What you must know about bulk buying, crowd funding, and real estate

The Internet has been around for the last few decades. When it first started, brick and mortar business could not fathom why they would want to be present in the digital space.

These days, it is the direct opposite and being in the digital space is something that all companies cannot do without.

The Internet has also impacted the real estate business. With the abundance of information on the Internet, potential buyers can easily research online beforeproceeding with a deal.

Deals wise, the Internet gave rise to property listing sites, whereby property agents could put their listings up for potential buyers to take a look.

However, by looking at some of the recent innovative Internet businesses, could it herald a change in the way real estate businesses and deals are done?

Bulk buying of real estate over the Internet

The concept of bulk buying is nothing new. How bulk-buying works is that by purchasing a large quantity at one go, buyers will be able to negotiate a better discount.

With the success of several bulk buying sites, the question is whether a similar bulk buying arrangement can work for real estate deals as well.

Conceptually, if bulk buying can work for consumer products in the digital environment, should it not work for real estate as well?

To validate the bulk-buying concept, a deal with one of the developers in Iskandar Malaysia was listed on our site. The bulk purchase deal was for freehold terraced houses and prices for some units were as low as RM580,000.

If there were at least 5 interested parties, all of them would stand to get an additional RM30,000 discount. Many users responded and ultimately 6 buyers followed up with the developer’s agent to secure the deal as well as the discounts.

This pilot deal showed that if the opportunity was financially worthwhile, it would be possible for bulk purchase of real estate deals to take place over the Internet.

Crowd-funding and real estate

Another Internet business that recently caught on is crowd-funding. This is a form of “crowd sourcing” and there are several well-known crowd-funding platforms currently available.

These platforms allow people to come together to co-finance artistic projects. Since there is a workable crowd-funding model for creative pursuits, can something similar be applied to real estate as well?

If you think about it, investors coming together to co-invest in real estate is nothing new. Hence, the next step could simply be just harnessing the power of the Internet for like-minded users to find each other.

The real estate market is a fairly opaque one, therefore any platform that allows people to exchange ideas and ultimately find co-investment partners,would provide more transparency in the market.

Similarly, to validate this “crowd-funding” arrangement, users were allowed to put their opportunities on our site and those who were keen to know more about the deal got in touch with the opportunity providers.

Just like any advertising medium, the platform was not directly involved in how the deal was structured and parties involved got directly in touch with one another.

Based on user feedback, the total committed co-investment amount for the first month was more than S$200,000.

While the figure is not much, it validates the concept that the Internet could be used to “crowd-fund” real estate investments.

Conclusion

Based on the various pilot projects that were done, it seems like bulk buying as well as crowd-funding of real estate online is actually workable.

There also appears to be strong interests for such services as the user base increased from 300 to about 800 within a month. Of the 800, about 200 users are from Malaysia.

It is anyone’s guess whether such bulk buying and crowd funding would eventually take off, however potential exists as the business, being Internet based, can easily be scaled across the region.

Right now, the signs are positive and we are looking for partners and investors to bring this business model to the next level.

Even if it does not gain widespread adoption and only captures a small group of engaged users, it would still be worthwhile as a very thin slice of Asia’s burgeoning real estate market is still rather substantial.