Much has already been said about millennials and their financial habits. As lifestyle priorities shift, this generation is often criticized for sacrificing long-term goals for short-term pleasures, be it a weekend Airbnb trip or the notorious avocado toast. Born between 1982 and 1996, the majority of millennials usually have less than $1,000 in their savings accounts. However, that doesn’t mean these under-40s are not seeking ways to be more frugal and multiply their savings. Whether pursuing homeownership or paying off student loans, real estate crowdfunding can be of great benefit. Here’s why.
The savings aspect
Savings accounts around the globe usually have very low interest. For example, the British giant Lloyds announced in September that its Instant Cash individual savings account rate would drop from 0.35% to only 0.2%. Even the “market-leading” and easy-access option by Marcus by Goldman Sachs has trimmed its rate from 1.5% to 1.45%. Luckily, millennials know how to use technology to their advantage, giving them many more options than in previous generations.
With real estate crowdfunding, aspiring homeowners can invest relatively small amounts of money (as little as 100 euros on most platforms) into bigger real estate projects. Based on their goals and preferences, they can choose different types of investments and enjoy stable yields. It’s a winning strategy for millennial investors – and one that’s relatively secure.
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The low risk
One of the main perks of real estate crowdfunding is that up to 40% of the platforms offer secondary market trading, which means that investors can sell their investment even before the maturity date of the project. This is a great safety check for millennials in case unexpected expenses appear. To further maximize security, millennials should invest – and reinvest – by seeking diverse projects across different platforms. Investing partial sums is also the best way to learn the ropes of real estate crowdfunding and better understand the different modalities of equity and debt investing.
For starters, it’s good to know that one of the safest investment options is the senior debt scheme. This strategy offers monthly dividends and the initial investment back in a time frame stretching up to two years, with yields up to 8%. While these can go even higher, that’s already a great rate in comparison with a conventional savings account.
Real estate crowdfunding is extremely transparent: It secures a direct connection between the investor and the specific project. Instead of betting on luck, the investors are empowered by information and can strategize their investments properly. Every aspect of the investment process is done online, which also brings many benefits to millennials. While in traditional real estate investment, the registration process is rather bureaucratic and rigorous, getting started on a real estate crowdfunding platform only takes a fragment of the time and effort (usually consisting of KYC verification). And, since some platforms offer an extremely user-friendly digital environment, getting started is as easy as turning a key.
Real estate crowdfunding can not only help millennials multiply their savings in a low-risk way, but also teach them valuable insights about both investing and the real estate world combined.