Invest in RE for rent or crowdfund?

Although investments in RE for Lithuanians are one of the safest and most attractive options, only 10% of residents were able to do it (according to LB data 2020-10-20). One of the key reasons – not everyone has the required a few tens of thousands.

However, as crowdfunding platforms advance, the situation is changing - now you can invest in RE only with 100 eur. Thousands of Lithuanians are already using this option and the average investment on such platforms is 700-800 euros.

While investing in RE through crowdfunding platforms is attractive, it has some drawbacks. One of them - you do not own the property. However, you get more revenue and your investments are 'taken out' faster and easier. Also, you can diversify by investing in a few hundred projects and that way risk decreases.

The main differences between buying RE and investing through crowdfunding:

• Investment size. To have a property and generate revenue by renting it out, you need to have (or borrow) at least 50 thousand euros. Investments on crowdfunding platforms start from 100 euros.
• Investment return. When renting your own house, it brings about 6% of return. Usually, when renting out, revenue is counted from 10 months because revenue from the other 2 months is recommended to save for refurbishment (of the property, of appliances. Properties that are rented usually require refurbishments more often. Revenue from money invested in crowdfunding is from 6% up to 12%
• Investment safety. When buying property, you will put all your savings in 'one basket'. If there will be fluctuations in the RE market, the value of your property will also alternate. To sell a property quickly is not that simple - usually, when selling quickly, you cannot sell for your preferred price. While crowdfunding allows not only split among different platforms but also on the same platform among different projects that bring different revenues (e.g. some - 7%, others - 10% or 12%. It depends on the size of investments).