Crowdfunding and Your Real Estate Investment Strategy
In less than a decade, the real estate industry has changed drastically, due to advantage afforded us by the Internet, namely, the ability to search for properties online. Even more recently, crowdfunding for real estate investments has opened the doors to new opportunities for investors. The question is: is crowdfunding for you?
How Does Crowdfunded Real Estate Investment Work?
You’ve probably heard of Kickstarter, a popular crowdfunding platform where entrepreneurs, artists, musicians, inventors, or anyone with a passionate idea pitches that idea and their associated goals to the world (essentially). Anyone interested in supporting that idea can then donate to the project, usually with the promise of some reward at the project’s completion.
That is the type of crowdfunding with which most of us are familiar. However, real estate investment through crowdfunding is not too dissimilar in that it uses the same sort of technology and framework, while opening the door to people who fall outside the traditional investment or lender profile. Entrepreneurs can identify a real estate investment property (ranging from single family homes, to multi-family, to commercial) and post the proposed investment on a reality crowdfunding platform like, RealtyShares. Investors can then pick and choose opportunities they would like to invest in.
The Benefits
- RealtyShares and other platforms provide a secure, automated way to raise funds for a real estate investment.
- Entrepreneurs can bypass traditional sources of investment capital in order to acquire enough funds to secure success.
- Investors can make less risky, more transparent and smaller dollar investments in projects they care about.
- Nationwide real estate investment opportunities are more readily available.
- Investors can diversify their property portfolio, by investing what they would normally invest in one property, into several—without the effort required to manage and operate said properties.
Does It Work?
It really depends on what you are looking to achieve with your real estate investments, but real estate investment crowdfunding is certainly a burgeoning portion of the industry: As of September 1, 2014, TimesRealtyNews.com saw $2 billion in real estate crowdfunding affected. We’ve seen numerous examples of successfully crowdfunded commercial projects where $25 million in funds have been raised for a single project—but that doesn’t mean that crowdfunding is exclusively for commercial investments. On the contrary, it shows the potential for residential real estate investors. The point?
- Keep your eye on real estate crowdfunding and check out a variety of platforms to give you greater insight: RealtyShares, iFunding, Realtymogul, RealCrowd, etc.
- Observe how residential projects fare in this medium.
- Think about whether diversifying your investment portfolio in this way meets your needs.
