> Reasons Why You Don’t Need a Real Estate Broker

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Reasons Why You Don’t Need a Real Estate Broker

If you want to purchase physical real estate, a real estate broker is a great asset. They’ll help you identify the types of properties in which you have an interest, run your comparables, help you negotiate a fair deal, and get all the paperwork ready to close on your property when you’re ready. In some cases, they’ll help you save money on the transaction because they have specialized knowledge of particular neighborhoods and understand the values of properties in those neighborhoods. This is true whether you have an interest in commercial or residential real estate.

Whether your interest is in rehabilitating properties or renting, a broker who understands how you like to invest can be a great person to have on your team. They’re like a well-trained bird dog. You can leverage their skill to increase your game.

However, you don’t always need a broker to invest in real estate. In fact, if you do it the crowdfunding way, a broker just might get in the way.

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When Not to Use a Real Estate Broker

Crowdfunding has gone a long way to removing the need for intermediaries. Marketplace lending, for example, connects borrowers with people who have money to lend. The borrower gets capital they need while the investor earns interest on the loan. Banks aren’t necessary.

By the same token, property rehabbers and landlords can raise the capital they need for real estate projects through equity-based crowdfunding. The project sponsor lists the details and scope of the project then gives up a percentage of equity in the project in exchange for the capital necessary to make repairs, update interiors, and get properties ready for tenants. In such cases, an investor can own a part of a property without tying up funds in a long-term arrangement and without ever actually touching the real estate. Like banks, brokers aren’t needed.

Real Estate Profit Sharing in the 21st century

Traditionally, buying and selling real estate has been out of reach for a lot of investors because it requires operating capital. If you don’t have a cache of liquid assets, you get to sit on the sidelines. Crowdfunding changes that.

When buying physical real estate, unless you have an impressive bank roll, then you’ll end up sharing your profits with other parties. If you share with a real estate broker, you are simply paying someone to locate, buy, and sell properties. As it turns out, profit sharing isn’t necessarily a bad thing. A pool of investors can fund one project together and each becomes a partial owner in a piece of real estate where it isn’t necessary to walk the ground, smell the roses, and knock on studs. As long as due diligence is performed, you can be confident in your investment.

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Instead of the real estate broker as intermediary, the crowdfunding platform performs all the tasks your broker would perform, but less expensively. You have more profits to pass around between you and your fellow investors.

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