Real Estate Crowdfunding vs. Shares

Real Estate Crowdfunding vs. Shares

Nowadays, people are increasingly looking for the best way to invest their money. One of the reasons for this is the fact that if you leave your savings in a savings account, you will receive virtually no interest on that money. This article will compare two ways to put your money to work: investing in real estate crowdfunding and investing in stocks. What possibilities do these two ways offer, what are the risks, and how does the average return of one compare to that of the other?

What is real estate crowdfunding?

Real estate crowdfunding uses the well-known collection system to provide loan applicants who need a certain amount of money to realize a real estate project with the necessary capital. This allows several investors to invest money in the same project simultaneously, which lowers the threshold for an investor to invest in real estate. Compared to traditional ways of investing in real estate, which often require a lot of capital and experience, real estate crowdfunding makes it possible to start investing with a much lower amount, from €100. It has also made it easier for an investor to find a suitable project; therefore, less experience is required to become a real estate investor. Partly because of these kinds of factors, we have seen significant growth in the popularity of real estate crowdfunding in recent years. Moreover, more and more attention is being paid to it, which means that this growth will only increase. The more popular it gets, the more interest it will generate. According to a survey of the real estate crowdfunding market from 2018 to forecasts for 2027, the European market will grow from €2.5 billion in 2020 to €4.1 billion in 2027. This indicates a growth of more than 65%. This is only the European part of the global market. For the time being, Europe is number two in the global contribution to growth. North America is the most significant contributor to the real estate crowdfunding market.

Real estate crowdfunding compared to investing in shares

One of the crucial factors in determining whether an investment opportunity is interesting or not is the return that the investor can expect. This means: how much money can an investor receive for the money invested? This can differ per case, which is why we often speak of an average return from a particular investing method. More and more people talk about stocks, which is also confirmed by the statistics. According to Statistics Netherlands, 1.2 million of the 7.7 million households in the Netherlands own shares. What are the results if you compare investing in stocks with investing in real estate crowdfunding projects?

When we talk about the average return of both options, we see that an average return of 6 to 7% can be expected when investing in shares, while the average return for real estate crowdfunding is around 9 to 10%. We can link the risk of both ways of investing with the nature of the type of investment. When investing in stocks, the value of the money invested can fluctuate considerably because traders constantly buy and sell. This, therefore, influences supply and demand. On the one hand, this is advantageous, as an investor then has the option to withdraw the money at any time. On the other hand, this means that the value can fall quickly, and an investor thus makes a loss on the investment. To keep this risk as small as possible, much knowledge and experience are required. This makes it more difficult for novice investors to get in. When investing in real estate crowdfunding projects, an interest rate is agreed upon at the beginning of the process that the investor will receive from the borrower on the money invested during the loan. The term of the loan is also immediately determined. At the end of the term, the borrower repays the borrowed capital to the investor. This means that the investment is fixed for a certain period, and an investor does not have to worry about fluctuations. Finding a suitable project is also made easy because these are published on a platform that is transparent to everyone. With this in mind, along with the absence of value fluctuations, investing in real estate crowdfunding requires less knowledge and experience up front, so it is pretty easy to get in.

Real estate crowdfunding versus equities, what will you invest in? In this article, we have discussed some essential factors that can influence your choices, such as the average return, the associated risk and the knowledge and experience required to start investing. Here's another brief summary. The average return for equities is around 6 or 7%, and with real estate crowdfunding, it is 9 or 10%. Concerning risk, we can conclude that your money with shares is always available for withdrawal, but this involves fluctuations in the value of your initial investment. This means increased risk, as your money could quickly lose its value. With real estate crowdfunding, your investment is fixed for a certain period of time, you receive interest on it, and at the end of the term, you get your entire investment repaid. This lowers the risk, as value fluctuations do not affect your money. In general, therefore, more knowledge and experience are required to invest in shares to reduce this increased risk as much as possible. Simply investing in real estate crowdfunding projects is more accessible for beginners.

Invest via Max Crowdfund

Max Crowdfund is a platform registered with the Netherlands Authority for the Financial Markets (AFM) that uses revolutionary blockchain technology. This makes the process of real estate crowdfunding more transparent, easier, more flexible and more accessible for all involved. You will find our real estate projects on our website. To start investing, follow a few easy steps to create an account, including verifying your identity and linking your bank account. After you have completed your account and selected an interesting real estate project, you can start investing from €100 in an easy, transparent way without having to worry about the value fluctuations of your investment!