I can’t tell you the number of strange looks that I’ve gotten in the past several months every time I mention Real Estate Crowdfunding!
It’s true. You can now invest in real estate through crowdfunding offerings! To be honest, it’s not that strange of a concept. Almost every major industry has been disrupted by the internet. It was only a matter of time before real estate investing was made more simple and efficient.
In this guide, I’m going to go through how you can invest in real estate online. I’ll also explain this whole real estate crowdfunding business and what it means for investors, property managers, and more.
If you find it to be helpful, I’d love a shout out on social media. Let others know about this resource! I’ve also put together a completely new domain name with all of my content on the subject of Real Estate Crowdfunding, which you can check out here.
1. Pick a Website to Invest Through
There are a bunch of different real estate crowdfunding platforms out there that you can choose from. Each have their own benefits and drawbacks.
When you’re picking a website, it’s important to get a familiarity of the types of investments and investors that they cater to.
For example, some platforms offer both debt (fixed income) and equity investments. With fixed income investments, your capital will be used to fund a loan for a property manager or developer. That company or individual will then be responsible for paying back the loan, which has multiple investors. As the loan is paid back, you’ll be paid back.
If you choose to invest in an equity offering, you’ll be buying a chunk of a property. That property will either produce cash flows or give you an ROI through a liquidation event, like when the property is sold.
Platforms also differ in the types of investors that they cater to. For example, some platforms exclusively cater to accredited investors, like RealtyShares. Other platforms offer financial products for non-accredited investors, like Fundrise with their eREIT.
I talk a lot more about the differences between all of these platforms in my Amazon ebook, Real Estate Crowdfunding Explained. I’ll share a few more platforms in this YouTube video, which I’ve embedded below.
2. Start Small and Focus on Learning
Don’t just jump into real estate investing on one of these platforms. Start small. Many of the platforms that I mentioned in the video above have very low minimums to start with. You don’t have the break the bank with your first investment.
As you begin to make more and more smaller investments, you’ll be able to see how those deals turn out and gain some familiarity with how the platform works. You’ll also gain more experience about the types of deals that work best for your investment strategy.
While it’s true that many of these websites have already returned capital to their investors in some form, I would approach real estate crowdfunding as more of an illiquid investment, even in the case of Crowdfunded Reits. This means that you shouldn’t be investing with money that you need tomorrow or even a month from now. These should be funds that you can afford to have in the investment for the duration of a year.
3. Understand How Platforms Work
I’m a firm believer in understanding every major player when you’re investing in anything, whether it’s real estate, REITs, stocks, bonds, etc.
You need to have a firm grasp of everyone’s “self-interested goals” so that you can make more informed decisions. This is economics 101. I’ve put together a short video to introduce you to how the industry works and the different business models out there.
As big of a proponent as I am of this entirely new industry, I’m always wary of 3rd parties. By being aware of how platforms operate, you’ll make sure that you stay focused on your investment goals. You’ll also be better able to decide which website you like most when you’re scouting out new investment opportunities.
4. Connect with a Community of Investors
I think that one of the smartest decisions you can make when you’re entering any new territory is to connect with like-minded individuals who have similar goals, interests, and aspirations.
Seek out other investors who have an interest in real estate investing both on the platform you go with and around the world.
You’re welcome to connect with other users on our forum, CrowdFunding Forum.
You can also seek out real estate centric Facebook groups, Google+ groups, LinkedIn groups, and online forums.
Real Estate Investors: 34,000+ Members
Real Estate Investing: 20,000+ Members
Real Estate Investing: 4,000+ Members
As you can see, there are a lot of communities out there where you can learn more about real estate investing and connect with other investors!
Being a part of a community will improve the rate at which you learn and it will give you the space to bounce ideas off of fellow investors. This can be very powerful as you’re exploring new ways to allocate your disposable income.
5. Learn as Much as You Can
When you’re navigating uncharted waters, go into rapid learning mode. This means signing up for every newsletter, browsing around blogs and forums, taking advantage of resources out there like Real Estate Crowdfunding Explained, and seeking out podcasts on the topic.
Especially with an emerging industry like this, having access to the right knowledge can put you lightyears ahead of other investors. Rather than become a cautionary tail, you’ll become one of the new success stories!
On this note, I invite you to leave any questions that you have as a comment below! As you begin to learn more and more about REC, don’t forget to share your knowledge with other investors. I’m always looking for new guests on the podcast who would like to share their experiences with the CrowdCrux community.
