Chances are good that if you follow HomeTuneUp, you have already invested in real estate in at least one way: buying your own home. While many people purchase a house for the sake of having a place they can call their own, many others do it at least in part because they see it as an investment in their future. If they can renovate and improve the house, they can turn around and sell it at a higher value.
But not a lot of consumers have an opportunity to take their real estate investments further than that. But all of that is changing. Crowdfunding real estate is on the rise.
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What is Real Estate Crowdfunding?
Real estate crowdfunding is a somewhat unusual concept, perhaps best explained through this article on Forbes. To sum up, for a very long time, real estate investing was restricted to individuals who 1-had a huge amount of money to invest, and 2-had the right connections through their professional and personal networks to locate a project and get involved.
With crowdfunding, that has changed. There used to be strict legal restrictions on who could invest in real estate, but the SEC opened the doors for non-accredited investors in October of 2015. Ever since then, companies have been springing up to help everyday people invest in real estate.
With real estate crowdfunding, you no longer need $100,000+ to pour into an investment deal. You can get started with as little as $1,000.
Why invest in real estate? If you have purchased your own home, you already know the answer to that, at least in part. As a hard asset, real estate is inherently valuable. There is also a scarcity advantage; there is only so much land on the planet.
On top of that, if you invest in commercial real estate, you can enjoy ongoing cash flow from rent.
You may have some familiarity with real estate investment trusts, or REITs. These have been around since the 1960s and were created with the goal of allowing average consumers in the US to invest in commercial real estate properties, but they posed a number of drawbacks. REITs typically are high in fees and hard to understand.
With real estate crowdfunding online, fees have never been lower—and transparency has never been higher.
Some other unique advantages of real estate crowdfunding include:
- Numerous different projects. You will find incredibly diverse options, so no matter what you are interested in, there should be opportunities in real estate which are an ideal fit for your needs.
- You get a chance to work with project developers. This means you have input in the structures you invest in building.
Are there any drawbacks? Investing in real estate always carries some degree of risk, even if you do it through traditional avenues. While real estate is a hard asset, values can crash in a recession. Liquidity remains low with crowdfunding (always a problem in real estate), and the risk of default from developers is elevated compared to traditional real estate investments.
For this reason, it is extremely important to think hard before investing in real estate, even if you are only going to be putting down a small sum of money. This is also why it is vital to read real estate crowdfunding reviews. That way you can be sure you are going through a reputable company and that you will get access to the best investments and the lowest fees. If you’re not sure where to start, Fundrise is swiftly becoming one of the top sites for real estate crowdfunding investments. Read a Fundrise review to learn more.
Investing in real estate used to be a complex process, and you needed a lot of money and connections to do it. But now you can invest quickly, easily, and securely in residential and commercial real estate projects around the globe. With real estate crowdfunding, you can enjoy the stability and steady cash flow of investing in hard assets, even if you only have $1,000 to start out!