Technology has Changed the Way People Invest in Real Estate

Real estate investment deal leaves people with mixed feelings of fear and greed. The significant amount of investment of capital means that people tend to be fearful, especially regarding the location of the property, issues involving tenants and the management of the property and worries about liquidity. However, this apprehension should be set off by the knowledge that real estate can offer higher returns in low interest rate environments such as the prevailing environment now, offers diversification from traditional investments such as stocks and bonds and as the ability to generate long-term capital appreciation. More recently, however, technology has remove barriers about how and where people make real estate investments and the old saying that real estate investment is a local business does not hold true any longer.

With the arrival of real estate investment innovations such as crowdfunding, investors of every age and income level has an opportunity to invest in real estate which was a privilege earlier reserved for the wealthy and the well-connected. They can now buy a stake in large properties within investment of as little as $ 5000. Crowdfunding activity is supported by more than 200 platforms with a combined value of billions of dollars worldwide. However, crowdfunding has its downside because lots of investors could have investments in the same property and each investor has a limited amount of control and flexibility over the capital investment.

This model of investing has made a sweeping and substantial change in long-term real estate investing. There is no real way of finding out whether the interests of the investors in the crowdfunding exercise are the same as the investors in the majority ownership. There are other problems such as potentially tax liabilities based on accrued income without receiving any cash returns, a thin secondary market for liquidity proposals and dealing with demands for fresh capital if there is a cash shortfall. In short, there are additional risk factors which to not appear in the traditional form of real estate investment. Because of the technological basis of the real estate crowdfunding platform, some of the shortcomings have been addressed with a more integrated model of funding, providing additional protection for investors and helping them to grow wealthier by combining cash flow and capital appreciation.

The fundamental reason for existence for the next generation of crowdfunding platforms is that they support a model of real estate ownership in which land is the important asset and not a certificate of fractional ownership. Other benefits include the generation of significant tax breaks related to homeownership and investment guidance from the investment managers throughout the period of investment. Investors have given this new generation of companies thumbs up over the last few years and this in turn has prompted generous funding from venture capitalists during the start-up stages of the new platforms.

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