While the concept of real estate crowdfunding is not actually new, the tremendous growth that the sector has been experiencing in recent years most certainly is. No matter if you are a current investor in this arena, have heard about it but have yet to get involved, or if you are one of the many individuals who have never heard of this investment vehicle, there are certainly some reasons that you should consider a real estate crowdfunding platform. Let us consider five such reasons that you should giver careful consideration to below.
Diversity in Your Portfolio is Key
For years, investors big and small have had the importance of portfolio diversification drilled into their heads. Within more traditional forms of investing, the mutual fund was seen as way to take advantage of this concept, but with the plethora of various funds and fund managers available today, many investors are seeking something a bit different. Real estate crowdfunding platforms have entered the scene and provide a way for investors to now diversity into the property market in ways never really possible before on this scale.
As we have seen recently, the American stock market has been experiencing some significant weakness in recent weeks. Many investors would like to move some of their money into another investment vehicle in order to further maximize their potential return on investment, and crowdfunding is proving itself to be a viable way to do just that. History has shown us that private real estate transactions can certainly generate some great returns, as they do not usually move in synchrony with the equities market. In addition, they simply are not that sensitive to short term volatility in the market. For this reason, since no investor can accurately predict when stock markets will falter, diversifying one’s portfolio is a great way to hedge your bets in the event that it does. Real estate crowdfunding platforms are proving themselves to do just that.
The Minimum Investment is Low
If you think about it, real estate investing has been traditionally reserved for only the wealthy in society, or for institutional investors. Sure, home ownership has long been associated with the American dream, but having much money left over to seriously invest in the real estate market has not really enter into the equation. The advancement and refinement of real estate crowdfunding platforms, however, has changed all of this. It is now possible to invest with a low minimum obligation. Where large amounts of money may have been required to purchase an investment property at one time, crowdfunding now opens this process up to nearly everyone by pooling together money from multiple individuals to accomplish the same core objective. Many of the platforms in existence today allow for individuals to invest in various projects for as little as $5,000 in many cases. This is enabling investors with less money to begin to enjoy the many benefits of real estate investing, but with much less risk than if they would have been required to purchase a property all on their own.
Diversification by Geography and Asset Class is Beneficial
If you have been keeping up with any of the financial news since the global economic crisis began you will understand that certain regions of the country and world have suffered greatly in terms of the real estate market. At the same time, other areas have rebounded nicely. Real estate crowdfunding enables investors to put their money into different areas in order to further diversity their dollars and minimize risk if one particular market were to end up faltering for a season. Crowdfunding allows you to determine how much risk you are willing to take on, and then you can move your money into markets that are more or less risk their your profile would allow for. If you have a certain amount of money to invest, you could choose to put it all into one market, or you could spread it across several markets throughout the country or world. Real estate crowdfunding really gives you that choice and leaves it up to you to decide.
More Transparency With Your Assets
Many have mistakenly claimed that real estate crowdfunding opportunities are similar in structure to the more commonly known REITs, but it must be pointed out there are several important differences between the two. Crowdfunding not only provides much more diversification in your investment portfolio when compared to REIT, there is also the added benefit of have much more transparency and control as you select the properties and their location. With crowdfunding you are able to peruse multiple different options that you would like to invest in, even narrowing it down to a specific geographical location with the full transparency of the project being detailed for you on the platform site. This is a feature that is simply not available with REITs.
The Headaches of Being a Landlord Are Eliminated
If you were to invest in real estate on your own, you typically become a landlord. With the privilege comes a whole host of headaches that leaves many an investor wondering if it is truly worth all of that. You not only become responsible for the property, but you have to deal with tenants, advertising for those tenants, and a whole host of other issues that came come up from time to time when being involved in the real estate sector. Crowdfunding, however, eliminates all of this by pulling in various investors that wind up leaving the property management to a host of sponsors that are assigned to handle the aforementioned issues as they arise. You are free to just invest your money in the projects that you like, and leave the hassles of traditional property ownership to others. So, no tenants, toilets and trash!
These reasons should help you decide to pursue real estate crowdfunding as a viable investment vehicle moving forward. Consider looking at Crowdventure.com and see what is available. Remember, you do not have to invest large sums of money to take advantage of crowdfunding.
Matthew Sullivan
@thecrowdventure
Matthew Sullivan is the founder and CEO of Crowdventure.com
Image by Shutterstock
