You’ve probably considered taking part in Australia’s property investment boom. That’s a smart decision, and by investing in property now, you can build your wealth over the years by simply holding onto the piece of land.
Buying property to rent is also incredibly popular, and is a passive income stream that people have used since the beginning of property ownership to get rich. There are a few drawbacks with this model, however. You have to deal with unruly tenants, pay for upgrades to the home, and lose money if a renter doesn’t pay rent.
There’s a better option, and once again, it leverages the power of a group. Similar to the benefits of using a Self-Managed Super Fun, property crowdfunding takes the buying power of a group and splits the rewards among the members.
Property Crowdfunding Explained
You’ve probably seen crowdfunding change the way that companies raise capital. On popular platforms like Kickstarter and Indiegogo, users can invest a small amount in a company and receive perks. This same model is shifting over to the property market in Australia.
Here’s how it works: on a crowdfunding platform, users can invest whatever amount they feel comfortable into a property. Depending on the share they have of the total property value, they’ll earn revenue from the rent from the tenant, relative to their investment. Also, if the property value rises, investors in the pool will also see the value of their contribution rise as well. It’s a revolutionary way to invest in property, and it’s starting to take the world by storm.
Benefits of Property Crowdfunding
The most significant benefit of property crowdfunding is in the shared responsibility. Because you’re only buying a portion of the property, it’s not on you alone to maintain the property, rent it out, or take the hit should a renter not pay. Instead, all of these risks are spread out amongst the dozens, hundreds, or thousands of investors.
Second, investing in crowdfunding campaigns requires little upfront capital. You don’t need to get a loan to own a share in a crowdfunded property yet you can still enjoy the benefits of the long-term growth. With that in mind, the more that you initially put in, the more your investment will grow as the value changes.
Potential Drawbacks of Property Crowdfunding
If you want to play an active role in the management of the property, property crowdfunding might not be for you. You are essentially a quiet partner with dozens of other owners, and you all must come to an agreement before changes are made. Some might prefer this hands-off approach, but others might want to make the decisions.
Also, crowdfunded investments are less liquid than other property investments. Should the market take a rapid shift, it is challenging to get rid of your shares in the property quickly.
Learn More About Property Crowdfunding
There’s still much more to be said about property crowdfunding in Australia. If you want to learn more, schedule an appointment with Adpen today.
