How to Start a Real Estate Crowdfunding Business

Blockchain's history of digital innovation has become inextricably linked to the transformation of various industries and real estate is not an exception. One of the most interesting areas that the new technology is opening up in the real estate market is crowdfunding. In this article, we will explain how to start crowdfunding business for financing real estate investments works and describe the benefits it offers to all market participants. In addition, we will also describe the process of developing such a project to help you enter this promising niche.

What is a real estate crowdfunding business?

A real estate crowdfunding business consist of an online platform that gives a wide range of people the opportunity to invest in real estate without the need for a large capital investment. Exactly how the financing process takes place and which properties participants invest in depends on the specific platform. It could be construction financing through tokenization, the purchase of apartment buildings for rent or a simple housing cooperative to buy a home in installments.

Such platforms are becoming a powerful tool for investors and ordinary real estate buyers, who can access previously unavailable real estate investment opportunities and participate in various projects. While builders and realtors are gaining access to new global sources of financing for their projects. Blockchain-based real estate crowdfunding platforms open up new opportunities and offer the following benefits:

• Transparency and trust. Blockchain provides a high level of transparency and immutability in transactions. All transactions are recorded in a distributed registry available for verification by participants. And all records in the blockchain registry cannot be deleted or changed. This builds trust between investors, builders and buyers.


• Accessibility and inclusiveness. Blockchain-based crowdfunding platforms provide real estate investing opportunities to a broad audience of people because they have a very low minimum threshold for entry and typically no restrictions on location or status.


• Reducing intermediaries and costs. The use of blockchain technology reduces the role of intermediaries and the costs associated with them. Funds are transferred directly between investors, builders and buyers, reducing transaction costs.


• Portfolio diversification. Real estate crowdfunding platforms offer a wide range of projects, allowing investors to allocate their funds between different properties. This promotes diversification, which can reduce risk and increase return on investment.


• Security and reliability. Blockchain technology ensures the security and reliability of data storage and transmission. Blockchain-based smart contracts automate processes and enforce transaction terms, eliminating the need for third-party trust.


• Global access: Blockchain-based real estate crowdfunding platforms can attract investors from around the world, providing global access to real estate projects and increasing opportunities for the development of global investment communities.

How a real estate crowdfunding business works?

Typically, a real estate crowdfunding business connects investors with property owners or builders. The platform creates a blockchain-based digital protocol that governs the collection and distribution of investments. Investors can make their contributions, using cryptocurrency or traditional funds, in exchange for tokens representing shares in real estate. Transactions and token ownership are recorded on the blockchain. Smart contracts execute the terms of the transaction, distributing the proceeds of the investment (rental or sale of real estate) to the investors. This ensures efficient investment management, security and transparency in the financing of investment projects.

At the same time, there are already several new real estate crowdfunding models that have been implemented with the help of blockchain.

• Real estate tokenization. Real estate is broken down into digital tokens that represent certain stakes in the property (if 1,000 tokens are issued for real estate tokenization, each such token entitles to 1/1000 of the property). Investors can purchase these tokens and receive income according to the size of their share. Blockchain technology ensures that the tokens are accounted for and transferred, and that the income is automatically distributed to the token holders. This real estate tokenization model is used by the startup RealT.


• Decentralized mortgages. Blockchain technology can be applied to mortgage loans without intermediaries. It allows to simplify and speed up the process of obtaining a mortgage loan, as well as reduce fees and costs. Homelend is an example of such a project.


• A decentralized blockchain cooperative. It is a digital version of a conventional housing cooperative, whose members make a monthly payment into a common fund to take turns buying a home for all members. Blockchain makes this process transparent and secure. In doing so, blockchain also makes it possible to collect all the money in a smart contract and manage its distribution through participant voting.


• Buyback model. In this case, investors purchase stakes in a property with the option for the property owner to buy back those stakes at a later date. Blockchain allows the tracking of shares and transactions, providing transparency and reliability of the buyback process.

How to start a real estate crowdfunding business?

In essence, this is an online business that is created on the basis of an online platform and the necessary legal documents to enable the purchase and sale of properties. To develop a blockchain-based crowdfunding platform, you need to define the functional requirements and business model, select a suitable blockchain platform, develop smart contracts and user interface and test and launch the platform. Here is a detailed description of these steps.

Step 1: Choose a business model

When building a crowdfunding platform, the first and important step is to choose the right business model. The business model determines the basic principles of the platform, the logic and goals of crowdfunding, how to attract and interact with investors, and the mechanisms for generating income.

Choosing a business model for your blockchain-based real estate crowdfunding platform requires careful analysis and evaluation of various factors. Here are some key tips that can help you with this choice:

• Research the market. Conduct market research on real estate and crowdfunding to understand current trends, investor and developer needs and the competitive advantages of other platforms.


• Determine goals and target audience. Determine what goals you want to achieve and what tasks you want to solve with your platform, as well as who your target audience will be. Consider their needs, preferences and behavioral patterns.


• Consider the models of other platforms. Examine successful real estate crowdfunding platforms and their business models. Analyze what makes these models successful and how they align with your goals.


• Conduct an economic analysis. Evaluate the potential revenue and costs associated with each model. Consider factors such as fees, subscriptions, development costs, and support costs for your blockchain platform.


• Check the sustainability of the model. Assess the stability and long-term viability of the chosen model. Consider factors such as competition, changing market conditions and potential risks.

Step 2: Choose a blockchain developer

Choosing a developer is key to successfully starting a real estate crowdfunding platform, as the quality of their work directly affects the reliability, security, efficiency and functionality of your platform, as well as the user experience. In addition, a good developer is able to recommend best practices and solutions tailored to the unique needs and goals of your project. When selecting a blockchain developer, it is advisable to consider the following factors:

• Experience and competencies. Make sure the candidate has sufficient blockchain experience and knowledge of smart contracts, decentralized applications and cryptography.


• Technical expertise. Make sure the candidate has a deep understanding of various blockchain platforms such as Ethereum, BNB Chain, Stellar and others. He should be able to recommend the most appropriate blockchain for your crowdfunding platform.


• Reputation, reviews and recommendations. Check the developer's past projects and find out how successful they were. To do this, contact previous clients and find out about their experience with this developer, how satisfied they are with his work.


• Communication and collaboration. It is important to choose a developer that you can easily communicate and collaborate with. Good communication will facilitate communication and ensure that your ideas are implemented effectively.


• Budget and timeline. Evaluate whether the developer fits your budget and can work within the given deadlines. Keep in mind that the quality of the developer's work and experience can affect the cost of the project.

Merehead has all the qualities you need to create a secure and efficient blockchain platform for real estate project financing. Our development team has the professional experience, expertise and in-depth understanding of the technical aspects involved in developing IT solutions. We guarantee a high level of quality, meeting deadlines and an individual approach to your needs, allowing you to successfully implement your idea and achieve the desired results.

It is worth mentioning separately that our company also provides the opportunity to launch white label crowdfunding platforms. Minimal customization is compensated by the speed of launch.

Step 3: Choose a blockchain for your project

Your choice of blockchain will affect the scalability, performance, security and cost of the platform's transactions. Different blockchain platforms such as Ethereum, Hyperledger, EOS and others offer different protocols and features that can fit your needs. For example, Ethereum is known for its flexibility and ability to create smart contracts, while Hyperledger offers a more private and hybrid solution.

Determine the basic requirements of your project, such as the number of transactions, the level of transparency and data privacy and the necessity for smart contracts, to choose the most suitable blockchain for you. Then study the features of each blockchain and compare them to yours.

Step 4: Define the functions of the platform

The next step in development is to clearly define the functions and core capabilities of your future crowdfunding platform. This will allow your team to focus on what tools and services should be provided to users, as well as to make sure that the platform created will meet the needs of your audience and the real estate crowdfunding market. Here are the features you need to implement in a project like this.

Project List. Provides the user with the ability to browse and research available projects that are looking for funding. The project list displays basic details of each project, such as its name, description, fundraising goal, timeline and current status. Users can filter and sort projects by various parameters to find the most suitable ones for their participation. In addition, additional information about a project's team, rating and feedback can be provided to help users make an informed decision about contributing to projects on the platform.

Developing this feature includes creating a user-friendly and intuitive interface that makes it easy to find and filter projects based on one's preferences. In addition, it is important to provide the ability to update the list of projects in real time so that users can see up-to-date information about each investment project.




Registration and Verification. When setting up your blockchain platform for real estate crowdfunding, make sure it allows investors, builders, buyers, and property owners to create accounts. Once registered, users can go through a verification process (KYC), which can include verification of identity, address and other relevant data. You can also add a two-factor authentication option and enable login to your platform via Google or Facebook.




Investor Profile Management. This feature provides investors with the ability to manage their profile on the platform and perform various activities related to their investments and interface customization. The development of this feature includes creating an interface where investors can view their investments, receive project updates, make additional deposits or withdraw funds. It is important to provide the ability to track past and current investments, as well as give investors access to their statistics and analytical data about the projects in the user's investment portfolio.




Analytics and Reporting. Allows users to generate reports, statistics and charts that help gain a better understanding of the status and performance of the investment portfolio, which helps make informed decisions, improve the platform's development strategy and provide statistical information to users to make investment decisions. In order to develop this function, a system of data collection, processing and analysis needs to be developed, as well as informative visualization tools for analysis and reporting.

Customer support. Includes the provision of assistance and solving questions arising from users. It communicates with users, provides information, solves problems and ensures that user needs are met. Developing this function includes creating an effective feedback system, training support specialists, defining effective procedures for handling requests, and ensuring a high level of customer service. Remember, customer support fosters long-term relationships with users and increases user satisfaction, which is important to the success of a crowdfunding platform.

Payment processing. Enables users of your real estate crowdfunding blockchain platform to make payments and receive a return on investment in their account. The development of this feature includes integration with payment systems and blockchain to ensure the security, reliability, and transparency of financial transactions. Payment verification and validation mechanisms should also be included to ensure the accuracy and reliability of payment processing and fraud protection.

Security. Includes the implementation of security measures such as data encryption, two-factor authentication, protection against hacking or fraud and monitoring and detection of possible threats. Developing this feature requires careful risk analysis, selection of appropriate technologies, and application of data security best practices.

Notifications. Allows you to send notifications through various communication channels, such as email, SMS messages, push notifications, messengers and social networks.

Step 5: Create the technical architecture of the project

The next step in creating your crowdfunding platform is to develop a technical architecture. This is a structural representation of a software system or information system that largely defines its components, modules, interfaces and the connections between them. The technical architecture also provides the basis for the development and operation of the system, determines the choice of technologies and algorithms, and ensures the efficiency, scalability and security of the system.

Step 6: Develop the UX/UI design of the platform

The next design step is to create a user-friendly and attractive user interface (UI) and optimize the user experience (UX). This includes creating intuitive navigation, easy-to-use data entry forms, an aesthetically pleasing visual design and also an attractive design that matches the brand and goals of the platform. A good UX/UI design will help improve user interaction with the platform, increase user satisfaction and contribute to the achievement of project goals.

Step 7: Choose the technology stack of the platform

The right technology stack ensures that the crowdfunding platform is easy, fast, reliable, and efficient to develop, as well as ready for future development and scaling. In addition, the right technology stack can impact the cost effectiveness of a project by reducing the development, support and scaling costs of a future project. Here is the technology stack for starting a crowdfunding platform backend: