10 Great Reasons to Invest with Real Estate Crowdfunding
Crowdfunding is changing the face of commercial real estate investing. Despite the practice’s phenomenal growth of late, some investors continue to be on the fence about it. Because it is powered by online technology and handled over the internet, crowdfunding is sometimes viewed as riskier than more traditional options. However, despite its relative newness, crowdfunding has quickly emerged as a viable way for investors of all experience levels and means to engage in direct real estate investing.
If you are still not sold on real estate crowdfunding, consider the following 10 reasons to give it a try.
- The Same But Better – Contrary to what many investors believe, crowdfunding does not reflect fundamental shifts in structure or action. It is no different than real estate syndication; it just simplifies the process of engaging in direct real estate investing. Engaging in crowdfunding is no riskier than offline investing. In fact, quality crowdfunding platforms make the practice safer, easier, faster, and more efficient.
- Exponential Growth – Title II of the Jumpstart Our Business Startups, or JOBS, Act of 2012 made real estate crowdfunding possible. Prior to this, real estate syndication almost always had to be conducted privately. Section 506(c) of Regulation D, however, allows syndication to be conducted publicly, which means that syndication can now be performed online. Despite the fact that this law only went into effect in September 2013, crowdfunding has rapidly emerged as an increasingly common way to engage in direct real estate investing. “Everybody’s doing it” isn’t necessarily the best reason, but it surely indicates that the practice is legitimate.
- Direct Investing – For decades, the only way for everyday investors to get in on most commercial real estate deals was by either buying into a mutual fund that is made up of several real estate companies’ properties or by buying into a publicly traded real estate company that owns numerous properties. Crowdfunding, on the other hand, allows investors to enjoy a stake in a single specific property or in a fund that has a certain investment focus. It is now possible to choose from operators, locations, and types of properties that more effectively meet your investment objectives and strategies.
- Powerful Reporting Platforms – In the old days, making sense of investments was time-consuming, inefficient and confusing. That’s especially true for those who aren’t financial wizards. Today’s best crowdfunding platforms include online dashboards that allow you to manage your investments more easily and intuitively. From the comfort of home or wherever you happen to be, you can receive and store K-1s, access quarterly reports, view distributions and engage in many other crucial activities.
- Easily Compare and Contrast Opportunities – The best real estate crowdfunding platforms provide information in a consistent format that makes it easier to digest and understand. As a result, comparing and contrasting competing investments is easier than ever. Through these platforms, you can access timely, comprehensive information about investment opportunities around the country. Most platforms let you apply filters to more quickly zero in on investments that meet your precise criteria. You can usually even register to be alerted when new offerings that meet your criteria hit the marketplace. What could be easier than that?
- Simpler Diversification – Even brand-new investors know that a crucial aspect of reducing risk is by establishing a diverse real estate investment portfolio. However, traditional investing meant having to come up with large minimum investments just to participate, making it difficult to affordably acquire a diverse array of properties. With crowdfunding, however, you can usually get your foot in the door with a much smaller minimum investment. This means that you can put smaller amounts into several opportunities rather than put all of your eggs into one basket. In this way, you can more easily put together a portfolio of properties with divergent risk profiles, investment structures, sponsors, asset classes and holding periods.
- Nationwide Access and Exposure – Under the old way of doing things, investors were usually limited to opportunities that were available in their neck of the woods. This, of course, drastically reduces your ability to find the right investments and to diversify your portfolio. Modern crowdfunding platforms have leveled the playing field by providing better transparency and easier access to opportunities across the country. At any given moment, you can log on to this type of platform to access available deals across the country in real time. Having the ability to invest in any market is huge. This system benefits sponsors too by allowing them to work with investors on a national rather than regional level.
- Avoid Equity Market Risks – Increasingly, investors are turning away from equity markets due to major international uncertainties. One only needs to look to China for a prime example of this issue. Crowdfunding enables investors to easily move away from U.S. equity markets and toward direct real estate investing instead.
- Unbeatable Convenience – Since everything is handled online with crowdfunding, investing in real estate is easier and more convenient than ever. With a few strokes of the keyboards and a few clicks of the mouse button, you can compare competing investments, access comprehensive information about each and complete entire transactions from wherever you happen to be. At long last, everyday investors have access to institutional-quality commercial real estate investment opportunities.
- Superior Cash Flow – Private real estate investment offerings on crowdfunding platforms allow for sustainable, long-term investor cash flow distributions that grow throughout the asset-holding period. They typically begin around 6 to 9 percent annual rates of return. They can produce yields in the double-digits within three years. Some even do so right off the bat. This allows investors to earn strong yields and, upon sale, exceptional equity appreciation.
If you have held off on investing in real estate through crowdfunding, there has never been a better time to get started. Crowdfunding is here to stay. If anything, it will become more popular and mainstream in the years to come, so get on board now to avoid missing out.
For more information about commercial crowd funding and how you can get into commercial real estate without millions in down payment and above average returns click the link below.