Jul 2020

10 things about Property Crowdfunding

If you are a long term investor or are just getting started in property investment, you have most likely heard of property crowdfunding. Giving yourself the opportunity to build a diverse portfolio of properties with a much lower outlay (oh, and a lot less work!) is becoming the investor’s model of choice.

The buy-to-rent market seems to be on the rise all around the world. However, becoming the landlord of a buy-to-rent property comes with several challenges that you might not be interested in tackling. Dealing with tenants, maintaining the property, dealing with management company fees and then there is all the hassle and costs of purchasing the property

This probably the main reason that aspiring investors are turning to crowdfunding and P2P lending as a way to get started the property ladder. You can create a diversified portfolio and cash in on potentially lucrative returns for less than the cost of investing in whole properties.

If crowdfunding is new to you, you probably have some questions. This is where Japan Property Investments can help. Although our company is based in Japan we are always around to answer your questions about property crowdfunding. To get your started we have outlined 10 key facts about property crowdfunding.

  1. In 2015, Real Estate and Housing was the leading sector in the alternative finance market.
  1. Equity and debt-based funding for Real Estate Alternative Finance amounted to nearly $850 million in 2015. That is much more than any other industry.
  1. Equity crowdfunding in property investment means that pooled investment from a number of individuals comes together to fund the purchase of a property. A management company such as JPI then purchases the property, once the full amount has been raised, and each of those who have invested receives a proportion of rental income corresponding to the value of their investment.
  1. Over 600 developments in both commercial and residential property were financed through P2P real estate lending last year.
  1. At present, it’s not possible to use P2P real estate lending to finance your own personal residential mortgage. 
  1. Japan Property Investments was formed in 2016 and is one of the first property crowdfunding investment company in the Japan. 
  1. Due to the nature of Property crowdfunding purchases, returns from these investments tend to be more consistent than other investment vehicles.
  1. Many Governments are behind the Real Estate Alternative Finance sector. Tax incentives are offered by many Governments to help the industry to grow.
  1. Whilst there is often a lack of support for investors in the case of a property crowdfunding platform going bust (this form of investment is not covered by the Government agencies) however, at Japan Property Investments you would still continue to own your portion of the property and would get together with the other investors to decide what to do.
  1. Also, if you want to exit from your investment term early, Japan Property Investment will help you find a buyer for your shares (in which case, you’ll get back what you invested, plus your dividend payment), or you are free to find your own buyer (and make a private arrangement regarding the financials).

These are some of the key aspects of property crowdfunding, an alternative finance market for Real Estate. They should give you some idea of what the sector looks like, and help you decide whether this form of investment is right for you.

Of course, as with any investment, you’ll have to take a good look at your risk tolerance, as there are risks involved.