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Why Real Estate Crowdfunding Is The Perfect Investment For Millennials

A Bankrate survey last month highlights Millennial attitudes toward real estate investing. As it turns out, they’re favorable towards it. More favorable, in fact, than toward cryptocurrency, gold, or even stocks and bonds.

In terms of generational interest in real estate as a long-term investment, millennials score the highest. For Baby Boomers, it’s 30 percent; Generation X, 31 percent; the Silent Generation, 23 percent; and Millennials, 32 percent to 34 percent depending on their income bracket. Even Millennials making less than $30,000 per year are more interested in real estate as a long-term investment than members of other generations. That’s good news for everybody.

Why Real Estate is a Good Investment for Millennials

While it’s true that the stock market has yielded higher long-term returns on average than real estate, real estate does have its advantages. It’s hard to say no to average annual 8 percent returns, but real estate investing can yield incredible short-term returns. Here are just a few of the advantages of investing in real estate:

  • Investing in real estate builds long-term equity
  • Certain types of real estate investing can yield tax-free gains
  • Owning rental properties can lead to passive retirement income
  • Real estate acts as a hedge against inflation
  • It also is a good hedge against a down market in stocks
  • Real estate is an appreciable, physical asset
  • Investors can see respectable returns without investing the full value of the property
  • Real estate allows you to diversify your portfolio

Real Estate Crowdfunding is a Good Investment When Your Assets Are Illiquid

One of the challenges of investing in both the stock market and real estate is you need to have a fair amount of liquid assets to invest. If you want to put $50,000 into stocks, you need $50,000. If you want to buy and hold real estate, you need to invest at least enough liquid assets to secure a loan for the rest. That can be anywhere from $10,000 to several hundred thousand depending on the market and the value of the real estate you are buying.

Real estate crowdfunding provides another avenue for passive income by allowing Millennials to invest in real estate through fractional ownership. It’s also a great short-term investment with long-term implications.

For example, if you want to invest in a $500,000 commercial real estate development project, you’ll need a large amount of capital to make a traditional investment. These types of investments are typically limited to the number of investors who are allowed in on a deal. You need to be liquid, and your money is tied up until the development is completed.

With real estate crowdfunding, however, you can get in on a deal like this with thousands of other investors. Each of you puts up a minimum amount of investment and you receive dividends when the property sells if it’s an equity investment. Your returns are based on the value of the real estate property at the time of sale. You can also get into real estate crowdfunding with debt. The concept is the same. You and several hundred other investors put money up for a project and receive ongoing dividends as passive income when the interest on the debt is paid off each month.

With real estate crowdfunding, you can invest in any number of projects simultaneously and keep investing your returns over and over as new projects are presented and funded projects close. And many investors are realizing returns close to stock market returns–in the 8 percent to 12 percent range. Millennials interested in real estate investing for the long-term should consider real estate crowdfunding as an option to traditional real estate investing that requires more liquidity to get started.

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