As a cursory study of market will confirm, property is one of the safest bets for those looking for a reliable investment capable of generating attractive returns and the prospect of capital growth.

However the route to building a successful property portfolio is littered with obstacles for the first time investor. To begin with, entry into the market generally requires a hefty initial investment and with lenders introducing tougher criteria for would-be landlords, raising the necessary sums is about to get even more difficult.

When these issues are taken into consideration, the market may begin to resemble a territory reserved solely for cash rich investors with a wealth of experience in the sector – but this is not the case with property crowdfunding.

Removing the Obstacles to Investment

The past few years have seen a huge increase in the popularity of property crowdfunding. According to independent think tank the Social Market Foundation (SMF) real estate crowdfunding in the USA has now reached $1 billion and they predict further significant growth in UK property crowdfunding in the coming years.

The good news for first time investors is that property crowdfunding offers an obstacle free route into the market and you don’t need vast amounts of cash or experience to get involved. For as little as £100 in some cases (figures vary), investors can reap the rewards in terms of rental income and capital growth, making property crowdfunding appealing in both the short and long term.

All potential first time investors have to do to get involved is register with a property crowdfunding platform and choose the properties they wish to invest in and the amount they would like to invest. Diversifying by investing in more than one property will spread the risk of possible voids or other costs, and might be a better bet than putting all your eggs in one basket. Another appealing feature is that investors are spared the time consuming hassle of property management following their investment.

What Questions should First Time Investors ask?

Just as the minimum initial investment varies from platform to platform, so do the returns on offer, and this is perhaps the first question first time investors should seek the answer to.

Another question to consider is whether you may be satisfied with a lower yield in the short term and sit tight for future capital growth. If this is the case investors should be aware that property values can fall as well as rise.

Investors should also ask how easy it is to exit the scheme should they wish to and what they will get back in those circumstances.

It should also be remembered that there is always an element of risk in any type of investment.

Other factors worth checking on include the levels of transparency and customer service on offer.

How is Property Crowdfunding Regulated?

As a result in the growth in property crowdfunding, concerns have naturally been raised about the potential risk of financial mismanagement. Consequently, the sector is regulated by the Financial Conduct Authority (FCA) which has put measures in place to safeguard against mismanagement and explain the risks to potential investors.

It is easy to discover if a platform is regulated by the FCA as the authorisation number will be displayed on the company website. Before registering with a crowdfunding platform you are advised to check for these details and if you can’t find them you should perhaps avoid investing with that company.

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