One of the most successful niches of the crowdfunding industry is in real estate. It’s already a billion dollar industry and is expected to clear $2.5 billion by the end of 2015. It’s more than just developers pulling together a few resources to build something for profit. In 2014, the largest project that was crowdfunded was worth $25 million.
For the record, that’s nearly 2x more than Kickstarter’s top project, the Coolest Cooler, at just over $13 million.
What makes the story of real estate crowdfunding so remarkable is the fact that it is still an emerging entity. Although there are 80+ crowdfunding platforms that are currently operating online right now, there is still room to grow. With higher returns, lower risks, and more opportunities, this won’t be an investment alternative.
This will be a primary investment.
Could Real Estate Crowdfunding Hit $1 Trillion Per Year?
There are two components of the real estate crowdfunding niche that haven’t even hit the industry yet. The first is the non-accredited backer, who under Title III of the JOBS Act will be able to make limited investments into projects that would normally only allow accredited backers. The residential and mortgage markets are also up for grabs.
There is a precedent in the UK that can be used as a measuring tool. LendInvest participates in residential crowdfunding and they brought in $240 million in 2014. Why are backers flocking to crowdfunding in droves? Because investment activity with modern technology can move more swiftly than REITs [real estate investment trusts]. More people can get involved. More backers means lower overall risks over a long-term perspective.
This means the US market could be potentially worth $1 trillion when all real estate options become available. That’s an infusion into real assets and real investments can fuel some phenomenal economic growth. Lending institutions may be easing some mortgage rules, but many households can’t afford a home just yet. Crowdfunding makes that potentially possible.
Real estate crowdfunding is one of the places a backer needs to be now and into the future. Although there is always some risk to an investment, the benefits here are tremendous and easily make it a risk that is well worth taking.