How crowdfunding helps you take advantage of a slow market

Crowdfunding allows each and every one of us to get into real estate investment with much smaller amounts of money.

We all want to be smart with our money, and we all try to make good decisions when it comes to investment. We could do worse than considering the advice given by American business magnate, investor, speaker and philanthropist, Warren Buffet, widely regarded as one of the most successful investors of all time. He says: "Be greedy when others are scared and be scared when others are greedy."

A lot of people are scared by the current market conditions - which translates into a good time to get great deals. Savvy investors like Buffet make the most of their money in the 'bad times' because they sit on a lot of cash when people need it the most - so can dictate (investment) terms.

Sadly, most of us don't have enough money saved up to take advantage of times like this, the 'bad times'. That's why the wealthy get wealthier. Average people like us are probably struggling in the slow market, or too afraid to take risk. Real estate investment, for example, requires a lot of one's capital to make an investment, right?

But not anymore. Our business model - crowdfunding - means pooling your (small) amount of investment money together with numerous others, to generate the sort of buying power only the wealthy normally have. For the average person, this is a great idea, as you are not allocating a majority share of your portfolio into one investment, making you more able to shoulder risk in the current market situation.

So, the first advantage of this 'crowdfunding' in real estate is that it allows each and every one of us to get into real estate investment with much smaller amounts of money. Using a smaller amount of your hard-earned wealth means you can afford to exercise more patience with your investment, and ride out the 'storm' of bad times in the market, waiting for the uptick to come back - and property is most definitely a cyclical market.

You can diversify your investment with ease too - spreading the risk, investing in multiple properties, in different areas, and different types of development (residential or commercial, for example) as they do and will perform differently. You can gradually build on your investments that are seen to be working.

In this current low-price market, through a crowdfunding investment, you have the ability to find a good entry point that will provide a good yield. In practical terms, this means you can make a decent return and get paid while you wait for the next up cycle.

By being smart with your money, diversifying your investment into a number of smaller, more manageable pockets, you are giving your wealth the chance to grow. You are joining forces with other like-minded people, all helping to grow each other's investment.

Most of us don't have the time or ability to spend all our time hunting for the best property investment deals. Investing in a real estate crowdfunding vehicle means the legwork has already been done. Experts have already researched the markets and worked out where the best possible investments lie, and risk assessments made. It's time-saving, it's convenient and it mitigates risk as much as you want it to.

Of course, as with any investment, it's important that you do your homework to ensure you are investing through a reputable and regulated platform that provides you full protection and complete transparency. Many 'crowdfunding' platforms have been formed recently, but only a few pass muster.

While considering where and who you might invest with, ask whether the platform is regulated, and how the investments are structured. Ensure you are not exposed to the operational risk of the platform. Is your investment ring-fenced and protected against fraud?

Before considering any investment, make sure you understand how much due diligence the platform does itself. You should raise serious questions about anything that seems unclear.

Real estate crowdfunding is a fairly new concept, and is innovating how real estate investment takes place. It offers many benefits, but it is also important to understand the cost structure. Ensure you receive value for your money.

You must evaluate the returns offered on a risk-adjusted basis, and don't allocate your entire investment portfolio on such platforms. Utilise it as an integral part of your investment portfolio.

The writer is co-founder of Smart Crowd. Views expressed are his own and do not reflect the newspaper's policy.