What is real estate crowdfunding?
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Real Estate Crowdfunding allows you to invest small amounts of money money (for example 1000 euros) in a real estate project or a real estate portfolio via an real estate portfolio via an online platform. In return, you a proportional share in the property, the portfolio or in the underlying mortgage and the underlying mortgage and you receive payments in the form of quarterly or monthly quarterly or monthly dividends.
There are generally two types of investments in Real estate crowdfunding:
- Equity crowdfunding: dividends are generally made up of rental income rental income. Investors own a proportionate share of a property or portfolio and are paid or portfolio and are compensated on the rents and on the sale of the property property if applicable.
- Debt crowdfunding: Dividends consist of interest income earned on mortgage payments on the mortgage payments on a property or portfolio. There is no income when a property is sold. In addition, investors do not investors do not own a proportionate share of a property or portfolio. portfolio.
Your investment will generally be for a predetermined period of time and your principal will be your principal will be returned at the end. But this is not always the case and losses can occur. losses can occur.
Real estate crowdfunding is done online and provides a great way for an investor to take advantage of passive real estate investing. There are many platforms such as Fundrise, RealtyMogul or RealtyShares. They usually showcase their current projects and the amount of funding needed. Some Crowdfunding sites allow you to choose what you want to invest in and where you want to invest, while others diversify your investment across multiple projects, which can include commercial and residential real estate.
Who can invest in real estate crowdfunding in the USA?
In 2012, the concept of real estate crowdfunding gained momentum and the Jumpstart Our Business Startups (JOBS) Act was passed. This allowed real estate developers to solicit funds from wealthy and accredited wealthy and accredited individuals on Crowdfunding sites.
In 2016, Title III of the JOBS Act opened up the market further and allowed non-accredited investors to also invest in these equity Crowdfunding platforms. Because previously, investors had to be "accredited," meaning they had a net worth of at least $1 million or had earned at least $200,000 for at least two years.
How has this market developed in France?
Last year, real estate crowdfunding captured 40% of the sums collected by participatory financing platforms, according to a according to a study by KPMG. Thus, individuals have lent more than 100 million euros to real estate developers.
The reason for this success is due to the promise of a high return, sometimes close to 10% gross per year, and a relatively and a relatively low failure rate.
However, a few precautions are precautions are necessary before embarking on this type of investment investments:
- Choose your platform carefully: make sure that the platform is registered as a CIP (Conseillé en Investissement Participatif) or PSI (Prestataire de Services d'Investissement).
- Correctly inquire about the taxation: it depends on the nature of the investment, and a posted profitability will not correspond in fine to your net profitability. In the majority of the cases, one subscribes to bonds and one receives with the expiry, the capital increased by the interests.
- Be aware of the risks: Crowdfunding is an illiquid investment, the money invested is blocked for the duration of the operation of the operation and the loss can be total in case of default of the promoter.
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