Residential Developments with Real Estate Crowdfunding

Depending on economic growth and the state of the commercial property market, interest in residential developments can tend to fluctuate. We will explain why residential development with real estate crowdfunding or crowdsourced financing is the best method of a source of finance's potential for Australian property developers.

Why Residential Developments

Potential high returns in Australian commercial property that both Commercial and Residential property has always been a popular investment option in Australia. When developing residential property, you have the ability to fully calculate and analyse the amount of risk that is involved based on certain criteria, including the features of the property and the prevailing economic climate.
People will always need a place to live and as a result, it can be assumed there will always be a growing demand for residential property.

The Advantages and the Disadvantages of Residential Development

If you're considering investing in residential property, we've discussed a few of the advantages and disadvantages of residential developments below.

The Pros

Low Volatility

There tends to be no daily fluctuation of price, making it easier to stick to an investment plan.

Capital Growth

When a bank provides most of the funds for a property purchase, there is considerable leverage and capital growth returns can be considerable.

Long-term investments

Investing in residential property can provide investors with consistent returns over the long term with wealth creation strategies.

Demand

Australian National Housing Supply Council reports indicate that not enough homes are being built by the public and private sectors.
This therefore should mean that the demand for rental properties should keep rent growing, and house prices stable.

Mining

High rental rates can be gained in some areas and as an additional benefit, mining companies often subsidise their employee's rents, which can translate to increased stability in tenancy and rental return.

Rental Increases

Legislation protecting both the landlord and tenant means that rent increases can be negotiated and need to be reasonable.
The Australian government social welfare policies mean that residential property investors can still increase rents where they rent to low-income earners, with rental assistance based on market rates.

The Cons

Valuation

Unless you have the property evaluated regularly, you don’t know the exact value of your property on an ongoing basis.

High Capital Costs

Initial capital costs tend to be much greater with residential property purchases. You need to have available the initial deposit amount for the first property which can be up to 20% of the capital cost.

Liquidity

If funding needs in the short term mean loans, the property is not an asset that you can liquidate quickly or just sell a small portion of.

Costs

The costs to buy and sell are quite high for residential property. Stamp duty, mortgage registration and agent costs all need to be taken into consideration.

Interest rates

Interest rates play a significant part of the costs of owning a property. When interest rates rise, investors need to be able to bear the brunt of the increased payments.

Negative gearing

If a rental property is negatively geared, the investor needs to find the difference each month between the income and the expenses of the property.

Taxation

If you hold a property for more than 12 months then the 50% capital gain discount applies when you sell.
If you live in your property then generally there is a full capital gains exemption. If you purchase an investment property, there may be tax advantages each year if the property is negatively geared.

Crowdfunding for Residential Developments?

Real estate crowdfunding – a process that allows individuals to join tens, or even hundreds of like-minded investors, and buy a share in an investment property – presents a revitalized and viable alternative to this traditional approach of sole ownership.

CrowdfundUP, has operated a commercial and residential real estate investment and crowdfunding platform since 2015 - bringing together these like-minded investors for the purpose of investing in property.

On the platform, Retail and Wholesale Investors are attracted to the returns on investments, diversification, access to new property investment opportunities, flexibility and speed.

Also, property developers see real benefits in a new pool of investors at a much lower cost than traditional sources of funding, as well as the ability to obtain community support for development projects.

Real estate crowdfunding for investors offers the potential for the average investor to affordably participate in real estate, while potentially reducing one’s risk and providing returns.

Benefits of Residential Developments with Real Estate Crowdfunding Platform

Access to Alternative finance sources

Developers have an alternative lending source and can market themselves to the local and international community.

Wider and diversified investor network

Offering an alternative funding source to property developers who have difficulty accessing traditional funding sources

Residential Developments with CrowdfundUP

The CrowdfudnUP alternative finance platform is backed by a wide range of Investors who are currently seeking First Mortgage Loans, Mezzanine finance, Debt and Equity Investment opportunities.

Please contact the CrowdfundUP team who can advise you on a wide variety of source funding such as apartment,residential development,school accommodation and hotel development feasibility consultations and valuations.

Related article

The information in this article is general in nature. Any advice it contains is general advice only and has been prepared without taking into account the objectives, financial situation or needs of any particular person.
The article content is not intended to be a substitute for professional advice and readers are urged to seek their own appropriate advice before making decisions.

Any reference to a particular investment is not a recommendation to buy, sell or hold the investment.

Aug 03. 2018 CrowdfundUP