Real estate investments have traditionally been backed by high net-worth individuals and institutions such as Blackrock, Oaktree, Starwood Capital Group, and Brookfield Asset Management. While individual investors can participate in these ventures, albeit with burdensome processes and minimum investment requirements that may not be affordable.
An easier alternative to traditional real estate investing has emerged - Crowdfunding. It is a method of raising money for businesses to offer more affordable investment options to a wide range of investors utilizing online crowdfunding platforms such as EquityDoor. It allows startups and small businesses to access sufficient funding without exhausting much time, effort, or resources. It helped many real estate companies to raise funds for their projects.
Globally, crowdfunding has grown into a multi-billion dollar industry that helps small businesses, start-ups, and project-for-a-cause fundraising drives to obtain the funding they need.
In 2019, crowdfunding moved $84B USD into various businesses that helped in funding new business ventures, research and development, and other activities. Last year’s performance is expected to have reached $114B.
While real estate accounts for a relatively small part of the crowdfunding market, its performance during the covid-19 pandemic was robust at an astonishing 33.4% CAGR (2020-2028). The global real estate crowdfunding market reached $120.7M for 2019 and is expected to up to $851.3M in 2028. This is mainly due to the growing industrialization that pushes commercial real estate developments, as well as more favorable regulations for real estate crowdfunding, and perhaps a more open mindset among individual investors seeking alternative ways to generate good returns.
What to Expect in Real Estate Crowdfunding Market
In comparison to the crowdfunding market of earlier years, the market for individual crowdfunding investors in real estate has flourished since the height of the covid-19 pandemic. In 2020, more than 60,000 individual investors participated in crowdfunding and independent sponsorships, generating over $7.035M (median) for each offering.
Forbes Magazine forecasts that in 2025 the global crowdfunding market will grow up to $200B with a Compound Annual Growth Rate (CAGR) of more than 15%. At that rate and based on the prevailing market and regulatory conditions, the crowdfunding industry may double its size.
Based on the market’s performance, real estate crowdfunding may continue to be bullish as it proves to be resilient despite some unfavorable market conditions. And, with about 36% of Americans not familiar with crowdfunding, there are still so much more opportunities in terms of the conversion rate of prospective investors to actively participating investors.
Research shows that 17% of crowdfunding activities are done with mobile devices. This means that mobile apps and other functionalities may become useful tools for crowdfunding in gathering useful market data.
As global economies improve, businesses and social activities gradually restart, fueling the need for more funding options, such as online crowdfunding to help grow.