Equity Crowdfunding 101: Everything You Need To Know About The Basics
The process of equity crowdfunding in property involves people investing in builds with a number of other individuals and, in return, once the project has reached completion, and the property has been sold, the original investors receive a return on investment directly correlated to their initial stake.
Before equity crowdfunding platforms emerged, only people with a lot of capital could invest in startups and projects, which restricted the number of people that could get involved in crowdfunding. Nowadays, anyone can invest thanks to crowdfunding platforms, as they have created a greater level of access for all, essentially democratising the process. In this article, we will explore some of the basic fundamentals to consider when you begin investing in equity crowdfunding.
More Accessible for Investors
Crowdfunding is enhancing the number of opportunities available, in turn making crowdfunding more accessible. Investors can benefit from property crowdfunding ventures due to the number of options available to both new and inexperienced investors. As a result, investors can access deals that might usually be offered to experienced investors with large amounts of capital. This means property crowdfunding has the potential advantage of allowing you to invest in builds with fewer funds than you would usually require to invest in crowdfunding schemes.
Even at the lowest end of the market, the minimum investment can be as low as £100, helping to bring a new generation of people looking to get started in crowdfunding.
With the government requiring the development of new builds, this again has enhanced the accessibility of opportunities, meaning that people looking to begin crowdfunding can contribute directly toward the property and see this through to completion. It is an innovative method of connecting investors to fundraisers and developers, meaning a more prominent chance for a diversity of people and amounts and greater options for all parties involved.
Who Can Invest?
The criteria vary from platform to platform. Some platforms allow registration as an investor to be extremely simple, while others not so much. A number of crowdfunding websites use FCA-approved tests to assess the individual’s readiness for investing before they can register on their platform.
Platforms such as LEOcrowdfunding have developed questionnaires that check if the individual understands the risks associated with crowdfunding and the investment process associated. Some investor-led platforms require you to self-certify yourself as a knowledgeable investor or an individual with a high net worth, which can prove to be somewhat more difficult.
Process of Equity Crowdfunding
When registering yourself on a crowdfunding platform, many of these will require you to take an appropriateness test to assess your eligibility due to FCA regulations and as part of the investor readiness assessment. The criteria for this can vary depending on the platform, however generally these will derive of a series of questions. Before undergoing this it is strongly advised to conduct your own personal research and due diligence in order to ensure that you fully understand the questions and the process which surrounds it.
Once you have completed the test, you will unlock the opportunity to get involved with the live projects available on the platform, which is where you can begin to assess the various opportunities and their value for you. It can be advantageous to network with similar investors and fundraisers as this will provide you with a community of others to ask questions and perhaps even crowdfund with on a project.
If you are looking to start investing in property development crowdfunding platforms, ensure that you do your research and assess the company, as well as the way in which they undergo their own registration process and requirements for this. It is advantageous to assess the value of the deals you would like to invest in. Contacting a property crowdfunding platform that educates its investors is always beneficial in order to ensure you fully understand the risks and rewards that come with crowdfunding.