Real estate crowdfunding is a great way for new investors to begin their path to developing a passive income. It allows investors to earn rental income and profits from the sale of owned properties. With modern-day technology and easy access to the web, real estate crowdfunding is something that anyone can take advantage of if they are interested in increasing their income.
What is real estate crowdfunding?
Real estate crowdfunding uses social media and the internet to connect investors who may have a mutual interest in investing in a common project. It is very similar to equity crowdfunding in the sense that investors can buy a property and become shareholders. Investors don’t have to buy the entire property but instead can earn a portion of the profits generated from the investment.
Real estate crowdfunding was originally created by JOBS (Jumpstart Our Business Startups Act), which allowed crowdfunding to aid small businesses. The SEC (Securities and Exchange Commission) has since taken off the restrictions so that non-accredited investors can invest in crowdfunding projects. This has widened the pool of investors in the real estate industry.
Who is real estate crowdfunding for?
Investors of all ages can begin their path to a passive income. Whether a seasoned or first-time investor, the playing field is level. One of the most important components of successful investing is taking the time to research potential investments, giving each investor an equal opportunity for success.
Conducting the appropriate amount of research determines the success that can come from each project. With easy access to the internet, research is something that any investor can perform within a matter of minutes. This makes real estate crowdfunding an easy market to dive into.
What are the benefits of real estate crowdfunding?
There are many benefits to crowdfunding. Due to the COVID-19 pandemic, lenders have been slower to supply funding because of sensitive financial stability. However, real estate crowdfunding gives investors a low-risk, high-reward opportunity. Platforms such as Holdfolio give both accredited and non-accredited shareholders the resources to gain more knowledge on investments.
One advantage of crowdfunding is the ability to earn extra money from the dividends that are generated by the investment. Depending on the platform and the package that is selected, investors can choose to have dividends paid out quarterly or monthly. From there, investors are given the option to either reinvest their dividends back into projects or pull out the earnings as they go.
Another attractive aspect of real estate crowdfunding is that many platforms allow individuals opportunities to invest as low as $500 to $1,000. This makes it relatively easy for new, young investors to enter the market.
Finally, real estate crowdfunding platforms provide users with resources to learn about real estate and also browse multiple investment opportunities online. They provide a secure dashboard that allows investors to be able to manage their investments in a secure manner.
What are the cons of real estate crowdfunding?
Although real estate crowdfunding can be a great source of income, there are also factors to consider in making this decision. One of the cons of crowdfunding is investor risk. There are many circumstances that are out of the investor’s control. Market volatility is likely the biggest downfall for this type of investment. Real estate crowdfunding may not be the right choice for you if you prefer to have more control over investments.
Crowdfunding can also be an illiquid investment, meaning that the investments cannot be easily sold for cash if necessary. In most cases, even if an emergency situation comes up, it is almost impossible to pull out the funds from that investment. This could be a problem for inexperienced investors who might need the flexibility to access their funds more quickly.
It is important each investor evaluates the pros and cons before entering a new deal. However, crowdfunding is an opportunity for investors with any level of experience to try a new line of investing. With crowdfunding, the opportunities and benefits are endless, especially if paired with the appropriate due diligence.