What should investors be looking for when evaluating real estate crowdfunding opportunities?
Real estate crowdfunding is quickly rising to be a go-to investment strategy for investors. There are a number of options out there on the web today. Some are good, others not so much. So, what should you be looking at when checking out your options?
Make sure it is a good fit. Different real estate crowdfunding platforms rely on different strategies and models. Look for the one which matches your desired strategy, is a match in terms of the amount of investment required, and shares your values. Are you looking to flip houses, hold for long term passive income, get into commercial properties, or invest in residential real estate? Are you willing and comfortable to bet $50,000 on a new investment partner, or does $5,000 seem like a smarter move?
There are some flashy looking websites out there, with appealing calls to action. Yet, some give very little detail about what your money will be invested in, and how. Others are far more transparent. Look at how much they are willing to share in general, how much they are sharing about how they do business, how your money is used, and other aspects. Those open to sharing tend to do far better over the long term than those operating who may be hiding aspects for other reasons.
They say the best indicator of future performance is past performance. So, how well has this platform performed in the past? What is the reputation of the owners and managers? See what data they share, but make sure you understand how it is calculated.
One of the best ways to choose or at least shortlist crowdfunding options is to get referrals. Ask around. Who have others had success with? Check out online reviews and see what others are saying about those you are considering. Ask the platform if they can provide references.
Do the numbers make sense? How much detail will they provide on their business, and the individual opportunities they are offering? What access will you have to the numbers after you invest? What type of reporting is offered to investors? You want as much access as possible, and not only to understand what you are investing in, but how sustainable the model is, and how profits are being collected and distributed.
Real estate crowdfunding has emerged as one of the most attractive investment options available today. Hone in on the best option by using the above factors to shortlist and perform your own due diligence, and then test the waters before scaling up your investments.