Real Estate Investor Magazine South Africa November 2015 | Page 16

COVER STORY Real Estate Crowdfunding A Growing Option for Investors BY KATHERINE JONES T raditionally landlords work as solo investors, managing portfolios in a well honed and time honored way, yet a small but growing section of the market have slowly started to disrupt the established buy-to-let model. Crowdfunding is a method of raising capital through the collective effort of friends, family, customers, and individual investors by tapping into the collective efforts of a large pool of individuals—primarily online via social media and crowdfunding platforms—and leverages their networks for greater reach and exposure. Crowdfunding platforms give the entrepreneur a single platform to build, showcase, and share the pitch with potential investors. With crowdfunding, it’s much easier for you to get your opportunity in front of more interested parties and give them more ways to help grow your business, from investing thousands in exchange for equity to contributing $20 in exchange for a first-run product or other reward. Crowdfunded buy-to-let has ignited interest among investors who want a slice of the property market but lack the capital to create their own portfolio. The 14 NOVEMBER 2015 SA Real Estate Investor rise of crowdfunding has been accelerated by people’s distaste with the banks. By taking power away from the institutions and giving it back to the people there becomes a democratising on the way people can invest. Property as an investment is a tangible asset that everyone understands and can put a value to, and as such lends itself well to the crowfunding model. Crowdfunding opens up the market to everyone so they can invest in property for a much-reduced commitment. It allows people to diversify across asset types and geographic areas, helping to spread risk and, hopefully, increase returns. There are also the benefits in allowing low-level investment and providing the opportunity to spread investment risk. These however lead to potential problems getting in and out of an investment. Real estate has long been a favored investment class due to its hands on quality. And those who have raised funds for a venture or invested in somebody else’s, will know that developing a single property can be a tough, high-risk affair. Brokers tend to keep their best deals off-market and close to the vest, ensuring insiders www.reimag.co.za