As 2016 kicked off, the talk of the street —Wall Street, that is— was the seemingly bipolar stock market. Only the riskiest investors would throw their money into the instruments of a high volatility market. But where do you go if you want to protect the wealth you’ve obtained and diversify your portfolio to maximize your gains?
Your best option is to invest in real estate crowdfunding and get the best of two worlds.
Why Real Estate Crowdfunding is an Accredited Investor’s Dream
- More control over asset allocation — If you invest in the stock market, your money will be managed by someone else. Yes, new tools are being developed that will allow investors to manage their own portfolios, but in most cases, you still get a laundry list of investments that you can choose just as you would with a professional manager. Chances are, many of the companies on that list will be companies you’ve never heard of. With real estate investments you have much more control.
- Lower investment buy-in — With real property, you have to tie up more of your money over a longer term. You have earnest money, closing costs, and other transaction fees. And you have to put money aside for ongoing maintenance. However, with equity investments, you don’t have any of that, which is why crowdfunding real estate offers the best of real estate investing coupled with the best of traditional intangible asset investing.
- Limited liability — Any time you pool your money with other investors, you limit your liability. Diversification allows you to protect your assets by hedging them against each other and against the market.
- More access and more investment choices — With traditional real estate investing, you are limited to your geographical area. Real estate is inherently local. The rise of the Internet and marketplace lending has given both investors and developers more options and more access to each other.
- Passive income model — Many people go to work every day and toil over a job they don’t like to make someone else wealthy. When you invest in real estate through a crowdfunding portal, you can make your money work for you. It’s a passive income model that means you earn even when you sleep.
One More Reason to Invest in Real Estate Crowdfunding
Debt-based and equity-based real estate vehicles serve different purposes. With equity, you can pool your money with other investors and keep it safer. At the end of the road, when a property sells, you get a percentage of the earnings on that investment. If it’s a rental property, you’ll also earn monthly passive income. With debt, you’re loaning your money to someone else to use for a property investment. In that case you’ll earn interest on what you lend in the form of monthly dividends.
With rewards-based and donation-based crowdfunding, there are no safeguards against losses. However equity-based and loan-based crowdfunding have the same built-in safeguards against losses that comparable traditional investment vehicles have. If a property owner defaults on a loan, for instance, the property goes into foreclosure. Investors can earn from that property anyway. When you invest in real estate crowdfunding all the advantages of equity investing and real estate investing are yours with fewer of the drawbacks than each on its own.