Do you want to invest in real estate properties but don’t have the capital and time to get started now? Consider achieving your goals through real estate crowdfunding.
When many people think of crowdfunding, popular sites like GoFundMe or Kickstarter may come to mind. But there are also real estate crowdfunding sites, that were established under the 2012 JOBS Act, available that allow people to come together to fund a project.
Real estate crowdfunding is a hybrid investment opportunity that incorporates elements of stock market investing with the ability to invest in specific deals in a specific location. You’ll be able to invest in real estate properties online without going through a credit check, reviewing lengthy loan documents, and acquiring a large capital investment on your own. You’ll be able to get a piece of the income stream that these properties produce.
Because real estate crowdfunding is fairly new to the average person, you must be willing to do independent research. Research the crowdfunding sites you’re interested in and attend their webinars. You also want to get recommendations from other people who have done crowdfunding with the company. Popular crowdfunding sites include Fundrise, Realty Mogul, and Ground Floor.
How Does Real Estate Crowdfunding Works?
Let’s say you have a property with a purchase price of $100k. If you’re an investor, you have to raise or acquire that amount in order to add the property to your portfolio. The investor could go to a bank and proceed with the process of completing tons of paperwork, getting appraisals, and putting down a 20% down payment.
If an investor is not eligible for bank financing or wants to avoid going through a bank, they can leverage real estate crowdfunding sites and acquire small amounts of money from a mixture of non-accredited and accredited investors. Everyone can contribute different amounts and earn a piece of the pie.
Questions To Consider
Before investing your money on a real estate crowdfunding site, do your research. Due diligence is required to ensure the investment is viable and makes sense for your portfolio.
Here are some questions that can guide your research:
-What is the crowdfunding site offering you for your investment in the deal?
-Will you be the first or last to get paid in the deal?
-What is the expected return?
-What do you know about the area you are thinking about investing in?
-How much do you know about the people who are putting the deal together?
-What are the goals for the project?
-What is the risk/reward profile for this project?
-How Much Money Will You Make?
All investments are risky in nature and do not provide financial guarantees. Read the strategy and disclosures for each fund to determine if the company is pursuing a long term capital appreciation strategy or focused on recurring streams of income. This will give you insights on how you could make money.
It’s important to get as much information as possible about a fund to decrease the level of risks you are taking on. You have a responsibility to know what you’re investing in and how the fund is expected to perform on an ongoing basis.
If you’re seeking to invest in real estate properties online and produce another stream of income, real estate crowdfunding is an option you should consider. Equip yourself with as much information as possible and proceed accordingly.
Charlene Rhinehart is an award-winning speaker, consultant, and coach who uses digital technologies to share inspiring stories with the world. She helps others live their best life as a Financial Coach at Wealthy Women Daily, Founder of the Career Goddess Academy, and Travel & Lifestyle Writer at BlackCoupleTravels.com. Charlene recently published her first book, “Dividends Are a Queen’s Best Friend” on Amazon.
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