4 Crowdfunding Benefits All Real Estate Investors Should Consider
In the ever-changing trends of the world, it seems that “crowdfunding” has made its way into nearly every single real estate investor’s dictionary. However, some may be a little hesitant at the moment to truly embrace it. After all, is this something that is going to stay or is it simply a fad?
Well, I’m here to tell you that although it is still in its infancy, crowdfunding has been rapidly reshaping the way real estate investors can seek out and invest in properties, making it a particularly well received investing method. To give you a better understanding of how it all works, here is a comprehensive guide that will break down all the finer points of the benefits associated with real estate crowdfunding.
What is Real Estate Crowdfunding?
Well, essentially, this particular method of real estate investing involves the pooling of funds by multiple investors when tackling a certain real estate investment project.
There is absolutely no doubt that real estate crowdfunding provides a lot of benefits for investors seeking access to private real estate investments. In comparison to investing in a REIT or buying an investment property the old fashion way, crowdfunding really has the upper hand when it comes to the following:
One of the major upsides of real estate crowdfunding platforms that none of the other types of real estate investment methods offer quite as well is transparency. For example, with a REIT, investors might only have a limited amount of information about the underlying access shared with them.
In addition, investors have limited knowledge of exactly where their investment dollars are going. However, when it comes to real estate crowdfunding, the crowdfunding platform helps to carefully vet each deal, and the moment that they are available, investors will have the chance to look over the finer details before committing to a final investment decision.
Investors have a lot of options when it comes to real estate crowdfunding, one reason being that investors aren’t restricted to a single real estate company or project. They can spread smaller investment amounts across a wide variety of projects or companies, thus helping to reduce any underlying risks. After all, if one of your real estate investment projects fails to meet your expectations, you will still have several other investments that have the potential to succeed.
For real estate investors who want to increase the diversity of their portfolio, crowdfunding is definitely one of the top ways to go about doing this. Here, investors will have the luxury of gaining more exposure to a wider range of property types and opportunities to enter an entirely new asset class.
The company operating the real estate crowdfunding platform does all the dirty work for you, such as scouting out all of the hottest properties out on the market and deals that would otherwise have been unseen by an individual. In addition, these platforms have operators that bring deals to them, for which the company underwrites to ensure they are bringing quality deals to the table.
All in all, real estate crowdfunding offers the perfect opportunity for investors to get otherwise unknown deals while still experiencing reduced risk and increased benefits.
Investors: Are you on board with the crowdfunding trend? Why or why not?
Let me know with a comment!
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With just under a decade of experience in the real estate industry, Sterling currently manages over $10MM in capital, which is deployed across a $26MM real estate portfolio made up of multifamily apartments and single-family homes. Through the company he co-founded, Holdfolio, he owns just under 400 units. Sterling was featured on the BiggerPockets Podcast and has been contributing content to BiggerPockets since 2014, with over 200 posts on topics ranging from single-family investing and apartment investing to wholesaling and scaling a business.