A Real Estate Crowdfunding Example

Let’s look at a real-life example of real estate crowdfunding to see how it works.

Imagine a company called Smart Developments wants to build a new apartment building in your town. They need Kshs. 10 million to get started, but they don’t want to borrow all the money from a bank.

So, they go to a crowdfunding platform and create a project listing. They explain that they plan to build 20 apartments and that investors can help fund the project. Each investor can contribute as little as Kshs. 50,000.

Many people in the community, excited about the project, decide to invest. Within a few weeks, Smart Developments raises the full Kshs. 10 million with the help of 200 investors who each contributed different amounts.

After the building is completed, the apartments are rented out. The monthly rent collected from the tenants is Kshs. 300,000. The crowdfunding platform then distributes this rental income to all the investors based on how much they invested. For example, if you invested Kshs. 50,000, you might receive Kshs. 7,500 each month.

After a few years, the value of the apartment building increases, and Smart Developments decides to sell it for Kshs. 15 million. The investors earn even more money from the sale.

This example shows how real estate crowdfunding allows everyday people to invest in big projects and earn money from both rent and property sales.