Real Estate Crowdfunding: Debt Investments

What types of debt investments are there and what are their strengths and weaknesses?

After explaining what is real estate crowdfunding, how it works and what benefits it brings over traditional real estate investing, let’s delve deeper and explore what types of real estate crowdfunding are on the market.

There are two main types of real estate crowdfunding investments at the moment, equity investments and debt investments. Investors need to consider several factors when deciding what investments they are going to take it. Usually, they vary in potential returns, liquidity and level of risk they possess.

Related article: Real Estate Crowdfunding: Equity Investments

In this article, we are going to focus on debt/loan investments and explain what are their strengths and weaknesses, and what they mean for investors.

Debt/Loan Investments

Probably the most common type of real estate online investments are debt/loan investments. In this case, investors act as lenders to the property owner, investing in a loan associated with the respective property project.

The holding periods for debt investments are relatively short and usually vary between 6–24 months, which makes debt investments pretty liquid on the real estate investing scale. During the period, investors receive a fixed interest on a regular basis.

Talking about the risk and yields associated with this type of investing, we have to divide debt/loan investing into two types: Senior debt and Mezzanine debt.

Senior Debt

Senior debt is the first source of money that property developers and sponsors are reaching for when……Continue reading

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