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Business / Finance

Pay and don't buy

Banki.ru: themes of the day 05.11.2017 at 21:00

Banking and financial news on the website Banki.ru

Collective investment in the real estate market have every chance of success. The main incentives are the low entry threshold and ease of investments.

Why will increase the demand for collective investments

the Economic model of collaborative consumption, formulated in 2010, Rachel Botsman and Roo Rogers, is attracting more supporters. Its basic idea: sometimes it is better to pay for temporary access to the product than to fully wield it.

In the field of transport this concept combines car sharing and services such as DriveNow and Zipcar. The real estate market — instruments of collective investment, when the buyer is willing to divide his property and the rights and obligations of the owner with other investors.

What is a collective investment

On the real estate market investors have two options: invest directly (in the rental business or redevelopment) or indirectly (via the Fund or the crowdfunding platforms).

the Essence of collective investments that a certain company gathers money from investors, invests in the project, generates and distributes profits. In the funds investors just give money to the management, and crowdfunding themselves choose what and how to invest.

the collective investment Market today,

Market of collective investments is growing rapidly. As shown by the analysis of the data from Preqin, the volume of funds raised in the global private real estate funds from 2013 through 2016 increased by an average of 11% annually. And, under forecasts of investors, he will surely continue to grow in the next two years — so think of 70.4% of the respondents who participated in the survey INREV.

According to research by Preqin, "Real Estate Spotlight", published in March 2017, since 2012 European companies have increased the volume of assets under management by 39%. At the same time, 72% of Fund managers noted increased competition for investor capital from the beginning of 2016.

the Amount of funds collected via crowdfunding, is growing exponentially: according to Massolution, the amount increased from $ 2.7 billion in 2012 to 34.4 billion in 2015 — that is more than 12 times.

as for the estate projects, in 2014 the volume of investments in this sector increased by 154% and reached $ 1 billion. Of the 2.1 billion collected through crowdfunding in 2015 in the US, $ 900 million was directed to real estate projects.

Why the market of collective investments will grow

a Number of factors guarantees the growth of the market of collective investments in the next 10-15 years:

1. Low entry threshold

Funds and crowdfunding available to investors even with a small capital. Minimum budget depends on the scale of the project and can start from 100 euros.

When this collective investments remain attractive to large buyers who can diversify the portfolio with small deposits in different projects.

But keep in mind that investing directly in real estate increase the initial capital up to 100 thousand euros for rental business and up to 500 thousand for projects of redevelopment.

2. Easy access

the Internet facilitates access to collective investments: online services allow investors to easily join groups and make the market more transparent.

for Example, a catalyst to increase the number of crowdfunding platforms will become the blockchain technology — large database for General use without centralized management. It investors will be able to store and update documents, personal data and information on remittances. The blockchain will make it easier to collect money for projects and reduce the cost of raising funds.

3. Simplicity of investment

the Deposits in the funds and crowdfunding foreign investors from participating in the management of the project their funds are managed by professional managers. Projects of added value require owners of capital considerable effort, time and knowledge of the market.

4. High yield

According to JP Morgan, the average annual yield of real estate investment trust (Real Estate Investment Trusts, REITs) exceeds the yield of other asset classes: securities, money on Deposit or commodities. The average for 2002-2016 years for real estate funds amounted to 10.8% for stocks and 9.8% for high yield bonds is 9.2%.

the Investors are planning to invest in real estate through a Fund or crowdfunding platforms, expect a yield of 8-20% per annum, depending on the scale of the project. You need to remember about the risks of the collective investment real estate funds — high volatility, for crowdfunding — the lack of liquidity. It is important to choose a company to manage investments with a good reputation, transparent reporting and clear strategy.

Yulia KOZHEVNIKOVA, a leading expert in international real estate Tranio, for Banki.ru

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