When you think about real estate investing, the first thing that probably comes to mind is buying a house. Of course, real estate investors have many other options when it comes to choosing investments in the real estate sector.
Real estate has become a popular investment vehicle over the past years. This is merely because of the advantages investing in the real estate sector brings. One of these benefits is the hedge against future inflation. As prices rise, so does the cash flow you get from the property. Furthermore, investing in real estate helps to diversify your portfolio and therefore reduce risks. In this article, we will discuss a few options for real estate investments.
Investing in real estate is not just ‘buying a house and renting it out’
One of the most known types of investing in real estate is investing in rental properties. When doing so, you become a landlord and therefore become responsible for paying the mortgage and maintaining the property. Unless you hire a property manager, being a landlord is a hands-on investment. Depending on the situation, taking care of the property and the tenants can be a 24/7 job, which is not always pleasant.
One of the ways landlords make money is by collecting rent. A vast monthly income is therefore generated. Another way for a landlord to make money is through appreciation. If your property rises in value, it may be possible to sell it at a profit.
Real estate flippers, as they are called, are an entirely different breed from landlords. Flippers are investors who buy properties intending to hold them for a short period. The property is in their possession for about three to four months and is quickly sold for a profit.
There are two primary approaches to flipping a property. The first approach is buying a property and renovating this property to increase its value. Ideally, the flipper completes the renovation work quickly and then sells it at a price that exceeds the total investment, including the renovation costs. The second approach is to hold the property and resell it. With this approach, the flipper buys a house in a rapidly rising market, holds it for a few months, and sells the property with a profit.
Investing in real estate through a crowdfunding platform is a relatively new phenomenon. Project developers apply for a loan to renovate or build a property, and investors fill up this loan through the use of crowdfunding. Investors put a certain amount of money into a real estate project and receive a specific percentage over their investment. Therefore, it is also possible to invest in multiple projects and thus diversify your portfolio.
When investing through a real estate crowdfunding platform, investors are provided with information and risk analysis regarding the project. The platform makes sure that both the project developer and the property are being checked on validity.
Real estate mutual funds primarily invest in real estate investment trusts and real estate operating companies. The real estate funds provide the ability to gain diversified exposure within real estate with a relatively small amount of capital. Investors are provided with a broad asset selection and can maximize returns as multiple investors can invest in a group of real estate funds.
Another advantage for investors when investing in real estate through a fund is the analytical and research provided by the fund. Information such as details on the required assets or the management’s perspective on the viability and performance of real estate investments is provided to investors.
Max Crowdfund is under development since 2018 by Max Property Group. The platform is a fintech resource that streamlines the investment process through automation and connects property investors with project developers. The platform uses blockchain technology to ensure transparency by recording all transactions performed by users logged into the system.
Max Crowdfund became the first regulated blockchain-powered real estate crowdfunding platform in the world. Max Crowdfund is currently operational in four countries: the Netherlands, Germany, the United Kingdom and New Zealand. The platform has raised a total of €2.776.600 with an average return of 7,95%. This is since being allowed to list third party loans in October 2020. Platform users can invest in real estate from as little as €100 or NZ$500. This is in line with the company’s mission, “making real estate investment accessible to everyone”. Developers can access alternative finance from registered platform users.
The expertise of the group of real estate professionals behind the platform is used during the Due Diligence process, a careful process to determine, among other things, the feasibility of the project. Thanks to this process and our knowledge, Max Crowdfund can always offer investments with the lowest possible risk.
Written by: Donna de Vries & Julia van der Kooij