Over the past few years, the investment landscape has changed considerably.
One such example of this is seen in the real estate investment landscape.
There has been a recent rise in real estate crowdfunding platforms.
These sites provide significant accessibility and investment opportunities to the average investor.
Today, we’ll cover everything you need to know about these exciting investment platforms.
We’ll go in-depth to cover what real estate crowdfunding is and the benefits that it offers.
We’ll also provide you with a few of the most popular real estate crowdfunding sites to help get you started.
Why Real Estate Investments?
Real estate can be a particularly attractive way to diversify your investment portfolio.
For one, real estate projects provide a high tangible asset value.
If you own stocks or bonds, there is nothing by which you can measure it.
However, real estate comes with a physical brick-and-mortar backing.
Real estate also provides stable annual returns.
The real estate asset class is high-yield, especially when compared to U.S. Treasuries.
Additionally, rental income can accrue over time and pay lucrative gains.
A recent article from the Washington Post highlights the benefits associated with investing in rental properties.
It says that they are a powerful wealth benefit “because they grow value in three ways: They typically appreciate in value over the long run, they harness the power of debt leverage, and they provide monthly income.
Most years, the value of your property goes up, and your mortgage goes down.”
The Problems With Traditional Real Estate Investing
In the past, it was very challenging to participate in real estate investing.
You needed to have a considerable net worth to gain access to the real estate market.
You also needed to worry about managing the properties that you purchased.
For instance, imagine you came up with the capital necessary to purchase a multifamily unit in New York that you plan on renting to tenants.
Even with enough cash for a downpayment, you need to have favorable credit to ensure that you receive a reasonable rate on a mortgage.
Without favorable credit, you will end up paying high interest rates on the investment property.
This could cut into your bottom line.
After you purchase the property, you begin renting it to tenants.
You must acquire licenses and insurance to do so.
You also need to do your due diligence and perform any repairs necessary to ensure the space is habitable.
Because you own the property, you’re responsible for all repairs associated with it.
Not only will this cost money, but it will take up a lot of time as well.
You could pass on some of these responsibilities to a property management company.
This company would be in charge of finding and vetting tenants and leasing your units.
However, it’s still a lot of work, especially when starting on the ground floor.
What Is Real Estate Crowdfunding?
Crowdfunding sites are an exciting alternative that allow you to become a real estate investor without having to deal with any of the hassles and headaches mentioned above.
Crowdfunding allows you to get involved with real estate deals regardless of your:
- Available cash on hand
Essentially, crowdfunding real estate means pooling your money together with other people to invest.
You can gain access to these investment platforms regardless of your track record.
Have poor credit?
Already failed trying to become a real estate developer?
Eligibility requirements may vary from site to site but generally speaking, as long as you can put down a minimum investment, you can get started.
Crowdfunding real estate sites are actually Real Estate Investment Trusts (REIT).
According to the United States Securities and Exchange Commission (SEC), a REIT “is a company that owns — and typically operates — income-producing real estate or real estate-related assets.
REITs provide a way for individual investors to earn a share of the income produced through commercial real estate ownership — without actually having to go out and buy commercial real estate.”
The site goes on to say that REITs can own numerous assets, including:
- Office buildings
- Apartment complexes
- Shopping malls
- Self-storage facilities
So, REITs operate very similarly to a mutual fund.
You buy into this fund, which is made up of various “stocks.”
For instance, your REIT may have an apartment complex in Florida and a shopping mall in Nevada.
You’ll then receive dividends from your investment.
You also don’t have to worry about traditional headaches associated with real estate investing.
Investors are not directly involved with the management of the property.
They don’t have to worry about making repairs.
If a refrigerator breaks in one of the apartment buildings in your portfolio, you’ll never hear about it.
Real Estate Crowdfunding Sites
Are you ready to diversify your portfolio and begin earning income?
Below, we’ve included some of the best real estate crowdfunding sites available.
Fundrise is perhaps the most well-known real estate crowdfunding site available.
Getting started with the site is easy, as the minimum investment is $500.
When you first sign up, you gain access to the Starter Portfolio, which tends to yield around 6.5%.
Once your account balance reaches $1,000, you can graduate to what it calls its eREIT portfolios.
These portfolios allow you to invest in geographic-specific real estate sites, including hotbeds like New York and Los Angeles.
Fundrise will work with you to help you meet your goals, whether it be short-term supplemental income or long-term growth.
RealtyMogul is a site for both accredited and non-accredited investors.
Accredited investors have more of a selection when it comes to choosing real estate properties to invest in.
RealtyMogul offers two types of REITs.
Their MogulREIT I pays monthly dividends and is more focused on debt investments.
Their MogulREIT II is for long-term equity investments.
MogulREIT II is for those who are willing to sit on a property for at least three years.
Earnings come in the form of property appreciation in value, which tends to generate higher income over time.
If you have a bit of capital on hand, you’ll want to consider getting started with Crowdstreet.
Crowdstreet focuses primarily on commercial real estate instead of residential properties.
While CrowdStreet accepts non-accredited investors, the minimum investment to do so is $25,000.
CrowdStreet is one of the only crowdfunding sites that allows you to invest exclusively in commercial real estate.
Some deals offer projected yields as high at 20%.
However, there is a bit more risk involved since there aren’t other assets available to mitigate risk and offset potential losses.
Another platform we’re fond of is Rich Uncles.
Rich Uncles works with non-accredited investors, much like Fundrise.
Investors have the choice between the Student Housing REIT and the Commercial Property REIT.
The Student Housing REIT has a $5 minimum investment, by far the lowest of any crowdfunding site.
The REIT provides a 6% annualized dividend.
The Commercial Property REIT requires a $500 initial investment, and it’s only available in some states.
The payout is around 10%.
Another real estate crowdfunding site is EquityMultiple.
The requirements to get started on EquityMultiple are a bit more rigorous than with Fundrise — EquityMultiple only works with accredited investors.
Your investment can yield as much as 10%.
Start Earning Passive Income Today
Investing can be an excellent way to stimulate your cash flow and boost your annual income.
Real estate crowdfunding tends to be a bit less risky than the stock market. While your returns might not be as lucrative, neither will your losses.
Consider taking advantage of crowdfunded real estate investment sites to begin earning passive income or saving for retirement.
If you’re a potential investor looking for funds for a minimum investment on a crowdfunded site, be sure to check out these 15 passive income opportunities to bring in extra cash.