How Crowdfunding is Changing Real Estate Investing

Crowdfundingis a word you're hearing everywhere these days, even in real estate investing circles, where the concept has been very well received.

While it's still a relatively new concept, it is quickly reshaping the way people find and invest in property. It is beneficial for both investors and real estate companies alike.

Old School Real Estate Investing

Beforecrowdfundingcame along, when it came to investing it was more about who you knew that what you knew. Because of the Securities Act of 1933, private securities investments could not be marketed publicly. Private deals were listed to investors who knew about them from personal contacts.

Once those investors found private investments, they would of course have to come up with the funding. The buy-in requirements for these types of exclusive properties were very high, which shut average investors out.

This is wherecrowdfundingcomes in.

Crowdfunding in real estate is a relatively new concept, but it's catching on quickly. The Jumpstart Our Business Startups Act (or JOBS Act) of 2012 removed a number of barriers that had previously existed for investors. For the first time in almost 80 years, small businesses and startups could raise capital and advertise in new, public ways. This concept then made its way over to the real estate industry, and crowdfunding took off. In 2015 alone, crowdfunding for real estate brought in hundreds of millions of dollars.

With crowdfunding, investors do not have to rely on connections to find them real estate deals (and they don't have to come up with huge buy-ins anymore). Now, real estate investors can access deals from their laptops. Crowdfunding makes it possible to start investing with as little as a thousand dollars. The deals are pre-vetted, making them safe and open to everyone.