7 Reasons You Should Consider Real Estate Crowdfunding. Guest Post by Daniel Kelly

7 Reasons You Should Consider Real Estate Crowdfunding. Guest Post by Daniel Kelly

There’s been a lot of talk lately about the SEC, Reg. A+, etc….but let’s put the lawyer talk aside.  If you’re a real estate investor, here are a few things you need to know about real estate crowdfunding.  It’s become a billion dollar industry in only a few short years, and more investors are getting involved every day.  So what is all the hype about?  Here are 7 reasons real estate crowdfunding might be right for you:


  1. Portfolio diversification.  The stock market is going to continue to go up forever, right?  OK, maybe not.  A downturn will inevitably come at some point, and when it does, you’re going to wonder why you decided to put 100% of your portfolio in equities.  Private real estate returns generally don’t move in tandem with the equities market, and aren’t as sensitive to short-term market volatility.  No investor can consistently predict market crashes (and if you can, you’re probably too busy swimming in a large pile of money to read this article), but portfolio diversification can help you weather the falls better.


  1. Low minimum investments.  Maybe you’re one of the lucky ones who can drop six figures for an investment property without blinking, but let’s face it, most people can’t.  The average 401k balance is only $100,000, so the average investor isn’t in a position to buy an investment property by themselves.  Many real estate crowdfunding platforms let investors participate in deals for as little as $5,000.  This lets you enjoy the benefits of real estate investing while limiting downside risk.


  1. Geographic diversification.  Maybe you think the California real estate market is a bubble just waiting to burst (again).  In that case, there are plenty of platforms that focus on the East Coast.  Interested in the Midwest?  Luckily for you, there’s a platform that focuses on Midwest properties.  Want to spread $100,000 around in 10 different markets across the country?  Real estate crowdfunding lets you do that, too.


  1. Wide variety of deals.  As a real estate investor, you’re no longer limited to the deals that your buddy at the country club brings you.  Investors can choose between lower-risk, lower reward debt offerings or higher upside, higher-risk equity deals.  Interested in stabilized retail properties or new development projects?  The odds are that you’ll find something you’re interested in on a real estate crowdfunding platform.


  1. Asset transparency.  Sure, you can always invest in a REIT.  REITs, though, typically own hundreds of different assets.  To put it bluntly, you won’t really know what the hell you’re investing in.  With real estate crowdfunding, you can select the markets and properties that you’re comfortable with.  You’ll also receive periodic updates on the property, something you won’t get with a REIT.


  1. No property management hassles.  Let’s face it, being a landlord isn’t much fun.  You occasionally have to deal with tenants who haven’t paid rent in three months, tenants who expect you to drop everything at 4 AM to deal with their leaky faucet, and tenants who use your property to conduct God-knows-what kind of illegal activities. Real estate crowdfunding allows you to invest in real estate while leaving property management to the deal sponsors.


  1. Investing in your community.  It’s no secret that a lot of communities and small towns have struggled over the past few decades.  Real estate is the foundation of any community, and instead of waiting for politicians or Wall Street/private equity money to come to the rescue, investors now can invest in their own backyard. Crowdfunding can help connect local residents, community organizations and other stakeholders by allowing them to directly invest in local real estate.  As more people gain the ability to invest in crowdfunding deals in the years to come, more communities will look to crowdfunding for a boost.


Obviously, not all crowdfunding platforms are the same, and not every deal is a winner.  Even the soundest platforms are only as strong as the properties that they list.  If you have any interest in real estate investing, though, check out some of the deals on a few platforms.  You might find a deal that’s right for you.

Daniel Kelly is the Head of Marketing at PeerRealty, a Chicago-based real estate crowdfunding platform.

Duke Long

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