5 Reasons Why Passive Real Estate Investing Works With Crowdfunding

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5 Reasons Why Passive Real Estate Investing Works With Crowdfunding

People have been looking for ways to invest their money in a way that earns generous returns for centuries. This is nothing new at all. In fact, real estate investing has been around for longer than most financial institutions, as the early days saw people bartering for properties and services. We have come a long way since those days, but the basic premise remains the same: individuals want to see a return on their investment, and the less work they have to do to see that return the better. While it is never a good idea to just invest your money and walk away, it is helpful to pump your money into a project that generates a constant revenue stream for you without you having to actually be physically involved. This form of passive investing has made its way into the real estate sector in recent years, and the opportunities today are almost limitless.

Passive investing with real estate has become more popular with the development of various crowdfunding platforms. While only a few such platforms existed in the United States a mere decade ago, and even fewer abroad, that number has mushroomed to over 80 today. This growth has enabled small and large investors alike to get involved today in scales never before dreamed possible. No longer does an individual investor needs to raise funds all on their own and be responsible for the entire process of owning a property, complete with the property management that it entails. Today, investors can choose to be silent watchers in the entire process, earning their return while other managers do the work for them. If properly executed, everyone can win, and the market can continue to expand. Let us examine a few of the specific reasons that passive real estate investing works in today’s economic climate.

Many of the Taxes Are Taken Out of the Equation

When participating in an investment that is structured as an equity, the process of passive investing in the real estate market makes it possible for you to earn cash returns that are tax deferred. In the short run, this enables you to keep more of the profits generated from such investment activity in your pocket, which can then be used to passively invest in even more projects found on real estate crowdfunding platforms. Investing passively, such as what takes place of real estate crowdfunding platforms, enables you to offset your income with your share of the depreciation expense exhibited by the project itself. This is made possible due in part to the pass-through benefit that is built into the concept of real estate ownership, no matter if you are the sole owner, or passively involved by just owning one share in the funds that were raised to complete the project. By taking taxes out of the equation, investors are able to generate more revenue much quicker than with other types of investments, enabling the revenue to be put back to good use. This is unlike traditional forms of interest payment, such as stock dividends or bond yields.

Property Management is eliminated from Your Vocabulary

Under traditional forms of real estate investing, the investor can end up doing it all. That includes finding the tenants, fixing the leaky toilets and faucets, cleaning up once tenants move out, and then repeating the process. There are a great many headaches that are associated with investment properties, and even the strongest willed individuals can eventually get fed up with it all. Passive real estate investors, however, can avoid all of this. There is no hassle, for example, with property management, as that becomes the responsibility of someone else. There is no need to locate tenants, evict people who are not paying the rent, worry about maintenance issues in the middle of the night, and the list can go on and on.

Banks Are Not Involved in the Process

In the past, deciding to invest in real estate typically involved going through a bank or other similarly placed financial institution. Such a process has proven to be quite difficult, labor intensive, and at the end of it all, your request might still be denied. In addition, the recent global economic crisis that we have all just lived through has only served to tighten certain restrictions on lending, not loosen them, to the point that many investors just do not even have the desire to do both any longer. Going through a real estate crowdfunding platform eliminates all of that, however, and unites borrowers with lenders in a creative and unique way.

The Experience of Others Are Leveraged to Your Advantage

As an investor, you cannot be an expert in everything. This does not have to keep you from putting your money to work for you, however, as there are many opportunities out there where your investor dollars can certainly generate a positive rate of return. Traditional forms of real estate investing, however, often meant that you did need to be a bit savvy in terms of knowing what areas to avoid and which to buy in. It took a level of smarts, if you will, that not everyone possesses. Going at the investment game alone, be it via the stock market or by purchasing your very own investment property, can be a risky proposition unless you have a series of advisors assembled around you to guide and direct your decisions. Leveraging the intelligence that is existent in any given market is exactly what crowdfunding does. You do not have to make all of the decisions. Others can do that on your behalf, and you just watch the returns come in.

In the end, passive investing allows money to be made while you are on vacation, or quite literally as you sleep. With real estate crowdfunding, you can be as active or inactive in the process as you want to be. The choice is up to you. Consider looking at a crowdfunding platform today to examine some of the many opportunities that await passive investors like you.

Matthew Sullivan

Matthew Sullivan is the Founder and CEO of Crowdventure.com, a real estate crowdfunding platform.              @thecrowdventure

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