Strategies for diversifying your portfolio with real estate crowdfunding

Real estate is a traditional investment for building up a solid estate portfolio. However, it is important to diversify your portfolio to reduce risk. Real estate crowdfunding is an interesting solution for diversifying your real estate investment.

 

What is real estate crowdfunding?

The real estate crowdfunding is a form of participatory financing that enables individuals to invest in real estate projects. Investors lend the sum of their choice in return for interest payments, usually in the form of bonds.

Why diversify your portfolio with real estate crowdfunding?

Real estate crowdfunding allows you to diversify your real estate portfolio in several ways:

• In terms of location: real estate projects are located in different cities and regions, which reduces the risk associated with local real estate market.
• In terms of asset typology: real estate projects involve different types of assets, such as housing, offices, retail, etc.
• In terms of promoters: real estate projects are carried out by different promoters, which reduces the risk of a promoter defaulting.

What diversification strategies are available with real estate crowdfunding?

Real estate crowdfunding offers a number of diversification strategies.

• Geographic diversification

Investing in real estate projects in different cities and regions reduces the risk associated with a local real estate market. For example, an investor wishing to invest in the Paris real estate market could divide the amount he wishes to invest in a real estate project in Paris and in a real estate project in Lyon, in order to limit risk.

• Diversification by asset type

Investing in different types of real estate asset reduces the risk of a drop in demand for a particular type of asset. For example, an investor wishing to invest in the residential property market could invest in both a new-build housing project and a renovation project for older homes.

• Diversification by promoter

Investing in real estate projects managed by different developers helps reduce the risk of operator default. Indeed, it is preferable to invest in projects carried by different real estate operators, as this limits the probability of default on the investments made.

How to set up a diversification strategy with real estate crowdfunding?

To implement a diversification strategy with real estate crowdfunding, it is important to follow these steps:

1. Define your investment objectives

Before getting involved in real estate crowdfunding, it's important to define your investment objectives. This will enable you to choose the most suitable real estate projects.

1. Conducting market research

It's important to carry out market research to find out about the real estate market and the various real estate crowdfunding platforms.

1. Choosing real estate crowdfunding platforms

There are many real estate crowdfunding platforms. It's important to choose reliable platforms that are approved by the Autorité des Marchés Financiers (AMF).

1. Analyze real estate projects

Before investing in a real estate project, it's important to analyze it carefully. This will give you an idea of the risk and potential return.

 

Real estate crowdfunding is an interesting way to diversify your real estate portfolio. It reduces risk by investing in different real estate projects, located in different cities and regions, and promoted by different developers.