Online crowdfunding making fractional property ownership a reality for small investors without betting the farm

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Chesney Bradshaw
Chesney Bradshaw

Renting a property whether a flat, townhouse, cluster or free-standing home is a necessity for many people but it doesn’t bring you any closer to ownership. It might seem a no-brainer to buy rather than rent but not everybody is in a position to buy property. You may not have enough to put down a deposit for a home. It’s all very well for guru property investment advisers to encourage you to buy a property but if you don’t have the money, what can you do?

Yet property makes up an important part of building wealth. When you have learned how to identify and structure property opportunities and acquire a poverty for yourself, you can get into generating income from tenants paying rent. The returns are higher than interest paid by savings accounts and paper investments such as unit trusts or mutual funds because you get a monthly return, not annually.

But how you do you get into owning your own property? Usually, it’s through many years of savings until you have a down payment. In some countries that might take very long. There are countries where the second generation take over paying for the property that the parents leave them because it’s not possible to pay off a home in a lifetime.

Now, the online marketplace is allowing people to come up with new ideas for property ownership and income generation that would have been unimaginable only a few years ago.

Some people live for years in a rented property and never even own a small share of the property where they have lived all their lives. For example, in the UK a man whose job was to inspect the first and last trams that went through Croydon moved into a property in 1937. The tenancy was inherited by his wife and then later his daughter in 2000.

How are people who rent able to obtain a small stake in the property they rent?

Online ventures are allowing anyone to own a stake in property for a small sum. Crowdfunding property businesses such as The House Crowd, Property Moose and Property Partner are making it possible for someone who is renting to take out ownership of the property. Customers pool their investments to form a company that buys a buy-to-let property. Income is generated by the tenants paying rent. The selection and management of properties handled by the crowd funding parent company with costs deducted before income is distributed. The profits or losses are split between shareholders whenever a property is sold. But financial advisers are saying that you still need to treat crowdfunding propositions like any other investment cautiously. This is why customers must answer a survey first to check if this type of property investment is right for them. Remember that the crowd funding property companies are not in it for fun and charge fees of about 15% of rental income and 15% of any profit when the property is sold. You also need to be cautious about timing to invest in residential property because although property prices have increased in recent years the possibility of further increases is in question. Who knows? Maybe they will rise. But maybe they won’t. Maybe they will be somewhere in the middle.

This type of crowd funding property by-to-let opportunity may take some time before it comes to your country. But the point here is to show how important it is to own even a share of an income-generating asset. How could you use this idea to own a share in a property? Do you have trustworthy partners to form a property syndicate? Or, do you want to do it on your own such as some property investors who own three or four flats and town houses becoming buy-to-let investors who manage tenants and arrange their own mortgages. One such investor has a solid income from residential properties that not only has grown personal wealth but the income generation acts as a shield in these rough economic times. If you want to find out how to own your own income-generating asset, you can click here for a free report.

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