We all know that portfolio diversification is of more benefit to an investor than the safest single investment. Yet, finding the perfect portfolio balance will vary from investor to investor depending on preference. Making it harder for newbie investors to find their personal investment sweet spot—as relaying on financial advice can be just as risky as trial and error. Key contributing factors of portfolio diversification are risk tolerance, investment motivation, and total investment.
Traditional Real Estate Investing
Traditional means of real estate investing worked for previous generations, yet it was not without its flaws. We have all heard it before that breaking into real estate investing is much like breaking into the ‘old boys’ club. Beyond the difficulty of getting past the threshold, traditional real estate investing can be taxing on time and resources. Owning investment property will require an investor to spend a bulk of their income on upkeep and renovation. On the other hand, finding a quality project to invest in can be impossibly difficult. This is where RECF comes in.
Real Estate Crowdfunding as a Means of Portfolio Diversification
There is no doubt that real estate crowdfunding is the go-to way for new investors to expand into real estate. Investment security, simplicity, and transparency are three features that all 21st century investors are looking for, and rightfully so. Most real estate crowdfunding platforms meet these expectations, which is why they have gained so much attention in the last 2 years. Let’s consider the three reasons why RECF is the perfect way to achieve diversification for those looking to invest in real estate.
- Transparency— Real estate crowdfunding has the unique investor benefit of low fees. Lower fees mean higher returns. This is possible due to the elimination of the ‘middle man’. RECF platforms understand that a streamlined investing experience is superior to an investment journey muddled down with endless fees, brokers, and intermediaries. Real estate developers are connected with investors with nothing in between but the platform itself.
- Low Investment Minimums— Most real estate crowdfunding platforms open their investment properties with investment minimums starting at $5,000. Sharestates.com is one of the few platforms to offer access to investment opportunities starting at $1,000.
- Great wealth transfer— Millennials are the largest generation living and will be the recipients of the $30 trillion left behind from the Baby Boomers. Everyday banks, apps, and FinTech platforms are redesigning in order to meet the needs of Millennials. RECF is another wave in this shift that is here to stay, with over 14% of Millennials already using alternative non-bank financing.
Why Real Estate Crowdfunding Should be Your Next Asset Class
If this still is not enough to convince you that now is the time to consider investing in real estate crowdfunds, we have a comprehensive white paper explaining in further detail the benefits of RECF. As a new or seasoned investor, understanding the complexities of real estate investing prior to investing in critical.
Download the white paper today to get a better understanding of the changing lending market.