5 Things You Need to Know About Real Estate Crowdfunding
Crowdfunding has played an instrumental role in helping creatives fund their projects. It is no surprise that other industries are taking note. Now crowdfunding for real estate ventures has caught up.
With real estate crowdfunding, investors can be more selective about the projects they want to fund. It also gives contractors access to funds for house-flipping projects, eliminating the need to tie-up their own funds.
Want to learn more about crowdfunding for real estate? Continue reading for the five things you will need to know.
1. Understand What Real Estate Crowdfunding Sites Do and Offer
Real estate equity crowdfunding is fairly new, so you will need to do your research. Any time you are about to do business with a company, you want to exercise due diligence. Check-out the company’s financials, years of expertise and profitability.
Crowdfunding comes with risks and you want to ensure the company you invest with has thoroughly vetted the projects they take on.
You will also want to consult with an attorney to review all contracts and agreements.
2. Decide Which Type of Crowdfunding You Want to Invest In
There are two types of crowdfunding for real estate.
Debt crowdfunding allows investors to earn money from the interest that is paid by the borrower. The loans are taken out by property owners who have bypassed traditional banks.
Real estate equity crowdfunding is geared towards funding investment properties. Money is earned from the portfolios monthly rents. House renovations, or property flips, are also popular equity projects.
3. Research the Minimum Investment Requirements
As crowdfunding for real estate grows the requirements are beginning to relax. Still, most established crowdfunding sites only deal with accredited investors.
Accredited investors are individuals with annual income of at least $200,000 or $1 million dollars in liquid assets.
Since 2012, over 100 crowdfunding sites for real estate have emerged. Each has its own set of rules and requirements. Minimum investments can range from $500 to $50,000, while annual fees can go up to 3%.
Non-accredited investors can get in on the action, but they will need to ensure investing doesn’t come with increased risks.
4. Know the Long-term Commitment?
Understanding the different types of investments is only one part of crowdfunding. Another important step is understanding how long you will have to let money sit.
For most crowdfunding real estate loans there is a minimum 3-5 year commitment. This is how long you will have to wait before you can access your money.
For a faster return on investment, equity crowdfunding may be best. Money is earned monthly, or as properties are sold…usually within weeks or months.
5. It Does Not Require a Lot of Work
The best part of crowdfunding for real estate is, beyond researching the sites, you do little work. Sites should have qualified teams who have already done the bulk of the work for investors.
If not, you have chosen the wrong site to invest with.
Are You Ready to Invest?
We hope you’ve found these real estate crowdfunding tips useful. When you’re ready to build your portfolio, seek the expertise of a Real Estate Attorney.
You may contact us today to schedule an appointment.