For a long time, for most of us, investing was something that other people did. Other people with heaps of money, that is. Investors were seen as men in suits, starting off rich and getting richer in mysterious ways. Thankfully, that stereotype is now a thing of the past. Millennial investors belong to every demographic. Many of them weren’t born rich and never even considered getting a degree in economics. How have such investors become successful? In a word: crowdfunding.
What is crowdfunding and why is it so exciting?
Crowdfunding is what it sounds like: raising large sums of money by asking lots of people to each contribute a small amount. It’s not a new concept: artists have been asking fans to fund their new projects for centuries. Since the early 00s and the arrival of crowdfunding sites like Kickstarter and Indiegogo, crowdfunding has become one of the dominant forms of online investment. In the last few years, it has become an increasingly popular way to invest in property.
Crowdfunding is exciting for potential investors because it’s accessible, it’s convenient and it’s versatile. Let’s take a closer look at how that holds true in action.
Crowdfunding is accessible.
Traditional investment relies on having large amounts of ready cash to spare. Let’s say you wanted to invest in property. To go about it in the old-school way, you would need to have enough money to buy a property outright, or at least to pay for a deposit if applying for a mortgage. You’d also need to cover the myriad extra fees that come with property ownership, like stamp duty to name just one. Crowdfunding property investment is completely different. You only need a relatively small amount of spare cash to get started.
Crowdfunding is convenient.
Crowdfunding is an easy way to get started without being an expert on where and how to invest money. Crowdfunding projects are presented online as fully-featured packages. You can avoid all the stress and confusion of hunting out projects, deciding if they’re worthwhile and negotiating deals. Instead, you can see all the information you need on one page and invest in less time than it takes to make a cuppa. When it comes to property crowdfunding, any company which offers you this opportunity will be heavily regulated by the FCA (Financial Conduct Authority). That means you can rest assured that the company you’re investing with is offering you secure, reliable investment opportunities.
Crowdfunding is versatile.
Since you only need to invest a small amount per project, crowdfunding allows you to develop a diverse portfolio with ease. You can choose from an endless variety of projects to invest in: any good crowdfunding platform will provide you with a diverse array of options which you can manage from a single account. Even within the property market, there are plenty of different options for crowdfunding. You can choose to invest in individual buy-to-let properties, corporate bonds or even development projects.
Types of crowdfunding: debt vs equity
Different options for crowdfunding investment can be broadly divided into two categories: Debt Crowdfunding and Equity Crowdfunding. In a nutshell, Debt Crowdfunding means lending money to a project, whilst Equity Crowdfunding means buying shares in a project. Debt Crowdfunding is lower-risk because the money you invest is lent out at a fixed rate, for a fixed term. This also means that returns are relatively lower. Equity Crowdfunding is higher-risk because you’re investing in new projects or companies which are as-yet unproven and therefore may fail. However, the potential returns are also higher, because you will get a share of the profits if a project meets expectations. Both Debt and Equity Crowdfunding options are available for property investors to choose from. A diverse investment portfolio would ideally include both types of project.
Crowdfunding and the UK property market
According to the latest English Housing Survey, the percentage of 25-34 year old owner-occupiers in England dropped from 57% in 2006-7 to 37% in 2016-17. In the same time period, the number of private renters in this age range increased from 27% to 46%. Meanwhile, according to the Office for National Statistics. the average cost of a property in the UK has risen to almost 8 times higher than the average annual income. The picture is even bleaker when you consider London property investment. The stats clearly indicate that investing in property via traditional means is less affordable than ever, and this trend is only set to worsen. Crowdfunding property investment allows young and new investors to get a foot in the door of the property market. For many, it’s the best way to invest money because it allows you to see returns on small sums, making it easier for you to save up and eventually have the means to buy property outright, should you so wish.
Property investments with Shojin
Thanks to crowdfunding, more people than ever are now able to become investors, even when traditional finance options are letting them down. Are you ready to become a property investor? Shojin is the perfect place to start.
Here at Shojin, you can invest as little as £5k to begin with, which gains you access to a variety of property investments, including both Debt and Equity Crowdfunding projects. Whether your appetite for risk is low or high, we always have something to offer. We can help you build a diverse portfolio without expert knowledge of the property market, and without a heavy commitment of time or energy. In fact, you can get started in just a couple of minutes. We also take great care to ensure we’re offering you the best properties to invest in, by committing to a level of due-diligence which goes above and beyond our competitors.