Investing in Crowdlending

Before we see how you can invest in crowdlending, perhaps it is better to look at a case study first. 

The above image represents a real estate crowdfunding investment case study. Note that real estate crowdfunding is also known as property crowdfunding. 

The owner of the business needs to raise some funds to finance the construction of new residential units. In other words, he needs a real estate development loan. From the image, we can see that there are 986 investors who have financed this project, for a tune of EUR 300,000. We can also notice what the return on investment from this project, which is 15.58% per year and will run for three quarters of a year (9 months). 

So, you let’s say you were part of this investment and you put in EUR 1,000, by the end of the 9 months, you would have earned an interest of EUR 116.85. At the end of the 9 months, you will receive all your investment back in addition to the earned interest, of course, barring any unfortunate events. 

If you want to invest in crowdlending, you will have to choose from three categories. They include – consumer loans (crowdfunding for privates), business loans (crowdfunding for business), and real estate loans (property investment crowdfunding).  

Check the figure below for more information:

Let’s go through each investment categories that are found in crowdlending platforms.

Consumer loans 

As the name suggests, this investment category is for private consumers and are usually short-term loans, micro-loans, or car loans. They are usually used by the borrower to purchase consumer products as well as on small spending such as buying a vehicle. 

Consumer loans are usually available in the range between EUR 200 and EUR 20,000. 

Business loans 

With this kind of investment, you will be investing in business projects and companies such as restaurants, crypto-currency firms, startup company, or consumer goods business. 

Business loans typically range from EUR 50,000 to EUR 1 million, which can be shared amongst multiple investors. 

Real estate loans 

This category is quite straightforward – you invest in real estate projects. It is further categorized into three – new real estate development loans such as finance a loan to build a new building that will be sold in future, buy-to-resell loan e.g. buy an apartment, renovate it, resell it, and earn on the plus-value, and finally buy-to-rent loan which is simply buying an apartment, renovate it, and them rent it out to earn rental incomes. 

Real estate loans usually range from EUR 100,000 to EUR 5 million. 

Investment strategies 

Now that you know the various categories of crowdlending investment, it is time to learn about some of the strategies you can use to invest. 

Choosing a strategy will allow you to understand what you are doing as well as allow you to be able to measure investment performance and to evaluate your investment choices.

There are hundreds of types of investment strategies, and which one you chose depends on your needs and personal preferences.

A lot of people don’t invest because they fear they would lose money. While this is common, it can be a great strategy if you are still learning the basics of investment. 

However, not investing might not be a wise long-term strategy as it is not guaranteed that you will not lose that money you are afraid to lose. If anything, not investing is the sure-fire guarantee that your money will lose value over time. Inflation will gradually and surely eat away your money.

Author: Yash Hirani

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