Talk to any CPA, Investment specialist, or estate/tax planning attorney and the one piece of advice they’ll all have in common is diversify, diversify, diversify. If you’ve been investing for a while, you’ve probably heard it at least a dozen or more times in the last couple of years. Diversification spreads out the risk, so if some of your stocks, dividends, funds, or otherwise are down, then you should still see growth in others. Real estate investing can be a way increase your portfolio diversification.
One Might Ask, Why Real Estate Investing?
Real estate tends to go on a 20-year prosperity cycle. It’s not a perfect predictor, but historically the value of real estate climbs for 20 years and then hits a down market. Anyone who’s tried buying property at the bottom of the market as it starts rising knows it’s not easy, and the traditional way of real estate investing includes a huge up-front cost involving heft real estate financing. But things have changed a lot in the last couple of years. What hasn’t changed is that real estate is and likely always will be a good investment, even more so with commercial or rental properties with multiple units.
Most investors find when stocks rise, people invest more of their funds there and less in real estate. However, that means with less competition for investments in real estate, the dollars from a portfolio go farther in real estate buying less in stocks, bonds, etc. People always need a place to live. Even as we see more people telecommuting, the need for a roof over our heads does not need change. Real property always has value, and even as the twenty year cycle continues, comparing one cycle to the next, historically the highs get higher and the lows also get higher.
Real Estate Crowdfunding to Diversify Investments
Crowdfunding is available for all kinds of investments, but real estate investments seem especially suited to this techie and IOT method. There are more than a hundred sites specializing in exactly that.
For the investor getting started, or for those entering this type of investment slowly, many sites require only $1,000 to $5,000 minimum investments. That is the case with Sharestates as well as other sites such as DiversyFund. The property developer puts the funds raised toward the first lien on an investment property. Different
crowdfunding platforms provide different levels of due diligence, but they are not all equal, so find one that matches your expectations.
The better the quality of underwriting, the more likely your investment will be safe and likely to pay off. As an example, Sharestates verifies 32 points and in 2015 saw a 10%+ ROI. Better still, ROI checks start coming on a monthly basis immediately.
The good news for crowdfunding investors seeking to diversify is that deciding to start with $1,000 gets you into a project, but if you want to start with $10K, you don’t have to drop it all into one property; you can diversify it into as many as 10 crowdfunded properties. And you won’t have to spend a lot of time learning how to profitably invest in real estate.
More Real Estate Crowdfunding Information
Different crowdfunding sites may only lend in specific states. This is because of lending regulation requirements for state certifications, or because lenders haven’t yet established a network on the ground in those states, so underwriting and reliable appraisals are not yet available. As always, when making investments, doing your own research is strongly advised. Some investors may want to drive by the investment property, but most of the real estate crowdfunding sites makes appraisals public to those investigating a property as a possible investment choice making the need for travel unnecessary. Those who don’t live locally can review public appraisals for properties. Knowing your investment preferences and criteria is key.
Just like you get a “grade” on stocks and bonds from major brokerages like Charles Schwab, look for a crowdfunding site that gives you a rating on the different properties. Most investors can afford to take bigger risks when they are younger, but as they get closer to retirement they want safe, solid places to invest. Also, look at the projected percentage or ROI. As usual, past successes don’t guarantee future success, but it’s not something that should be ignored either.
If crowdfunding looks good to you, do some platform research and remember, there are other ways to invest in real estate without taking on a mortgage.
The Huffington Post hosts the original article.