Demystifying Real Estate Crowdfunding (1)

The longer I live the more I’m realising how important it is to be part of a group of people.

Being part of a crowd is proving to be very important to our physical and mental well-being. I have just  finished watching a TED Talk from Eric Whitaker – pure joy from a virtual choir. Ingenious! and proof of our desire to be part of something bigger.

I have watched platforms like Kickstarter gain impetus and delighted in the idea that people are willing to give a helping hand to someone they don’t know but are happy to give them money to get an idea into production.

Now that same idea of the group working together for the greater good of the whole has come to real estate and I couldn’t be happier. Now I too can be part of a group doing something I am passionate about. No don’t laugh, I love property investing but it has always been rather elusive, but now by joining a crowd I have the power to invest in some property and growing my portfolio/finances and taking control finally! I really like the idea of having the ability to add my small amount of savings to a pot with others to buy a property and taking my proportional share of the profits when it’s sold.

I am unashamedly curious about anything new so, I started investigating the various sites that deal in crowdfunding real estate. I soon realised that all crowdfunding is not equal so I decided to write a few blogs covering what I have unearthed. I hope there are interesting facts for you that will inspire you to be brave enough to start investing this way.

Crowdfunding real estate companies have already raised over $100 million to buy up hundreds of real estate properties across the U.S.  and many other countries like; the UK, China, Japan, Australia, Canada and France. All of whom have realised that crowdfunding is the way forward for real estate investing.

Investing in a crowdfunded real estate investment does not actually make you an owner of real estate.  You, the investor, become a member of a limited liability company that in turn holds title to real property (in the case of equity) or takes a loan secured by real property (in case of debt). I have found that most companies deal as equity companies – using the investors money to buy a property outright with cash. And we all know how sellers like cash, but as  important a fact is that  the company is debt free.
Your ownership in the LLC is considered personal property rather than real property with you having a right to share in the income generated by the property. This is usually set out in a document called an Operating Agreement.
Each company has its own stipulations on minimum investment amounts but generally speaking they are pretty manageable for the everyday guy/gal and you get to choose which properties you wish to invest in.

Crowdfunded real estate investment is a little different from investing in real estate stock.
When you invest in real estate stock, as a REIT, (Real Estate Investment Trust) you are investing in a company that owns and operates various real estate investments.  Generally speaking, you do not choose the specific properties and own a share in the overall stock.
However they still use the power of finances from a group of people.

Both types of investments have their pros and cons.  REIT’s offer instant liquidity whereas with crowdfunded real estate you’re locked in until an exit event such as the sale of the property (which can range from three months to ten years).minions

Crowdfunding is continuing to evolve and it will be exciting to see what changes come about in the industry especially as we are beginning to show a lot of more interest in property either due to a shortfall in our own savings plans or because governments have changed their retirement policies making us more accountable for our retirement funding.

All in all an exciting time to get into property investing on terms that are more accessable than ever before.
Why not have a look around the Internet and see if this crowd investing is for you!
I’ve found the company I want to crowd invest with.
Go well till the next time




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