If you have a traditional investment portfolio, you’re probably familiar with concepts like stocks, bonds, and mutual funds. However, if you’re looking to diversify your portfolio, you may want to explore some new possibilities and try something new.
Real estate is often a stable place for long-term investments due to it being a tangible asset that’s always going to be in demand. You might even have considered the possibility of fixing and flipping houses to help bring in additional income. Instead of getting your hands dirty with a fix & flip, there’s another way to get involved in real estate investing — one that doesn’t involve locating, renovating, and selling property yourself. It’s called real estate crowdfunding and it’s offering a great deal of success for a number of people.
What is Real Estate Crowdfunding?
Real estate crowdfunding is, in essence, using an online crowd to fund real estate projects. It’s a process that’s been around for many years, but the internet and current technologies have helped take the phenomenon to new and exciting levels. Through real estate crowdfunding, multiple investors come together to fund a specific project. In most cases, it’s a project that the investors have selected deliberately and believe has the ability to bring significant rewards.
How do I Get Involved With Real Estate Crowdfunding?
When you decide that you want to start investing through real estate crowdfunding, you’ll first want to perform platform research to find the platform that will meet your needs. From there, decide how much money you want to commit to your real estate crowdfunding portfolio. Many of Sharestates’ real estate crowdfunding opportunities have small investment minimums starting at $1,000. This allows new investors to try out the process before jumping in with both feet. From there, you’ll be able to review the different projects that are currently being offered. Spend some time browsing to see which ones interest you the most, then commit your money to that project. It’s a very simple process that can have exciting long-term rewards.
What are the Risks Associated With Real Estate Crowdfunding?
Like any investment, real estate crowdfunding has some risks. What makes real estate crowdfunding stand out on the risk spectrum is that you can invest in real estate for a minimal dollar amount. Also, the investments are tangible objects, secured by the property itself–unlike most other investments. Sharestates will continue to make this a priority, but there is always the risk of the unknown and uncontrollable. If an investment were to default, Sharestates would take the proper foreclosure procedures to return as much of their investor’s money back as possible. Since the investment minimums are low, it also allows investors to diversify their portfolio by spreading their investment dollars throughout multiple projects with multiple real estate developers/borrowers.
Another risk with real estate crowdfunding, in general, is the platform you choose to invest through. In the event that Sharestates were to disappear or go bankrupt, all the investments would be safe. Sharestates has a bankruptcy remote structure set up to ensure this. All outstanding investments would be serviced by a backup provider, keeping the investments safe and secure.
What are the Rewards of Real Estate Crowdfunding?
Aside from making real estate investment accessible, real estate crowdfunding can also be a very rewarding investment strategy. Sharestates users typically see a 10% net annual return on most of the senior debt positions available on the platform. Sometimes, those senior debt positions can go north of 10% as well. When investing in equity, which carries more risk, investors can see returns north of 30% net annualized. Many investors on Sharestates also choose to reinvest their dividends to help their money grow quicker. This investment strategy can many times build wealth at a faster pace, growing real estate investment portfolios quickly. If cash flowing investments are important to you as an investor, most of the debt offerings on Sharestates.com are cash flowing monthly–showing a return as soon as 1 month after making an investment.