In recent years, crowdfunding has become a worldwide phenomenon through which people can realise their personal goals or obscure initiatives. Think, for example, of the Kickstarter success ‘Eat your Spoon’ created by Sarah Munir. She aimed to raise money to develop edible cutlery to reduce plastic waste. Or the crowdfunding campaign ‘Reboot the Suit’, an initiative aimed to collect $500,000 to restore the spacesuit Neil Armstrong wore. You can read more about these initiatives and other special ones in the following blog post.
However, most people do not know that crowdfunding has also become a method to invest and simultaneously make a profit. In this article, therefore, we explore the differences between real estate investment crowdfunding and charity-based crowdfunding. Yet, before we discuss the relevant differences, we need to start with the foundation and explain the overall concept of crowdfunding.
What is crowdfunding?
The concept of crowdfunding is rooted in the broader idea of crowdsourcing. This is referring to use the crowd to obtain ideas, feedback, and solutions to develop corporate activities. In the case of crowdfunding, the objective is to raise money for investment from a large audience, in which each individual provides a tiny amount. Depending on the kind of investment, crowdfunding can be differentiated into the following categories: reward-based crowdfunding, equity-crowdfunding, donation and crowdlending.
Nowadays, crowdfunding has become increasingly accessible as traditional ways have been replaced by online crowdfunding platforms. This, in turn, has positively influenced the development of the size of the crowdfunding market. In 2011, MarketWatch reported that the size of the crowdfunding market was $1.5 billion. This has since grown to a whopping $12.2 billion and is projected to reach $25.8 billion in 2027. In other words, the crowdfunding market has gained quite an audience. Besides, it has become significantly crucial for people in dire need of funding.
However, crowdfunding is not only beneficial for people who are seeking capital to realise their goal; it can also be a way through which profit is made. For instance, funding projects and making a profit through investments is precisely what kind of service Max Property Group offers its customers. They do it via its online crowdfunding platform Max Crowdfund. Thus, in practice, what appears to be the same way of collecting the necessary funds from many people, can eventually lead to different kinds of prospects depending on the type of crowdfunding.
1. Different prospects
The first and most apparent difference between investment-based and charity-based crowdfunding is the outcome for investors. As mentioned above, through real estate investment crowdfunding, investors can gain additional monetary benefits. Whereas charity-based crowdfunding does not reap any profits. Depending on the annual rate of return, users of the Max Crowdfund platform can invest in real estate and are guaranteed profit.
2. Goal realisation
Charitable campaigns essentially rely on people who are willing to invest in a good cause. Sadly enough, many of those campaigns struggle to raise the target amount as people are reluctant to donate their money without an additional benefit. Scholarly research has verified this by stating that charity fundraising platforms still lack an efficient way to discover potential donors. In this sense, charity-based crowdfunding has become less trustworthy, as the realisation of the final goal is not guaranteed.
Real estate investment crowdfunding also relies on the input of investors. However, Max Crowdfund has established a big enough audience of +66,000 registered users who are willing to invest and make a profit. Realising the final project with the help of our investors is, therefore, a guarantee.
Another difference between charitable crowdfunding platforms and real estate investment crowdfunding platforms is their “perceived” accessibility. Charitable crowdfunding platforms are widely known for their inclusivity and have therefore consolidated the reputation of “crowdfunding is for everyone.”
Being perceived as accessible is not precisely the case for real estate investment crowdfunding. It is still being perceived as a practice done by “old grey men” who possess much capital. Max Property Group tries to get rid of the old stigma and get more people involved in making a profit through investments.
Making real estate investments through the Max Crowdfund platform
Max Crowdfund is an online real estate crowdfunding platform through which users can manage their financial wallets and invest in loans or raise the necessary funding for their real estate projects. Users can make investments from as little as €100,00. This is part of our long-term goal of making investments inclusive to everyone. Furthermore, because of the low-entry characteristic, users of Max Crowdfund can easily spread their investments over several projects, reducing the risk of the investor’s portfolio.
Are you interested in making a profit through investing in real estate? Visit the Max Crowdfund website and register for free.
Written by: Roos van Beek