Questions about Crowd Funding/Syndication
Indianapolis, IN · Member since 2014 · 46 posts · 12 votes
Questions about Crowd Funding/Syndication
3 Replies
- Investor/RE Broker · Eugene, OR · Member since 2014 · 3k+ posts · 968 votes7y
@Ken Scarbrough Are you accredited or non-accredited? If accredited there are a lot more options open to you, although those available to non-accredited have been expanding in number. BTW crowdfunding should be seen as a technique for marketing using technology, and is fairly newly in use ( maybe 5+ years) for syndications. Syndications have been around darn near forever, and the vast majority are probably still not crowdfunded.
- 7yIan IppolitoBusiness MemberInvestor · Tampa, FL · Member since 2015 · 1k+ posts · 1k+ votes
@Ken Scarbrough, I have both syndications/crowdfunding investments (in addition to directly owned real estate) in my portfolio.
From an investor point of you there is not much major difference between syndications and crowdfunding other than you find out about the former through networking/the country club network and you find out about the latter through the Internet.
The pros are that it is truly a passive investment. (So if you were hoping to gain an inside day to day look at how they do their operation, that is unlikely to happen as a limited partner in a syndication/crowdfunding deal. The general partner is the one that is making all those decisions and running the show and you have limited say). On the other hand, during due diligence, they will generally be an open book, so you can ask as many questions as you want, do it on site visit, etc. So if that’s all you were looking for, then syndications/crowdfunding would be fine for you.
The other advantage is that you can access much larger, high-quality properties, strategies and asset classes at a much cheaper entry point then you could if you had to own the whole property yourself. Maybe you pay $25,000 minimum to invest and share in the profits of something that cost $30 million. Most people don’t have an extra $30 million laying around to invest on their own.
The lower minimum allows you to diversify the same amount of money into multiple properties, multiple strategies, multiple asset classes, and multiple locations. So this is better for your portfolio.
They also allow you to access (if you do your homework well) operators who have years more experience than you have and can ever hope to gain on your own.
The downside is that you pay a fee for this expertise. So if you’re looking to save the maximum money, then it’s not for you. The other downside is, being a passive investor means giving up control. Some people can’t do that, so it’s not for them. Also have to feel comfortable with vetting the sponsors. If not, then it’s not really a fit.
As far as which sponsors are out there: there are literally thousands to choose from. I have a number that I prefer and think are some of the best, and if you ask any investor they will have different selections based on their risk profile.
Before selecting sponsors I would recommend taking a step back and looking at your whole portfolio. Figure out what percent belongs in real estate first. Then out of that figure out what percent belongs in the different areas (debt versus equity, Core versus core plus versus value added versus opportunistic, residential versus commercial, retail versus office versus hotels versus self storage versus mobile home parks etc.) then once you figure that out, take a look at the top two or three platforms in your first chunk. Also I would recommend joining an investor club where you can network and get more syndications then you could find on your own. If you start with the top down approach then you won’t end up with a portfolio that is out of whack on risk, because you are investing in whatever you happen to run into.
The Real Estate Crowdfunding Review - Indianapolis, IN · Member since 2014 · 46 posts · 12 votes7y
Thank you
@Ian Ippolito and @Larry Fried for you responses! I have been considering this as another investment tool to add to my "toolbox", but want to do some research before diving in. Thank again!
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