What is the end goal for a real estate developer? Is the goal to rehabilitate a residential property, such as a single family or multi-family home? No matter what the ambition is, one thing that is for sure is the renovation costs are going to require a large sum of money a lot sooner than later. At Luxe Crowdfunding, we want you to be fully informed with prefunding. This is why we are the best when it comes to a real estate investment group in Florida.
What is Crowdfunding?
Some investors may not be familiar with this phrase. Crowdfunding is essentially the opposite of the mainstream approach to business finance. Traditionally, if you want to raise capital to start a business or launch a new product, you would need to pack up your business plan, market research, and prototypes, and then shop your idea around to a limited pool or wealthy individuals or institutions.
What is Prefunding?
Pre-funding is an alternative to the crowdfunding model. By pre-funding a deal, the real estate crowdfunding platform provides the sponsor with funding for their deal almost immediately, allowing the developer to proceed with the project. The platform then makes the offering available to potential investors. The obvious effect is to transfer risk from the sponsor to the real estate crowdfunding platform. Since this requires a lot of capital, only a few platforms currently provide it. Trust our real estate investment group.
Are There Benefits?
When choosing to take the route of pre-funding, there are many benefits that come tied to it. For sponsors, the benefits of pre-funding are clear. Pre-funding allows real estate developers to get their deals funded in a matter of days rather than weeks or months. This helps sponsors avoid delays, minimize the risk of deals falling through, and focus on real estate. The benefits for investors are less obvious but just as significant. First, pre-funding aligns a real estate crowdfunding platform’s interests with that of its investors. Any platform that pre-funds a deal is displaying confidence in its due diligence. Pre-funding also allows investors to start earning returns immediately upon investment, and almost eliminates the risk that a deal will not go forward.
Since there are obvious benefits, why don’t more investors turn to this choice? The easy answer is that it requires a lot of money to pre-fund deals in advance, and that is undoubtedly true. Beyond the cost, pre-funding also needs platforms to expand a great deal of time and effort in the due diligence process. A platform cannot simply put up a deal and hope for the best when its own skin is in the game. The exhaustive due diligence efforts that are required for pre-funding ensure that only the highest-quality deals will be listed.
Call Us Today
If you are interested in prefunding, we have all the information you need. Luxe Crowdfunding is here for you. Call or contact us today for more information. We are a great resource, Florida. We know all the facts when it comes to learning how to invest in real estate. Our professionals are the leaders in the real estate investment group industry.