The concept of crowd-funding has exploded in popularity in recent years, allowing money to be raised for everything from small businesses to charities to potato salad. Crowd-funding creates the possibility to raise funds through the small contributions of multiple people.
Although real estate is a relatively new use of crowd-funding, the potential is massive.
Crowd-funded real estate investing has been a major game changer and it has allowed more people to invest in real estate than ever before.
It opens the door for investors in all layers of society and creates the potential for so many new opportunities.
According to this article in Forbes, real estate crowd-funding is a dynamic and thriving industry. It grew to an estimated $3.5 billion in 2016 and is anticipated to be valued at more than $300 billion by 2025.
What are the benefits of crowd-funding in real estate?
It lowers the bar and makes real estate deals more accessible to the average investor.
Investors have more opportunity to diversify their investments and purchase from different asset classes.
Unlike stocks and bonds, the real estate market isn’t prone to wild fluctuations and real estate can offer better and more stable long term returns.
There are more possibilities for short-term investments, rather than just the traditional longer-term periods available.
Members of a crowd-funding project enjoy transparency. They know exactly where their funds are going to and how they are being used.
Real estate crowd-funding puts a lot of control in the hands of the investor, allowing them to invest exactly as much (or as little) as they choose.
Real estate crowd-funding is booming and there are currently hundreds of platforms out there - with more being added every week. Of course, not every platform can go the difference and scale into a sustainable business. Crowd-funding platforms are only as good as how you use them, so you also need a solid business strategy in order to achieve success with this type of investment.
Let’s look a little deeper at the different types of real estate investment crowd-funding, as well as what makes Partbnb unique.
Equity Based Vs Lending Based Crowd-funding
There are two different types of real estate crowd-funding, depending on whether the crowd-funding is based on debt or equity.
When it comes to equity based crowd-funding in real estate, the investor purchases part-ownership of the property. In other words, as an investor you become a partial shareholder in the property. When you invest in real estate in this way, you’ll enjoy a return based on any rental income of the property, as well as any capital gains relevant to your ownership percentage when the real estate is sold.
On the other hand, with lending based real estate crowd-funding you are essentially investing in debt. So, you’ll essentially be lending money to the property owner and you’ll receive a fixed return based on the interest rate as they pay back the loan. Lending is generally safer than equity and provides a more stable and predictable return. However, along with this lower risk it also brings lower returns.
In contrast, equity based real estate crowd-funding brings a potential for higher returns. You have the chance of enjoying a higher rental income and a larger increase in the value of the property. So, for these reasons many investors find equity based real estate crowd-funding to be more appealing.
Partial Ownership
Partial ownership of real estate property is a great example of equity-based real estate crowd-funding.
It’s when multiple people invest their money into one property. The property is divided into several small portions and anyone is allowed to purchase as many or as few portions as they desire. Everyone owns the property - partially.
This type of real estate investing has an advantage, as it allows people who don’t have a large sum of money to still invest in property. Even if you only have a small amount of capital, you’ll have more investment opportunities. You’ll be able to diversify your investment as much as possible - spreading your risk across multiple properties. You can even start with a small portion of the property and buy more in the future.
By inviting many people to each invest a small amount, each person has the chance to own part of a property much larger and more valuable than anything they could purchase on their own. This is one of the main aspects that makes partial ownership desirable to so many different types of investors.
What Makes Partbnb Different?
Partbnb is a platform offering investment properties on a partial ownership basis. Each property is divided into 10,000 parts, starting at $34 each. Investors can buy as many parts as they want and after 6 months of ownership, they can purchase and trade them on the platform.
So, what’s the unique advantage here? What makes Partbnb unique from other crowdfunding or partial ownership options for real estate investment?
First of all, one of the major distinctions when it comes to Partbnb is that it features vacation rental properties on gorgeous Caribbean islands. These locations are leading destinations for tourists from the USA and around the world who are looking for a tropical getaway.
Why does this make a difference?
Since the properties offered by Partbnb are located in highly desirable travel locations, they will be highly successful as short-term vacation rentals. As an investor, you will enjoy a steady monthly rental income, paid directly into your digital wallet.
However, unlike owning a full vacation rental property of your own, there’s no need to worry about marketing the rental, managing the property, arranging cleaning in-between guests and all of these aspects. Everything is handled by a capable local vacation rental management company. You’ll enjoy the benefits of the monthly rental income, without any of the hassle.
A huge perk of this is that short term rentals will achieve higher yields than longer term rentals. Plus, owners will be able to stay at their vacation rental properties for a discounted rate. (Oh, and did we mention that the Partbnb platform is incredibly simple and user-friendly?)
To find out more about how Partbnb works, click here.