The Ultimate Guide to Crowdfunding Real Estate Development
Do you know that 36% of Americans are unfamiliar with crowdfunding?
That means that as popular as it is, crowdfunding is still an untapped industry. By combining something new such as crowdfunding with real estate, a billion-dollar industry, you get an innovative approach used by few.
It is predicted that the real estate market will hit $3,717 trillion in 2025 with an average annual growth rate of 8%.
Despite the pandemic and the resulting economic crisis, in 2021, the industry has withstood and shown growth of about 3,2%.
Realizing the real estate market is a reliable structure, tested by time and circumstances, many investors continue to invest in the industry and receive passive income. Moreover, crowdfunding platforms make investments available to many.
Below, we’re describing the steps for launching the real estate crowdfunding business.
What is Real Estate Crowdfunding?
Real estate crowdfunding is a modern way of financing a real estate project by attracting several investors.
This model had a massive boost only in 2008 after the extensive economic crisis in the United States. Since small and medium-sized businesses have always been the engine of trade, the crowdfunding system made it possible to revive business and restore the country’s economy.
The restoration process was very successful. And now people worldwide can use crowdfunding for their welfare improvement.
Why is real estate crowdfunding software so effective?
First, it allows companies to raise funds for their projects more efficiently by attracting different investors.
Secondly, real estate investors can immediately become shareholders without spending extra money and time searching for profitable investments on their own.
Before searching how to start a real estate crowdfunding business, let’s look at the processes taking place in the market in 2021.
Real Estate Crowdfunding Market
According to surveys, about 40% of people in Europe and 26% in the United States want to invest in real estate businesses. That’s why crowdfunding real estate development is one of the best ways to achieve their goals.
In 2020-2021 there is extensive growth of crowdfunding platforms worldwide. Now we have almost 7 million companies, and their number significantly grows.
Due to the official statements, 80% of crowdfunding businesses doubled their funding goals and received an extensive profit.
There are three leaders in the real estate crowdfunding market: The US with 42%, the UK with 11%, and Canada with 5%.
The property market will grow to $2774.45 billion in 2021 with an annual growth rate of 3.2%.
How to Build a Real Estate Crowdfunding Platform?
To succeed in any business, an entrepreneur needs to build the right step-by-step strategy for implementation.
Otherwise, chaotic steps in project implementation will lead the business to go in the wrong direction. There is a big chance of feeling particular distress and financial loss.
Conducting Market Research
Marketing research is a part of the first project phase – the Discovery Stage.
Many business owners sometimes underestimate this stage since it is the base on which the project will later stand.
At this stage, it’s vital to study the idea prospects, the tech stack suitable for development, explore competitors, and the core functionality of the platform.
An important point when you are implementing your real estate crowdfunding software is the research of competitors. Pay attention to the following things when researching your competitors:
- What are their pain points and strengths?
- What techniques do they use to attract customers, what do they lack?
- How can you improve such points in your platform?
Of course, there are several real estate crowdfunding platforms on the market such as Fundrise and RealtyMogul. To get to the top or even become a leading project, you need to find your specific value for your target audience. A unique value for the client is a mandatory component of any business. Research the market, competitors, target audience and find something that wasn’t introduced to the audience before. The key point is to bring value to your product.
Setting Business and Technical Requirements
There are 2 main criteria in creating a real estate crowdfunding platform with maximum benefits. You need to set up your business and technical requirements.
Let’s start with the business one.
You need some unique features of your real estate crowdfunding platform.
For example, Fundrise offers the most diverse selection of investment portfolios. The selections available from other crowdfunded real estate investing platforms are often quite limited. Consider buying a cheaper property and give access to a more extensive cluster of investors. Include a calculator of potential investments in your project, create a quarterly analytical report on market trends, and so on.
When you decide on your business strategy, it’s time to think over tech requirements. To create a working crowdfunding project, you need to develop a custom platform from scratch or use a ready-made standard solution.
If you have a startup project with a limited budget, you can contact an outsourcing company that can choose the best technical stack and top developers. It’s a great idea to look for a suitable outsourcing partner on proven platforms like Clutch and GoodFirms.
Implementing an MVP
We believe that the implementation of an MVP is an excellent idea for creating a real estate crowdfunding platform.
An MVP is a minimum viable product that allows launching the business with the basic functionality sufficient to work and bring value to users. Business owners save time and money since it’s faster to create and it’s cheaper than a fully-featured project.
Getting Customer Feedback
When your MVP product is complete, your platform is going to the market. Here is where the MVP effectiveness will show. You will be able to get quick feedback from your customers, which is valuable. They will help you improve your product, and you can refine it to a positive user experience.
The modern world provides extensive opportunities to try the best job ever which is called passive income.
In 2021, everyone can make investments in hard capital – real estate. If you are looking to create a real estate crowdfunding platform, the talking has been done – now is the time for action.
To sum up all above, let’s go through the main points not be missed:
- Start with market research
- Create a unique value for your platform
- Find a trusted outsourcing partner
- Develop an MVP product
- Get customers feedback as soon as it starts
- Upgrade the platform after customers’ feedback
Remember, there is fierce competition in the market, and the strongest survives. It’s quite challenging, but the winner takes it all. It means your real estate platform can become the project that can make a difference. It remains only to start.