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Understanding Investor Trust in Real Estate Crowdfunding

LIFULL Investment, a subsidiary of the LIFULL Group, recently conducted a survey to gauge investor sentiment towards real estate crowdfunding. This move is in response to the rapidly expanding market, where transparency has emerged as a significant factor for trust among investors.

Background of the Survey

The real estate crowdfunding sector has seen significant growth, allowing individual investors to engage in real estate transactions online. However, challenges such as delays in fund repayments have raised concerns about the reliability of operators and the quality of information disclosed by the funds. This shift has caused both individual investors and regulatory bodies, like Japan's Ministry of Land, Infrastructure, Transport and Tourism, to stress the importance of transparent information dissemination. A committee has even been established to oversee the enhancement of disclosures for general investors as part of the future structure of the specific joint real estate business.

Key Findings from the Survey

Deciding Factors for Selecting Crowdfunding Services

The survey indicated that the foremost consideration for choosing real estate crowdfunding services is the reliability of the operators, as reported by 37.5% of participants. This suggests that investors prioritize the credibility of the companies behind the funds over attractive terms and promotions. Given that real estate crowdfunding inherently lacks capital guarantees, the operational credibility of these services is crucial for investor decision-making.

Trustworthiness Based on Information Transparency

A majority of respondents, 71.6%, cited transparency of information as a vital criterion in assessing the reliability of the crowdfunding services. This underscores that investors prefer thorough and comprehensible disclosures over the operator's size or past performance. With most investment decisions being made based on online information from the operators, the provision of holistic risk disclosures has become increasingly important for building investor trust. Operators must be forthright and honest about potential risks associated with their funds, rather than merely cherry-picking favorable information.

Importance of Returns

When it comes to selecting funds, a staggering 47.0% of participants highlighted the attractiveness of returns as their main consideration. However, qualitative responses showed that many investors also seek a balance between safety and returns, indicating that too high a return could raise red flags. Additionally, factors such as the property's location and the junior investment ratio were also taken into account when seeking favorable returns.

Insights from LIFULL's Management

Naomi Koyama, the operations manager of LIFULL Real Estate Crowdfunding, commented on the findings:

"The conditions for selecting crowdfunding options hinge on a proactive stance towards information disclosure." The survey clearly delineates that investors are not solely focused on high returns but deeply value transparent information provided by trustworthy operators. In the upcoming fiscal year, LIFULL anticipates a rise in new domestic funds, signifying the need for all investors, especially newcomers, to consider the inherent risks associated with individual funds.

By focusing on the balance between yields and risks, investors can ensure they are making informed decisions.

Transparency Initiatives

LIFULL Real Estate Crowdfunding is dedicated to fostering this transparency, conducting thorough reviews of fund operators as part of their service. This includes the preparation and release of comprehensive reports to help investors make informed choices. Recognizing the urgency for information disclosure, new measures will be introduced, including:

• - Fund Review Reports detailing LIFULL's assessments of funds
• - Business Operator Review Reports set to be released in September 2025
• - Monitoring Reports produced during the fund's operational period for investors

Conclusion

The findings from this survey emphasize the significance of transparency in establishing trust within the realm of real estate crowdfunding. As the market evolves, it becomes imperative for investors to combine their search for high returns with a robust understanding of the risks involved. LIFULL Investment remains committed to providing clarity and trustworthy information to empower investors in making sound investment choices.