Right, let’s start off by first explaining the difference between the two options.
Debt crowdfunding is also known as Peer-to-Peer (p2p) lending and operates like a loan but bypasses traditional banks. As an investor, you would lend your money to either another peer or company and it would be returned in an agreed timeframe with interest. This could either be monthly or at the end of a project. The company must return all loans (investments) before taking profits. This is a low risk and low return form of investment. The average returns for debt crowdfunding are between 5% -9% per annum.
Equity Crowdfunding differs from debt in that people invest in an unlisted company or project in exchange for equity. Money is exchanged for shares or a small stake in a business or project. Investors make returns by either receiving dividend, profits, or shares. This is a higher risk and higher returns strategy as your returns could go up or down during the investment period. The average returns for Equity Crowdfunding are between 8% - 15% per annum. I think we all know banks and the low interest rates which Bank Funding offers to investors and the hoops you need to jump through to get a loan. If you invest your money in a bank you can expect to receive returns of between 0.9% - 3.9%.
Property Investment Crowdfunding is quite a unique model in that there are several different companies offering investors tailor made investment strategies to meet their needs. Investors are given the opportunity to invest in rental income, equity in a property (which is sold at a profit) or investing in property development. Shojin Property Partners is an equity property investment company who co-funds in all their developments.