Since the time of the introduction of the JOBS act, Crowd Funding has become a new and easy way to raise capital. In fact, over the last year alone, over $5 billion worth of money was raised through crowd funding. The process is simple and has allowed a lot of people to invest money on tech, start ups and even movies. All you have to do is get people to look at a short proposition and if they like it, they can either invest or contribute small sums of money towards the project. Real estate is not too far behind and many people are looking for investments in real estate crowd funding. Crowd funding, however is a little different in this field. Here are a few basic things you should know about real estate crowd funding.
Crowd Funding – Debt and equity
If you are looking to raise money or are looking to invest money in a real estate Crowd Funding, there are only two ways to do it; either through debt or equity. The simplest way to differentiate them is debt has to be repaid as a loan, Equity gives everyone invested in the real estate ownership rights and will be given a cut in the profits that are made. Both cases have the investors being repaid in a timely manner, but only those with equity interests can reap off the value appreciation that a piece real estate is likely to have.
Those who invest will not have any real ownership of the land, but will be part of a limited liability company that is formed as a result of the agreement and will not have any real property, but will own personal property. Crowd Funding in real estate is still a fresh concept so over the years, it will develop and evolve, the market now is also more focused in favor of real estate, so positive changes can be expected sooner that later.