Property crowdfunding has caught up, and more people are now looking to invest in this lucrative platform.
Since the first platform started more platforms have been set up, but how do you choose the right platform?
Here is how to evaluate and make the best decision according to your budget and risk portfolio according the Shojin Property Partners.
When it comes to property crowdfunding the most important thing is the returns on offer. Returns received are based upon how well a property performs; it would be wise to research the location of the properties and how well rental yields perform in that area.
After such an analysis then the next question would be whether the yield been offered beat the averages for that area. If not then you need to analyze and make sure you are clear on the actual return on investment after all costs have been deducted.
2. Yield vs capital growth
Crowdfunding allows you to diversify your investment across different properties thus cushions you from significant losses. As an investor, although your reasons may be different, yield and capital growth are an essential part of your final decision.
To gain high returns and growth on capital you need to invest in properties producing healthy cash flow. This way you will not be under pressure to sell or liquidate you can wait it out and enjoy the returns.
3. Security and risk of investment
Security of your investment is critical and to ensure it’s safe you need to ask how your investment is protected in case something goes wrong, and how much equity is there.
When you invest on a platform check what security is in place to help you recover your capital investment in case something goes wrong?
Some types of investment to check out that is low risk include already valuable properties with a healthy cash flow.
If you decide to go big with your investment with long term, buy to let investment then ensure you are protected with either ownership of the property through a shareholding in an SPV or the charge is registered at the land registry.
4. Success record and transparency
Crowdfunding is a lucrative investment, and it’s becoming increasingly popular, at the same it’s important to look for one with a proven track record.
Find out who are the people running the platform and if they have a proven track record in property investment. If they have a proven record with their own property portfolio, this will grow your confidence in terms of protection of your investment as well as their ability to make the right decisions.
A platform with a history of successful investments and transparency can protect you from potential pitfalls.
In crowd funding liquidating your investment may take a while; thus if you need money in a short while then maybe it is not the right type of investment.
As an investor you will have little to no control over the sale of property; thus you need to understand how it works. For example, you can look for shorter-term projects between 6-12 months with defined exits.
In some companies, they will assist you to sell your shares but there are no guarantees, so check if that option is available.
Property crowdfunding works well as a long term investment and gets you more returns in terms of growing yields and capital growth.
6. Customer service
A supportive customer service that is responsive and looks after customer needs is an essential part of a crowdfunding platform.
When it comes to investing your money, you don’t want to be frustrated by inconsistent replies to queries or non-responsive customer service. To help you figure out whether it’s a good choice check for testimonials and reviews from other customers.
Positive feedback means they offer excellent service and lousy feedback, well you already know that’s not the place to invest your money.
Property crowdfunding is a lucrative investment, and with the right platform, the returns will be worth it.
Finding the platform that works for you in terms of the length of investment will help you be a better asset manager. Besides, you get to expand your property portfolio and pick what works for you.
Another thing you should consider as in a platform is third party engagement; they should be able to conduct due diligence on all properties listed to avoid risking your investment.
Roll up your sleaves and research the platforms you might be interested in and simply check off the above factors before considering your investment. Invest in companies with a good property investment track record of success and with lucrative properties to invest on.
Consult with crowdfunding companies that already have a good property portfolio for advice and tips on investing.
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