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Crowdfunding refers to the practice of raising small amounts of money from a large number of investors by reaching out to them online, primarily via social media, to achieve a certain goal, such as building a startup or tech innovation, or for a charitable cause.

 
Real Estate Crowdfunding in Australia
 

There is no doubt that, in recent times, crowdfunding has become quite popular with businesses seeking funds to expand or innovate. From the Micro Drone to the world’s first wireless smart in-ear headphones, The Dash, several entrepreneurs have crowdfunded the journey of their products from idea to reality. In addition to helping businesses take-off, crowdfunding also provides regular individuals an opportunity to be a part of the businesses they believe in – letting them play venture capitalists in a way.

And now, crowdfunding is slowly inching into a space very close to Australians. Yes, we are talking about real estate. Crowdfunding is making it easier than ever before for Australians to set their foot in the property market by allowing them to make fractional property investments for as low as $1,000.


Real estate crowdfunding in Australia

Last year, a study published by the University of South Australia (UniSA) in partnership with DomaCom explored the potential of crowdfunding as an “alternative investment vehicle for entering Australia’s tenuous property market.”

The research established that while property crowdfunding is at a nascent stage in Australia, there is strong indication of growth as more people become aware of digitalised investment platforms. It also pointed out that Australians perceive property crowdfunding as a long-term investment strategy offering low to medium risks, yielding similar low to medium returns.

Demographically, 33 percent of the investors were aged between 55 and 64 while only 4 percent of the investors were under 35 years of age.


How does real estate crowdfunding work?

In principle, real estate crowdfunding works like any other crowdfunding project. Here, a large pool of investors put their money together to fund an investment property or a development project. Talking about returns, investors make money through the rent generated by the property or its sale. The money each investor makes is proportional to his or her investment in the property.

Besides, most real estate crowdfunding platforms also provide a secondary market to investors where they can sell their shares any time they like.

Benefits of real estate crowdfunding:

  • Low entry point – Investors can own a part of a property for as less as $1,000 with real estate crowdfunding
  • Portfolio diversification – Seasoned property investors can diversify their portfolio by purchasing small shares in numerous properties
  • Liquidity – Investors can sell their shares at any time to redeem their investment

A major drawback, however, is the fact that you only own shares in a property, and not the property itself, when you make a fractional investment.


Is real estate crowdfunding the right choice for me?

If you want to invest in a property but don’t have an adequate deposit saved up for a home loan or don’t want to take out a mortgage, fractional property investment or real estate crowdfunding could be a good choice for you. BRICKX and DomaCom are two popular real estate crowdfunding platforms in Australia to get you started.

Even if you prefer to own a property outright, you can diversify your investments by putting some of your money in crowdfunded real estate projects. Considering the higher rate of return, it can also be an effective way to save up a deposit for a future home loan.

Talking about home loans, if you want to buy a property the traditional way, start by comparing competitive home loan deals on HashChing, Australia’s first borrower-friendly online mortgage marketplace, here.

Since its inception in 2015, HashChing has settled home loans worth $880 million for over 40,000 borrowers. The company offers more choice and savings on home loans to its customers through its strong network of over 700 mortgage brokers in addition to stellar customer service facilitated by sophisticated technology.

Currently, HashChing is seeking funds to increase brand awareness, introduce new technology and expand the team. The company has joined hands with Equitise, a crowdfunding platform, to raise up to $5 million by the end of June via crowdfunding. According to the offer, anyone can make an investment in the company with a minimum amount of $250, worth 200 shares. As per legislation, the investment is capped at $10,000 per investor. The offer is open to public on the Equitise platform until 5pm (AEST) on 15 June 2018.

Read more about the offer here to partner with one of Australia’s fastest growing fintech companies that places its customers’ interests first.

Disclaimer: Like any investment, Crowd-Sourced Funding (CSF) is risky. Investors may lose their money and the business may not achieve its objectives. You should consider the CSF offer document and the general CSF risk warning contained in the offer document in deciding whether to apply under the offer.

 

By Vidhu Bajaj,
HashChing Content Writer

 

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