Real Estate Crowdfunding Explained

Real estate crowdfunding offers another option for diversifying your financial portfolio.

Crowdfunding offers new and exciting ways to invest in properties without the traditional hassles. A way to diversify your portfolio, it allows you to purchase a property (or a share of a property) as part of a group. If you happen to be in a position where you have only a small amount of money to invest, it may be one option to examine as a way to build your wealth.

What Is Real Estate Crowdfunding?

First things first, what exactly is real estate crowdfunding? In a nutshell, it's an innovative way for people like you and me to invest in real estate projects, whether they be residential, commercial, or even development, without the need for truckloads of cash or going through the intricacies of becoming a landlord.

The Nuts and Bolts: How It Works

So, how does this work? It's all about bringing together a bunch of investors through an online platform, which acts as the go-between for investors and property developers. Think of it like a crowdfunding campaign, but instead of contributing to a creative project, you're investing in real estate. Your money becomes part of a pool of capital using online financial technology, typically with the money paid into a privately held real estate investment trust (REIT) that own various real estate investments.

Here's how it typically works:

You Find a Crowdfunding Platform: Start by finding a reliable real estate crowdfunding platform. There are several out there, so do your homework and pick one that suits your investment goals.
Do Your Due Diligence: Be sure to spend the time looking at other's reviews and examine the vendor closely before investing. Ask how long your money will be tied up and speak with your accountant about the tax impact of your crowdfunding investments. Compare the terms, structures, fees and opportunities among various platforms.
Select Your Project: Once you've signed up, you get to browse through various real estate projects. These could be anything from residential developments to office spaces or even hospitality ventures.
Invest Your Dough: After you've found a project that tickles your fancy, you invest your money. Here's where things get interesting – you don't need to buy the whole property; you can invest in a portion of it. So, even if you don't have the budget for an entire building, you can still get in on the action. While you can invest as little as $500 in many platforms, make sure as with any investment, it's money you can afford to lose.
Wait for the Returns: Once the project gets rolling and starts generating income (like rent or the sale of properties), you, along with the other investors, get a slice of the profits. It's kind of like being a shareholder in a real estate venture.

What are the Benefits?

Now, you might be wondering, what's so great about real estate crowdfunding? There are a few standout perks:

Diversification: With a smaller investment, you can spread your funds across various projects, minimizing risk.
Accessibility: You don't need to be a real estate mogul to get started. It's open to regular folks with modest budgets.
Hands-Off Investing: Say goodbye to the hands-on responsibilities of being a landlord. You can invest and watch your money grow without the property management hassles.

A Few Words of Wisdom:

1. Due diligence a must: While real estate crowdfunding is a fantastic way to dip your toes into the real estate game, it's essential to do your due diligence. Research the platform you're considering, read up on the project details, and consider seeking advice from professionals.

2. Track records vary: Not all platforms and projects are equal. Some lack a good track record, so be certain to examine their experience and time in the game.

3. Accredited vs. Non-accredited: While some platforms are open to all investors, others may require investors to qualify as accredited investors in order to contribute (annual income is over $200,000 or their net worth is over $1 million).

Conclusion

Real estate crowdfunding can allow you to be a part of lucrative real estate ventures without the traditional headaches. So, if you've been curious about investing in real estate but didn't know where to start, crowdfunding might just be the gateway you've been looking for.

How to Have a Support Team for Fresh Ideas and Diligence

For ideas and support for investing wisely, consider joining the Investors Network Community INC Mastermind Program. Feel free to contact Katy who can answer your questions so you can see if it's a good fit for you.

A Mastermind group is one of the most valuable additions for your toolbox to help you achieve the life of your dreams.

Katy Fleming, Director can be reached by email at success@fleming2u.com.

Categories: crowdfunding, Real Estate Investment Strategies