What investors should consider to begin real estate crowdfunding?

We like to think that since the beginning of time, real estate projects have often been funded with many people coming together to successfully execute a project. Back in the day, there was no Internet, and back in the day, they didn’t call it “crowdfunding”, but in essence it was the same concept.

A key part of investing is both knowing and trusting the people with whom you are doing business – and again, this principle holds true in all types of investments, not just online crowdfunding. So just like any other real estate investment, investors should be assessing at least the following important factors specific to the investment opportunity:

• Physical property – location and type of development
• Financial – return and financial analysis including currency risk, reporting and payment terms
• Legal – legal structure and regulations
• Social – local current market conditions, comparable metrics and data
• Know your developer/sponsor track record and history management team
• Expertise in the particular category of the project being funded ability to easily contact them
• Know your investment appetite – consider other investment options/personal portfolio assessment
• High risk tolerance – consider equity offerings with higher returns
• Low risk tolerance – consider debt offerings with lower returns

As well as a few specific to the crowdfunding platforms themselves:

1. Trust, transparency and credibility of the team – their track record
2. Technology and ease of use
3. FAQ and Terms of Use are clear and understood
4. Easy access to the key team members with questions/comments about the platform or particular deal
5. Investors should look to work with platforms that they trust and like, but equally important is the quality and appeal of the investment opportunities listed on the platform.

Once on board, we believe most of our members take the following thought pattern in order of importance when assessing any offerings.

1. Country
2. City
3. Location
4. Developer
5. Deal type
6. Structure
7. Term
8. Returns

Note: We put all other factors above the returns, some deals do not work out as planned so best to be comfortable with the first points on the list, so you will feel better if you have to wait longer for your investment to mature, or in the unfortunate situation that there are legal issues, you feel protected by the law in that country.

My personal goals as an investor is to find a happy balance between spreading risk and not wanting to monitor too many individual projects. I also like the occasional high risk/high reward investment to keep things interesting.You need to find your happy place.

I welcome all comments and would love to hear what you think.

Note from Huiyi, TIA’s community manager:
Julian is the CEO & Founder at InvestaCrowd – an Asia-based real estate crowdfunding platform, bringing our members institutional grade real estate investment opportunities, from markets with transparent and established legal systems and real estate developers who have proven and successful track records. 🙂