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Equity Crowdfunding Real Estate: An Effective Way to Locate Investments

By Guest Author | April 8, 2016

Residential and commercial property investors are realizing the importance of equity crowdfunding. It’s an easy and effective tool for locating potential investments. They can also offer access to a variety of other deals and directly connect them with other developers. Before you commit to your next real estate investment project, you’ll want to read over some important factors to alleviate any risk.


Tenant and Maintenance Risks

Thanks to the latest technology advances, real estate investment has gotten a boost. It’s also helped increase the sales of dwellings that may not have otherwise moved. When it comes to assessing an investment, you want to take into account the sustainable return. A vacant property may not be able to generate revenue. Quality tenants and maintaining a higher occupancy rate are major concerns for real estate investors. Quality tenants will be able to pay their rent even in times of a downturn economy. They probably won’t cause damage to the rental property. Because of their good credit rating, they may be able to commit to a long-term lease.

Location, Location, Location

Entrepreneurs looking to finance their startup businesses often base their hopes on equity crowdfunding. Successes such as AubreyChernick are inspirational to the following generation. He got where he is today by building Candle in 1976. Chernick is excited about the future of new business. Instead of funding a company, he sees this as the masses being able to participate and make the dreams of other hopeful entrepreneurs into a reality. You can get a better handle on a new investment by assessing the location. If you’re looking for real estate development, you have to remember that the surrounding area can impact the cost of your dwelling. Abandoned areas that are run down could invite crime. Other considerations include future zone planning or development. Centralized amenities such as public transportation, airports, hospitals and schools can add value. Accessibility is another positive factor. Being centrally located is considered one of the finest attributes when considering a property’s location.

Loan-to-Cost Ratio

When you want to compare the loan money used in financing a particular real estate development project, loan-to-cost ratio can be helpful. If a project is estimated near $1million, and they need $700,000, you would figure the ratio at 70 percent. This could be construed as a risky investment since the borrower is at the higher range of a loan default. This is especially true in an economy that is problematic. As the ratio gets higher, you’ll find the risk to skyrocket with it. Before diving into any investment, you need to assess the risk and recognize it for what it’s worth. If you don’t mind the level of risk, you could experience a much higher return for your investment. Making an educated decision based on the necessary facts can help prevent any financial surprises occurring down the road.

Track Record for the Issuer

Crowdfunding for real estate purposes is booming. Matching investment opportunities with investors can be especially compelling. Since it’s a trillion dollar global industry, crowdfunding can help promote growth. Before committing to a particular investment, you want to do your research first. Smaller scale projects are far more risky than a development deal that exceeds $200 million. Individuals who are just starting out in the real estate market are also considered a risk. It can help to learn the track record of the issuer. Important considerations include if a particular property is under development. This allows you the chance to search past projects and risks associated with that particular investment.

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