Crowdfunding For Wholesaling Properties

What is real estate wholesaling?

The profit for the wholesaler is the minimum amount that had been fixed with the buyer, and the amount that is ultimately paid by the buyer or the one with whom the contract is made.

The whole point of real estate is allowing the wholesaler to cut down his risks by allowing him to back out of the whole deal if he is unable to find a buyer within the expected closing date. Another important advantage is that there is no need for repairs to be made on the property.

Overall, investing in real estate is less risky than other kinds of investments. At the same time, there are a number of problems in India when it comes to investing in real estate.

For example, there are still no Real Estate Investment Trusts (REITs) in India. Investing in the REITs cuts down the risk significantly because it is the trust that decides where to invest the money. At the same time, even without the REITs, real estate happens to be among the most stable and evergreen businesses in India.

The most important question here is, how and why should real estate wholesale be crowdfunded in India?

Crowdfunding can actually benefit real estate wholesale all the more in cases where the profits from the wholesale are used for a purpose beneficial to the society, or when it is a venture by a non-profit or a private organization in order to utilize the profits for a social service project.

Under the present circumstances, the real estate project without these motives does not raise much hope. The reasons are quite simple actually- the average middle-class people still find it difficult to trust online transactions, and rightly so.

The condition of internet financial security in this country is abysmal. In addition, real estate happens to be among the shoddiest sectors in the country, simply because its immense profitability makes it a double-edged sword. In addition to all that, many crowdfunding platforms are not very transparent in terms of the business that they conduct.

Also, private enterprises do not like being accountable for their dealings, but this is really very important for a practice like crowdfunding, where building a support base is crucial, and that can be done only through transparency and being accountable for potential donors.

Another thing is, without social accountability, crowdfunding for wholesaling properties can acquire the character of online betting, which is illegal in India, at least according to the law books.

Under such circumstances, wholesaling properties through crowdfunding can be most successful when the motivation is a social benefit. After all, this venture involves attracting donors at two levels- attracting the potential donors to the retail project and investing them to crowdfund.

So there are chances of the donors willing to do one of the things, but not both.

So what can be done to ensure that the crowdfunding project for wholesaling properties is successful? Here are a few things that can be followed:

1. Crowdfunding for wholesaling properties can actually make it profitable for the wholesaler as the price attached to the property can be set at much higher for charitable causes than for private causes.
2. The profits from a wholesale crowdfunding project can actually be a good way to start a social service project or to undertake a large-scale social service work. In other words, such a project can help a number of people than an individual project can.
3. Precisely because such a type of crowdfunding can tend to be more profitable, it becomes very important for the parties involved to list out exactly how the funds would be utilized- the amount to go to the actual cause, to be used for running the campaign, and to benefit private parties.
4. Crowdfunding for retail wholesaling can actually be profitable for the sellers in terms of public relations. In case a buyer who is a representative of a larger organization decides to invest on such a project, they automatically become a contributor to the project, and that would add a lot of value to the company or organization. In other words, here is a chance for sponsorship.

And all of this can be successful if the crowdfunding platforms through which retail wholesaling would be conducted are themselves reliable. That can be ensured only by choosing the most reputable crowdfunding platforms in India, which would not only ensure a safe transaction and the credibility of the wholesaler and the owner of the property but would also ensure a wide reach of the campaign, bringing in investors from respective fields.