4 Crowdfunding Benefits All Real Estate Investors Should Consider

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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.

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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.

The Benefits

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:

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Related: 5 Surprising Things to Know About Real Estate Crowdfunding

Transparency

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.

Flexibility

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.

Diversity

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.

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Related: Real Estate Crowdfunding: What Investors Should Know About the Growing Trend

Deal Flow

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!

About Author

Sterling White

Sterling White started in the real estate industry at a early age back in 2009. The company he co-founded Holdfolio is a real estate crowdfunding platform based in the Indianapolis market. Before founding Holdfolio Sterling and partner Jacob Blackett were involved in the purchasing and selling of 100+ single family homes nationwide. In his free-time he trains for a World Record

8 Comments

  1. Peter S.

    Hi Sterling,
    It seems like there have been a few articles written about RE crowdfunding in the past few weeks. Does this type of investing function similar to peer to peer lending sites, such as Prosper and Lending club? What are some companies that are doing this type of investing?

    • Peter Amour

      similar to those mentioned , but you have to be accreditted investor . there are many if you do a google search , or try the forums on BP . i have used realty shares , realty mogul and have been happy so far , not sure about all the others though.

    • Sterling White

      I am not too familiar with using Prosper or Lending Club so I can not speak on those, but Peter had a good list of some companies in the real estate crowdfunding space. As he stated however those companies are only dealing with accredited investors. There’re some platforms in the space that do target non-accredited as well, in which you can do a simple google search to find them.

  2. Philip Kauppila

    I also looked into crowdfunding with one of the upper echelon companies. FYI, unless you are accredited (AKA so wealthy that you don’t need to invest with them) you are pretty much out of luck in this area. For those accepting non accredited lenders. I understand this is illegal and I would do some real due diligence before putting any money with one of these companies.

  3. Aaron M.

    I have personally been investing with Lending club for a number of years now, and I am not accredited. This may have changed, but I believe it depends on how much you want to invest with them whether you need to be accredited or not. Since you can start with as little as $25, I believe that is why.

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