Real Estate: The Open Secret to Wealth Creation (and how Crowdfunding is increasing access)
There’s a saying in Asia that all great fortunes are built on real estate, and when you look at the Forbes’ list of Asia’s richest families, it’s not hard to see how that has come about. In my personal opinion, real estate investment is one of the best way to grow one’s wealth, and this is a view based on personal experience and anecdotes from close friends of ours.
Before we quit our jobs to pursue our own entrepreneurial interests, my wife and I were both working in the Finance sector, based out of Canary Wharf; we were fortunate enough to have decent jobs with decent salaries and the good sense to live modestly while investing prudently. As part of our plans, we disposed of our direct real estate investments, which we had only bought a few years prior. They weren’t townhouses in Wimbledon or penthouses on High Street Kensington (quite the opposite), but they were always cash flow positive, and when we sold them, we realised the capital gains we crystallised were many times our salaries at the time and far outweighed the savings we had accumulated in almost a decade of employment since graduating from university.
There are those who will put our experience down to dumb luck (and there is perhaps an element of that), but we certainly didn’t buy at the trough of the market nor did we sell at the peak. Instead, we did our research, waited for the right opportunities to present themselves and acted quickly to secure the best deals. Also, rather than stretching to buy the largest, most lavish home our budgets would allow, we lived in a one-bed rental close to work, while investing our spare cash to save up a deposit for the next buy-to-let property.
It was tough work, which fortunately paid off, but as an individual investor, one has traditionally had very limited options to gain exposure to direct real estate investment. REITs are an indirect and imperfect way to gain exposure to the asset class, and we certainly aren’t wealthy or well-connected enough to be given access to a club deal or co-investment opportunities.
However, the advent of real estate crowdfunding has changed the landscape and made investing in real estate far more accessible than ever before. The introduction of real estate crowdfunding platforms such as Property Crowd have meant that serious investors no longer need to put all their eggs into just one or two buy-to-let baskets. They can still do their detailed due diligence, have full discretion over which properties go into their portfolio (without managing the day-to-day like conventional landlords do), and they can gain access to syndicated deals with superior risk-adjusted returns which they wouldn’t ordinarily be privy to. All from the comfort of their armchairs and with the click of a mouse.
In an age where young adults are struggling to get on the housing ladder, pensioners are searching desperately for income and savers are getting next to nothing on their deposits, real estate crowdfunding presents an elegant solution: not by forcing people to take disproportionately higher risks just to get a more decent yield, but by by-passing a broken banking system altogether and matching demand with supply more efficiently through the use of technology.
It is worth reiterating once again that real estate, in my mind, is one of the worst kept secrets to building great wealth and crowdfunding has made real estate investing more accessible than ever. Register today with Property Crowd to find out more about the investment opportunities we offer, now also eligible for inclusion in a tax-free ISA wrapper.