you may get a digital copy of the film for one funding amount, but invited to the premiere for another.

What is property crowdfunding?

It’s the same basic idea as crowdfunding. A group of people buy a property together. The property is managed by the crowdfunding company, so the investors don’t have to do anything else. When the property makes a profit (either through renting or sale), the profit is shared between the investors. The more they invest, the larger percentage they receive.

Why has property crowdfunding taken off now?

Partly because the technology is up and running, but also because there’s now confidence in the technology. Crowdfunding has become a more popular option now because crowdfunding platforms have been shown to be capable of being both successful and (more importantly) safe. The safety partly comes from recent legislation passed to protect investors.

Also, house prices have been rising in recent years. There are more people who would like to invest in property, but the sheer expense involved is offputting. Crowdfunding is a way that they can invest with a lower amount of money and, as a result, less risk of loss.

What’s the market for crowdfunding like?

The crowdfunding market increased in the space of a year by 295% , going from £84 million raised in 2014 to £332 million (including real estate crowdfunding) in 2015. Equity-based crowdfunding is already the second fastest growing sector in crowdfunding.

Also, it’s moving fast, prompted by areas of regeneration like London and the Northwest. The record so far for fastest funding was in property – £843,100 raised in less than 11 minutes.

If I want to invest, how do I get involved?

It depends on who you crowdfund with. Brickowner offers a portfolio of properties handpicked by experts, with a percentage set aside for crowdfunding. You can then buy shares in those properties, starting from £100.

Once the property is fully funded, it can be rented out (or, in the shorter-term, renovated and sold, but the management company will make their intentions clear). The management company will take care of all the practical elements of finding and maintaining tenants. As this happens, you receive your proportionate share of the profit earned.

And finally…

It’s important to do your research. There are public records of local house prices that you can easily find, along with historical information. The more prepared you are, the better you’re likely to do.

If you’re interested in getting started in property investment with as little as £100, learn more about Brickowner .

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