Real Estate Crowdfunding
When we speak of real estate investment, most take it to hundreds of thousands of dollars, and you usually do not have such an amount lying in your checking account unless you are Barbara Ann Corcoran.
But lack of funds should not stop you from expanding your investment portfolio, and this is where real estate crowdfunding can make a big difference!
Real estate crowdfunding is a process of gathering funds from many investors and putting the whole sum into funding a real estate project. Property investment was earlier only meant for the HNIs (high net-worth individuals), but now you can earn significant passive income with nominal investment thanks to online real estate crowdfunding platforms.
But if are you wondering what is crowdfunded real estate. Read on to learn more!
What is Real Estate Crowdfunding?
The World Bank estimates that global crowdfunding volume, including real estate and other industries, will reach $93 billion by 2025 (source). Crowdfunding for real estate allows small investors to pool money and be able to invest in larger real estate projects.
Today, investing in multifamily apartments in the US via crowdfunding is very common.
Investing in multifamily real estate helps you make money in two ways:
1. Monthly to annual cash flow distribution from property operating profits.
2. Equity growth upon sale.
While some real estate crowdfunding platforms allow only accredited investors, others enable investors to have a stake with a minimum amount of $5,000.
Top Real Estate Crowdfunding Platforms
Are you searching for the best real estate crowdfunding platforms in 2023? Here are a few names you might want to research,
It is an equity crowdfunding real estate platform that offers multifamily real estate investments for US citizens or permanent residents. You can fund projects ranging from $1 million to $30 million.
Minimum investment: Investment starts from $1000 for individual investors to $100,000 for accredited investors.
Fees: 0.15% annual investment advisory fee + 0.85% yearly portfolio management fee.
It is a prominent equity-based multifamily real estate crowdfunding platform where the developer invests in a big part of the project.
Minimum investment: It starts at $25,000 and is only available to accredited investors.
Fees: Management fees are dependent on the investment size.
They offer the option to invest in both debt and equity investments. They have more than $5 billion in deals posted on their platform and say they have invested in $1 billion of total property value.
Minimum investment: You can start your investment portfolio with just $5000.
Fees: The platform levies 1% to 1.25% as management fees.
It acquires, develops, and manages commercial real estate investments.
Minimum investment: You can invest as little as $500 in the DiversyFund Growth REIT.
Fees: No administration or broker fees, but a 2% management fee is charged.
How Does Real Estate Crowdfunding Work?
Buying multifamily real estate in the US is frequent and widespread among those looking to build and increase their wealth.
Buying larger multifamily property on your own can be onerous. You have to have a sizeable amount of equity, you need to secure a mortgage, and once you purchase you have to run the property.
On the other hand, real estate crowdfunding allows investors to invest their money in much smaller increments in a variety of different properties where all of the above is handled by the crowdfunding firm.
What are the Real Estate Crowdfunding Investment Options?
Most real estate crowdfunding platforms give you the opportunity to invest your money as either equity in a property purchase or as debt as part of a loan to a property owner.
In an equity investment, you will get a direct stake in a property. The return occurs as an equity share of the total rental income or gains when the property is sold.
In debt investments, you are putting money into a loan secured by some underlying real estate serving as collateral. You will receive monthly or quarterly interest payments.
However, before you make a crowdfunding real estate investment, undertake due diligence and make sure you choose a legitimate platform and you are comfortable with the risks.
Real Estate Crowdfunding: Conclusion
Real estate crowdfunding offers the opportunity for people to invest in real estate without needing substantial money. Before investing in real estate crowdfunding, it’s essential that understand the advantages and disadvantages and conduct a thorough risk assessment before investing.
Real Estate Crowdfunding: FAQs
Q: Is real estate crowdfunding risky?
A: All real estate investing comes with inherent risk. The nice thing about Real estate crowdfunding is it generally allows individuals to invest smaller amounts and the ability to invest in many deals which can diversify exposure to risk if you invest in the right properties.
Q: What happens to your money if you invest in a crowdfunded funded deal fails?
A: You will most likely lose your money.
Q: Where can I learn more about real estate crowdfunding?
A: There are a variety of sources; you can read white papers, attend seminars, or take a course. We suggest you search the internet to identify these kinds of options available in your area.