Invest On Own Or Through Crowdfunding?

8 Replies

Hello, all - I am brand new to both the bigger pockets community and real estate investing (other than REIT's).  Just starting out, am I better off investing with one of the crowdfunding firms (like Realty Shares, etc.) or are there advantages to investing in separate properties on my own?  Looking forward to hearing your opinions.  Thank you.

my personal suggestion is to get your feet wet with your first deal on your own....

i'll clarify you will need a realtor, a lender, a contractor, a title agency, a broker in order to complete the deal.

If you have purchased your own home, then you've been through the process once and that may be enough to consider yourself into real estate investing. most financial investors want to know you can swim before they jump in the water with you.

also the first few deals are pretty easy to get the money through banks at a low interest rate. you go to outside investment options when you can't get banks to throw money at you. 

private investors, hard money lenders, and crowdfunding will eat into your profit margins.

with all that said, you're not alone, you have this entire bigger pockets community here to answer your questions when they arise. some are good answers, others are not as good, but we're all trying and learning here.

Thoughts?

B

Hi Carl,
To clarify, are asking the pros/cons of being a passive investor in CF and being an active investor owning your own property?

@Carl Sanger ,  investing on your own in direct real estate gives you the most control. You know exactly what property is being purchased. On the other hand it  also does require a lot of time to learn about real estate, pick out the right property, hire a management company, etc. this may or may not fit your needs depending on your situation. 

 Real estate crowdfunding has the advantage of allowing you to diversify into many different properties, rather than being tied into one or just a few.   Since you pool your money with her investors, it lets you get into much larger and potentially lucrative investment types such as apartment buildings, office buildings, warehouses, etc. that most people would not be able to afford on their own.  Also it requires much less time. The only time invested is the due diligence at the beginning. 

 The downside is that you have to be comfortable in selecting a manager that will do the work for you.  Some people aren't comfortable doing that, and if so then crowdfunding is not for you. 

 And last option is to not choose between the two but simply do both. That's what I do. 

If you have any further questions, just let me know.

Carl,

I'll add one more observation, assuming you are interested in passive investing, crowd funding is one way to do it but don't overlook syndication and direct relationship you can get w/a deal sponsor and the learning that can provide you to be a better investor going forward.  My experience w/both are that you can generally learn more and get closer, better comfort on your investment in dealing directly w/the deal sponsor / syndication team.  Typically, in crowdfunding, you go thru a portal and the crowd funding site, you may have one initial call w/the sponsor and that's it.  With syndication, we can create deeper relationships w/our investors, sending out monthly project update, quarterly financials, and conf calls as needed.  Crowd funding has advantages in usually lower minimums and can spread into all sorts of niches but if you say hey, I really like a certain niche (i.e large multi-family apartment communities), then finding a sponsor w/a great track record that identifies the best markets to be in and finds value - add investments that lowers your risk, you can learn and earn.  I've posted in link below on reasons why DIY and syndication can co-exist.

https://www.biggerpockets.com/forums/432/topics/30...

@Carl Sanger Like Ian I have both my own properties - bought mostly turnkey for a more passive experience; and investments in a rather unique crowdfunding platform. The latter is definitely more passive, but it also has the advantage of me knowing exactly what I am investing in - portfolios of 10 mostly SFR properties that the managers already own and continue to co-own even after I invest. I wrote about my experience with this investment earlier this year:

Have I Found the Holy Grail of Passive Real Estate Investing?

Hi @Carl Sanger , crowdfunding is great if you are an expert at evaluating offerings on your own. Real Estate available via crowdfunding can range in scale from single family homes to $50-100M projects. Crowdfunding makes real estate easily accessible, however, in regard to institutional/syndicated real estate investments, the advice of an expert who works in the industry every day, knows all the players and their track records, and performs due diligence on each offering is a great benefit to you and comes to you at no cost. You might consider using an investment advisor to evaluate which offerings are suitable and promising.

@Carl Sanger Jumping into RE prior to getting educated playing with fire.  These forums are filled with the options available.  Before you can even think about what direction to go, you first need to evaluate your resources and interest. This is for you to answer for yourself.  Do you have money/credit, time, and/or education/experience.  Those are the three key resources. Before you decide where you are going you must first determine where you are

Thank you all so very much for allowing me to tap your knowledge!  I will consider and research all of your points.  My only follow-up question is:  Do you think that I could lean more toward one type of investing than another in order to be sure to also obtain the tax benefits (depreciation, deduction of expenses, etc.) vs. another?  Again, I can't get over how much help I have received in just my first day on bigger pockets - thank you all so much!

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