Real estate crowdfunding has become so popular in the last three years that it’s practically a buzzword at this point. Still, you may not have given this investment vehicle a try yet. Perhaps you are skeptical of anything that seems so trendy. Continue reading, though, and hopefully you’ll be convinced of real estate crowdfunding’s potential.

You Don’t Need a Lot of Money

The reason why so many traditional investment vehicles continue through the generations despite not always working out very well is because people would prefer to stick with the devil they know. It can be scary taking your hard-earned money into the unknown.

If you’ve never been a part of a real estate investment deal before, it’s understandable that you might be shy about the prospect. After all, this is usually an option for the very wealthy. Those of us who don’t fit into that category would rather not even think about how much money it would take to buy a seat at the table.

One reason real estate crowdfunding is doing so well, though, is because just about anyone can afford to give it a try. People have spent as little as $100 in investing. Good luck finding any stock worth your time where that would buy you more than a share or two.

While $100 isn’t going to do a whole lot with real estate crowdfunding either, you could see some impressive gains for as little as $5,000. With a bit of budgeting, most people could make this amount work for them.

There Are Serious Returns to Be Made

Not only could you not do very little with $5,000 on the stock market, but you also wouldn’t see any results for quite some time. Five years would be a pretty generous estimate. 10 would probably be more realistic and that’s a very long time in stock market years. Who knows where your stock could go by then.

With most real estate crowdfunding deals, you start seeing returns almost immediately. While it will be some time before you make all your money back, at least you’ll begin heading in the right direction early on.

What’s more, we’re talking about between 10% and 20% in a lot of situations. Again, you’re just not going to find that on the stock market. If you did, you’d most likely be smart to sell right away, whereas, with real estate, that could be a reoccurring thing every year.

We’re going to touch on REITs some more below, but real estate crowdfunding generally brings in much larger profits than this option as well.

Enjoy Diversification

You don’t need a degree or years on Wall Street to know that the first rule of investing is to diversify. Again, the stock market makes this more difficult than most people understand. Obviously, you can buy shares in tech companies, agricultural companies and manufacturing companies to try to spread out your investment, but think how little that really gets you in return.

First off, that’s going to take a lot of money to buy the shares you need to actually make this strategy pay off. Second, the recession should have taught us that when the stock market drops, the entire thing goes. Yes, there are times when the agricultural market might take a hit and no one else. However, we’ve also seen that the entire economy can fall at once.

Now, would something like that affect the real estate market? Most likely it would, yes. It might also force people out of stocks and into something more permanent, like property.

In any case, real estate crowdfunding makes it easy to diversify and land is only going to stay down for so long. They’re not making any more of it, after all, meaning it will always head back up. Furthermore, you can invest in single-family homes, two-family homes, apartment buildings, motels, hotels, bed and breakfasts, office buildings, strip malls and much more. That’s a lot of diversification options right there.

You Get More Control

Go ahead and invest in a stock like Facebook and you may make good money in the future, but it won’t be because of your hard work. Sure, you’d be smart to research the company before investing, but after that, your contribution is largely over.

Even REITs (Real Estate Investment Trusts) can’t offer you much in the way of control. You just hand your money to a firm and they put it into their investments. Most investors don’t even know much about the properties they’re investing in.

With real estate crowdfunding, you have all kinds of control over where your money goes and how the property is managed.

Also, it’s worth mentioning here that REITs operate much more like stocks, meaning they’re very sensitive to downturns in the market, even when the actual properties your money is in aren’t devalued in the least.

Tax Benefits

While it definitely depends on the specific type of real estate investment you put your money into, there can be some really great tax benefits to explore. This is a good reason to involve a tax attorney early on in your real estate investment career, just to be sure you’re not missing out on these benefits.

No Lack of Options

Right now, there are roughly 150 platforms you can use to invest in real estate crowdfunding. Over half of those are right here in the United States. This can be seen as another way to increase your portfolio’s diversity, but it’s also important that you realize how all of these options give you control. At the moment, the consumer is largely in control, and these platforms will work hard to earn and keep your business. Take advantage of that.

On top of that, you can invest in a property and then use your immediate returns to invest in another property and so on and so forth. This is something the stock market can’t provide you with. In practically no time at all, you could have quite the portfolio.

Now that you understand more about real estate crowdfunding, why not give it a try for yourself?

Matthew Sullivan

@thecrowdventure

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