Real estate development

Real estate crowdfunding on development operations is a form of investment that aims to generate value through the construction or redevelopment of real estate. This type of investment is generally short-term or medium-term, ideal for those seeking an attractive return in a short time frame, but with greater exposure to the risks associated with the real estate market and development dynamics.

What is Crowdfunding on Real Estate Development transactions?

Investors help finance construction or renovation projects. Once the work is completed, the property is sold and the profit generated is distributed among investors. The investment period varies between 1 and 3 years, depending on the project, and is geared toward creating value in the short term.

Advantages of Real Estate Development

• Return in the short term: this form of investment aims to create value in the short term, and the return comes from the difference between the cost of purchase and renovation and the selling price of the property.
  
• Accessibility to large Real Estate Development projects: even investors with small capital can participate in development projects that, historically, were reserved for large players.
  

How to make a profit

• Gain on the Property: the gain is from selling the property at a price above the purchase and development cost. The overall return on investment is often measured by Return on Investment (ROI), which indicates the percentage of return over invested capital.
  

Risks of Crowdfunding on Real Estate Development Operations

• Sale risks: the profitability of the project depends on selling the property at a price that exceeds the costs incurred. If the market is unfavorable at the time of sale, returns may decline.
  
• Development costs and timelines: Construction costs and permitting and construction timelines may vary from projections, affecting returns and project duration.
  
• Market fluctuations: development investments are more exposed to changes in the real estate market, as they aim to maximize returns through sales alone.
  

Conclusions

Real estate development crowdfunding is a suitable solution for those who are willing to take more risk to achieve potential returns in the short term. With a shorter duration than income-producing real estate and greater exposure to market dynamics, this approach offers an avenue to attractive gains, as long as one assesses the risks associated with development variables and market fluctuations.