Once the real estate investment itch sets in, it’s hard to satisfy it. There are several aspects of investing to consider before plunging into the your first investment property. Establishing an investing budget is the first, and most important. Other considerations include devoting enough time to learn about each property, analyzing local markets, and staying abreast of real estate trends.
Before the new millennium, real estate investing involved sending large sums of money to firms and developers. Investors needed fat pockets and an influential circle of realtor friends. Now, thanks to marketplace lending, specifically crowdfunding, anyone with the desire to earn consistent returns and the minimum funding requirements can tap into real estate investing.
Marketplace lending relies on hundreds of individuals to purchase portions of loans that fund real estate acquisitions. This presents developers and owners a quicker method of securing financing, compared to more traditional lending options.
Like with any investment, individuals who invest in crowdfunded properties receive steady returns on their stake in the investment property. These returns average between eight and twelve percent. For instance, a crowdfunding platform lists a home for $500,000 with an expected return of 10 percent.
An entrepreneur decides to invest the minimum amount of $1,000. Based on the 10-percent return of investment, the investor receives $100. Real estate crowdfunding garners steady, reliable returns that surpass most other investing platforms.
Plan and Budget Before Purchasing Your Investment Property
Before making any investment decision, investment gurus recommend creating a plan and a budget. These should specify the amount of money allocated for investing. Click here for help creating an investing plan.
Diversified Real Estate Portfolio
It’s never a good idea for an investor to stash all her eggs in the same basket. Research all of the options available for investing, including land, apartment complexes, condominiums, retirement facilities, retail spaces, and private homes. Extensively examine each property and its respective locale. Observe the market trends. Does the area need another coffee shop? Do hair salons already saturate the area?
The same is true when investing in fix and flip properties. Read the details of the intentions for each structure. Compare neighboring properties and their sale price. What is the average time similar homes spent for sale? Do your philosophies align with the crowdfunding site? When in doubt, contact a member of the management team.
Reputable marketplace lending sites like Sharestates make it easy for investors to ask questions.
Can Anyone Invest in Crowdfunding?
Many crowdfunding platforms only permit accredited investors to purchase shares of properties. According to the Securities and Exchange Commission (SEC), an accredited investor is one with assets totaling over $1 million or one whose income totals at least $200,000 annually. However, more sites now approve non-accredited investors.
Real Estate Investing Requires More Than Money
Selecting the most lucrative investment opportunities requires more than a little money. Like other any other investment, it takes adequate time and research to choose the best investment property. Read your crowdfunding site’s blog to stay up to date on news and related info. Realtor.com is another helpful tool. They often produce monthly reports on the top cities with best housing markets.
The stock market may be in flux; the country’s political landscape may be a volatile mess. One thing is certain, crowdfunding and marketplace lending (MPL) provides stable, lucrative income opportunities. Keys to investing in marketplace lending include things like surveying the field for the best platform, researching the investment opportunities, and of course, finding the most lucrative returns.
And then what? After selecting an appropriate crowdfunding platform, what’s a savvy investor to do? Invest!
Marketplace Lending Basics
For newbies, crowdfunding and peer-to-peer lending fall under the umbrella of MPL. The MPL phenomena gained traction in the late 2000s. MPL grants individuals the opportunity to participate in the purchase of big-ticket items like real estate, loans, and pretty much anything of value. An online platform, like Sharestates, provides users a selection of goods (in this case, properties) needing funding.
The platform allows users to purchase/fund a portion of the goods up for grabs. Most crowdfunding platforms require minimum investment amounts and all offer some kind of return. Real estate crowdfunding delivers some of the best returns. For example, Sharestates’ properties average annualized returns in the eight to 12-percent range.
Furthermore, MPL presents real estate owners and developers a convenient opportunity to fund their projects. Securing funding through MPL is usually quicker and more attractive than conventional funding sources like banks.
Choosing the Right Marketplace Lending Investment
Once a user selects their desired marketplace lending website, the next step is to research the funding/lending opportunities. For real estate investors, this entails analyzing the properties. Things to consider include its location, comparable structures, age, after repair value (ARV), loan amount, loan-to-value ratio, and the expected financial return. Be quick! Savvy investors recognize a profitable property when they see one.
Also, smart real estate investors diversify their portfolio by funding all sorts of properties. For the ultimate diversification, consider properties like land, condos, apartment complexes, mixed-use properties, houses, retail locations, and even retirement communities.
As mentioned earlier, a marketplace lending opportunity includes anything of value. In addition to real estate, this could also encompass filming ventures, personal loans, and more. Investors should weigh the risks, pros and cons, and decide which venture fits best in their portfolio. Some MPL projects, like films, actually offer early release versions as a return on the investment.
Post-Investment Tips for Real Estate Investors
Don’t fall into the post-investment slumber. For real estate investors, stay busy researching new projects and properties. Read up on the latest office renovation trends, or home renovation trends. Learn all there is to know about each major city and which provide the most lucrative real estate opportunities. Staying ahead of the curve now, makes for quicker, future investment decisions.
For instance, 10 different cities in California were listed atop Realtor.com’s 20 Hottest Markets’ chart. Professional real estate investors keep this sort of info nearby in case they stumble upon an investment opportunity in lucrative locales.
Want to learn more about crowdfunding and how to earn a steady, reliable income? Check this out.
Every real estate investment has a value proposition. A comfortable working knowledge of the proposition for one type of transaction, should not be taken to be an expertise in all real estate investments. While it is certainly possible to advance to larger, more financially rewarding transactions, such as a multi-family property, it is important to remember that a new type of transaction means learning a new set of rules.
The experienced residential flipper, for example, will often consider the larger value proposition of a multi-family property. The reasoning is simple. A four unit building is like doing four flips at the same time. However true that simple math may be, it demonstrates a misunderstanding of the difference in the markets.
The Income Approach to a Multi-Family Property
The value proposition of the flip transaction is to correct problems that prevent the property from commanding the true market value demonstrated by comparable sales. These problems take many forms, but the ultimate resolution of them allows the property to be sold at the existing market value.
Multi-family rental real estate can be valued by comparison to sales of similar properties, but the Income Approach is much more common. This values the property as a function of the amount of annual income it produces and the capitalization rate. For a given amount of annual income, a lower capitalization rate, called the cap rate, will result in a higher property value. A higher cap rate, on the other hand, will result in a lower property value.
Attractive cap rates are defined by comparison to returns on other investments. Factors such as the reliability of the income stream, a proxy for risk in this type of real estate investment, influence the cap rate. Renters at the lower end of the social-economic spectrum are considered to have a higher risk of default, so properties that cater to this group have a higher cap rate.
High Value Multi-Family Unit to Move the Cap Rate
So, a simple way to improve the value of a multi-family unit is to increase the rents by attracting renters further up the social-economic scale. Here is where the flipper’s experience in creating market value can be a great asset. Like the individual residential house, rental units have characteristics that make them more or less attractive to renters.
For example, an aesthetically pleasing exterior creates good curb appeal to the home buyer, and can command a higher rent. A security system that prevents vagrants from entering the common areas of a multi-family property, also is a clear value added feature. The quality of the flooring and the appliances in the units also directly impacts the amount of rent that can be charged.
Increasing rents by improving these factors, increases the value of a building under the Income Approach in two ways. First, it increases the annual income the building generates. Second, as the tenants reflect the higher socioeconomic status that can afford the higher rents, the comparable cap rate goes down.
So, although the value proposition of a multi-family property is more involved than a single family residence, it shares some of the fundamental characteristics. Successful flippers can use their skills in correcting problems in residential units, and step up their game by creating improved values in multi-family units.
Street vendors know the best location to sell their merchandise and get there before their competition saturates the market. The same approach can help anyone become successful in real estate. However, the competitive environment of the real estate market means the savvy real estate investor needs to move faster than others. They need to recognize the factors that will drive real estate values, rather than just follow real estate prices. Once a location develops these factors buyers will come, and real estate profits will go to those selling instead of buying.
Availability of Good Jobs Drive Real Estate Values
Unless the target market for the real estate is retired empty-nesters downsizing for retirement, the availability of good jobs is a primary factor driving real estate values. A strong job market will attract residential real estate buyers. An increase in homeownership will drive commercial development for businesses that supply goods and services to this market segment, creating more jobs and attracting more buyers.
The demand for residential real estate will also bring renters into the market. This will drive up occupancy rates for multi-family units, resulting in a more favorable return on investment. If the strong job market persists for an extended period of time, these renters will add to the demand for residential real estate as they become first time buyers.
Low Unemployment Means a Strong Market
Measuring job growth can be done either statistically or fundamentally. The statistical approach is straightforward. A high unemployment rate means that it is more likely that there are jobs that need to be filled. Keep in mind that workers are always changing jobs and companies are always failing and laying off workers. This means a low rate of unemployment is full employment and a strong market.
Large cities with an unemployment rate low enough to be considered full employment are Salt Lake City, Utah (2.8%), Denver, Colorado (2.9%), and Austin, Texas (3.5%). Other large cities with low unemployment rates are Phoenix, Arizona (4.8%) and Dallas, Texas (4.1%).
Smaller cities that meet the statistical definition of full employment are more numerous and form geographic clusters around the country. Examples include Fort Collins (2.5%) and Boulder (2.4%) Colorado, Logan (2.5%) and Provo (2.5%) Utah. Another cluster exists in the Northeast. Examples in this area include Lewiston (3.2%) and Portland (2.8%) Maine, and Portsmouth (2.4%), Dover (2.4%), and Manchester (2.6%) New Hampshire.
The cluster in the Midwest includes several small cities in North and South Dakota, including Sioux Falls (2%), Rapid City (2.9%), Bismarck (2.2%), Grand Forks (2.5%), and Fargo (2.2%). It is not much of a stretch to include Rochester (2.8%) and Mankato (2.8%) Minnesota in this cluster. This serves to make the point about taking a fundamental approach, rather than a statistical approach, to unemployment.
Consider the Sustainability of the Real Estate Investment
The development of the Bakken Shale formation in western North Dakota could be playing a significant role in the very low unemployment rate in the Midwest cluster. The “shale gale” created a boom economy and tens of thousands of jobs. The same dynamic is true for the high-tech communities in Texas and Utah. Any booming industry creates jobs.
However, simply identifying a booming region might not be enough due diligence. The sustainability of the industry over the investment horizon of the real estate investment must be considered. The demise of the Bakken Shale jobs has been repeatedly and persistently forecasted, and the growth of high tech jobs is linked in some ways to the availability of high tech workers.
The health of these industries is dependent on larger political and economic forces such as the debate over fossil fuels and immigration policies. Restrictive measures will cut oil production and move high technology jobs overseas. This could reverse the employment trend in those regions and cause real estate investments to either lose money or take longer to pay off.
Understanding the interplay of all these factors can be difficult, leading many real estate investors to stay close to home and on familiar ground. Partnering with a larger organization or finding a local investment partner is one way a small real estate investor can find new investing grounds.
Buyers want homes with modern, updated features. The same is true for office spaces. There are several office renovations that will help sell your property faster. Some makeovers include installing the latest wireless devices, charging stations, and ergonomic desk designs.
Although these tips apply to the home office and office building, most realtors suggest converting your home office into a bedroom. Bedrooms rank higher than a home office to buyers.
Office Renovations That Cater to the Client
Before starting any office renovation project, there are some crucial questions every real estate investor should ask themselves. What’s the best use of the space? It’s best to purpose the space with buyers in mind. Is the building or unit better equipped for corporate executives or a call center?
Are cubicles more practical for the layout than individual offices? What local tax incentives apply to renovating the building? How does the building/suite measure up to the surroundings? It’s vital to address these questions (and more) when considering which office renovations will help sell your property faster. Local realtors should be well-versed with these concerns.
Modern Office Renovations: Less Furniture is More
Grand, hulking executive desks are a thing of the past. Real estate investors know that modern offices highlight comfort and convenience rather than showy furniture. Keep in mind the purpose of the space when staging or purchasing the furniture. Contemporary furniture is prominently metal and glass with some featuring wood accents.
Modern conference tables include center slots for charging stations and presentation docking connectors. Trending ergonomic office desks slope inward for a more comfortable experience. Many also raise and lower in one or two simple steps. Recent studies prove the health benefits of standing while working. Office chairs that feature the latest designs include foot rests and head supports.
It’s not necessary to purchase office furniture for the space. However, spending some time and money staging the area with contemporary pieces helps investors see the potential of the unit.
Smart Office Renovations
When conducting office renovations to help sell your property faster, it’s always beneficial to install smart devices. The latest smart devices lower utility costs, help employees work more efficiently, and increase security.
Smart locks allow doors to unlock and lock with the wave of a phone or key fob. Owners and managers divvy out access to employees and have the ability to monitor and activate the smart locks via the web. Smart thermostats control the climate and monitor the environment for movement.
When everyone leaves the building, the thermostat increases its temperature to conserve energy. Smart lightbulbs provide a similar service as the thermostat. They monitor areas and click on and off when rooms are empty or occupied. A wireless air quality monitor is another device that will help sell your property faster.
When connected with an air purifying system, two or more air monitors positioned around the office signal the system to clean the air when pollutants become too dense. Other smart office devices include security cameras, web servers, light switches, cloud printers, audio speakers, and window blinds.
Like politics, all real estate is local. The characteristics of a particular real estate investment can easily move its market price in a direction contrary to the asset class as a whole. Even macro-economic factors such as interest rates and mortgage qualifications which either expand or tighten the overall real estate sector can be overcome by local factors. New York residential real estate is seeing investment trends in these two fundamental ways.
Chinese Private Investors
The first proof in this pudding is counter-intuitive because it is global. Chinese private investors have been purchasing significant properties in New York for several years because they are familiar with New York. It is one of the most well known cities in the world. Their investments have been focused on “brand name” properties in the quintessential brand name city.
There is a reason for this. As an emerging market economy, China has domestic savings that exceed domestic demands for capital. The preferred allocation for these ‘excess savings’, according to Spencer Levy, the head of research for the Americas at CBRE, are large investments that have a strong annual yield. New York real estate meets these criteria better than any other option in the world today.
This trend will continue because of economic and political considerations in China. Domestic consumption in China is slowing down quickly, closing off what little opportunity there was for investment inside the country. Laws designed to keep capital in the country have increased political tensions and have had the unintended consequence of increasing interest in foreign investments.
Of course, Chinese investors do not blindly throw significant amounts of capital into any investment and are not speculating in New York real estate. As prices on their preferred properties increase, they look for alternatives. Recently, they have begun to purchase properties in Queens and are beginning to compete with middle market buyers.
New York Public Transportation
The other factor driving real estate values in New York is absolutely local. More than any other city in America, New York depends on public transportation. It has the lowest percentage of car ownership per household in the country by far. It follows that changes in access to public transportation will impact real estate values.
This will be demonstrated in 2017. Projects such as the Second Avenue subway will impact real estate values on the Upper East Side. Delays in the project mean that the trains will need to be actually running for the average buyer to see the value of these properties. However, once values start to increase it is likely that this market will draw greater attention.
Public transportation will also improve values for South Williamsburg. This change anticipates the scheduled shut down of the line from Manhattan to Brooklyn in 2019. Investors unfamiliar with that project are more likely to miss out on the value proposition of this area.
An announcement last year by New York Governor Andrew Cuomo that he will make public transit a priority showcases the importance of understanding the impact local events can have on real estate values. His intention to improve service and build new infrastructure will impact some areas more than others. Knowing where the greatest benefit will be felt, and when it can be expected, is the type of detail savvy investors seek in order to maximize returns.
It is even possible that the familiarity Chinese investors have with New York residential real estate will combine with changes in public transportation to significantly drive values in certain areas. If this is the case, this sector may see even more substantial increases in value than currently anticipated. Local real estate investment firms, of course, are willing to help any investor interested in benefiting from this possibility.
Spring welcomes fresh blooms, spring cleaning, and effective curb appeal trends for real estate properties. Spring also produces many open houses for real estate agents and investors. First impressions are lasting impressions. Buyers usually judge a property upon seeing the listing in the ad, hence the importance of curb appeal.
Here are three curb appeal trends to enhance any real estate investment and bolster open-house numbers.
Front Door Facelift
The front door frenzy surges onward, but it has evolved from simply painting the front door a bright color. The current curb appeal trend involves coating the front door a flamboyant color while painting the surrounding porch and entryway neutral colors. Accompany this with flares of colored accessories like rocking chairs painted red, or taupe furniture sporting yellow pillows.
Also trending are ornate entryways complementing the vibrant front entrance. Porches are big business again and, when designed right, provide an alluring focal point. With the eco-friendly craze trending, consider using natural elements on the façade like wood and stone.
Budget Friendly Tip: Pressure-washing the exterior of the home, including wooden planks, walkways, and driveways, provides a quick pick-me-up for a low price.
Remember to upload those photos. As HGTV.com points out, “88 percent of homebuyers begin the process on the web…” Utilize social media connections to spread the images across the internet.
Renewing the Landscaping
Showcasing a manicured lawn and a lush garden is a start. Sticking with the times, less is more when renewing the landscape. Some buyers see dollar signs flashing above elaborate gardens. They know the cost to maintain extravagant yards. Installing a simple hedge, a low row of colorful plants, and bright mulch is all that’s needed to get the property noticed.
Mixing vintage and modern features is another curb appeal design trending this spring. Converting an old, cast iron wash pot into a fountain highlighted by contemporary LED lighting, is a great example of this.
Upgrading the Garage Door
Gone are the days of boring, one-size-fits-all garage doors. Today, garage door designs are limitless.Trending are glass garage doors that provide a modern, unique look. Other trending options include boldly colored wooden doors, carriage-style doors, doors that showcase rich wood grains, and solid colored doors.
Garage doors now add intrigue and value to homes. They make statements when painted bold colors like red or yellow. And best of all, they represent the majority of a home’s curb appeal. It costs close to $2,000 to replace a garage door but the real estate investor/homeowner recoups nearly 80% of that cost upon selling the property.
As a real estate investor, you need to stay abreast of what’s hot and what’s not in the consumer marketplace. Properties that sit on the market longer than the average of 50 days, cost you money. There is more to home improvement than simply upgrading the kitchen and bathrooms. It’s also important to consider the types of materials, appliances, colors, designs, and other key elements preferred by consumers. The latest remodeling trends, found below, will keep you ahead in the game and in front of buyers.
Future Medical Needs
It’s guaranteed, everyone ages. With age come medical conditions, some of which will leave us debilitated. Consumers recognize this fact and want more handicap-friendly homes. Wider doorways, level thresholds between rooms, taller toilets, tub and shower rails and seats are all features trending this year.
This one should come as no surprise. Gone are the days of segmented living where hallways bred walls and walls bred confusion. Today, the open floorplan reigns supreme. Consumers want a continual flow from kitchen to dining area to living area. You can achieve this effect with hard floors and open walkways.
Kitchens For Catering
Humans are social animals and prefer to entertain guests. Homebuyers covet a dream kitchen that features a large island, lots of storage, sophisticated appliances, and plenty of counter space. Trending countertops like quartz, marble, and even wood, are now preferred over granite (an oldie but goodie). Also, consumers prefer dark or white cabinets with glossy or unpolished metallic hardware over yesteryear’s oak cabinetry. Spicing things up, designers now feature two-toned cabinets, where a section of the cabinets are a different color than the rest (usually dark and white).
Other popular kitchen features, according to Remodeling.hw.net, include water filtration systems, in-house coffee stations, wine coolers, sensory faucets, and phone and computer charging stations.
Smart Home Improvement Trends
The smart home is hugely popular today. Integrating smart devices, like light bulbs, appliances, flood lights, doorbells, thermostats, fire/smoke/gas detectors, water-leak detectors, security systems, and cameras, produces more value and a higher return on investment. You can’t outrun this home improvement trend.
Consumer Reports states that “in 2017, 33 percent of homes are expected to have at least one connected device, and the household penetration should top 60 percent by 2021, according to Statista, a market research firm.” Nearly all smart devices connect with mainstay digital assistants like Google and Alexa, which means you can now ask Alexa to dim your lights or start the dishwasher or turn down your A/C.
Meddling With Metals
Metals in the home were once only used for things like bed frames, wall and ceiling joists, and appliances. Today, metal is more than a support piece, it’s now an accent piece, a piece of furniture, a backsplash, and a doorknob. Brass, copper, steel is incorporated throughout new construction. It’s modern, it adds character and texture, and it sells. As metals become more prevalent in the home, the matte finish will follow suit. Before you know it, you’ll wow your buyers with matte appliances.
Here is a list of more remodeling trends that can be incorporated in your real estate investments.
- Garage door upgrades
- Fancy laundry rooms
- LED light strips
- Self-cleaning toilets
- Glass tiles
- Indoor gardening
- Natural materials like wood and stone
- Finished basements
- Eco-friendly materials
- Standalone tubs and showers
- Hidden storage areas
- Bursts of colors
Planning on performing your own home improvement renovations? You’ll want to see this. For further reading, check out this nifty list from Realtor.com of projects that result in the highest return on investment.
Forecasting future trends won’t ever be completely accurate, but chief economists from Zillow and Realtor.com are likely to be top notch on their estimations of what will happen in the real estate market in 2017. Svenja Gudell from Zillow and Jonathan Smoke from Realtor.com recently weighed in on the near future possibilities. Check out their thoughts.
For those not ready to make the big leap into ownership, there is some good news: rent prices compared to income should mean rent becomes more affordable for many. Gudell said: Incomes are growing faster [than rent prices] for the first time in quite some time. That’s not to say the rent prices won’t rise, expect an overall rent price hike of about 1.5%, mainly because more rentals will be available as more people are buying homes.
Mortgage Rates Will Climb
Interest rates have remained at record lows for several years, but as the economy turns more positive, the interest rates will rise. That has already begun, and the Federal Reserve indicated they expect three more increases before year end. For those planning to buy a home this year, it will be better to do it as quickly as possible and shave off a lot of money over the term of the loan. If you can do it during the winter or early spring – even better, since homebuying usually increases during the late spring and early summer.
Home Values Increasing Still, but Slower than Last Year
According to Gudell, home values rose in 2016 on average by 4.8% and 2017 should see them grow by another 3.6%. That is actually a sign of the growing economy, home values are normalizing according to both Smoke and Gudell.
Home Buying Expected to Rise
Expect to see both Millennials and Boomers buying many of the homes. The oldest millennials are hitting their mid-30s, so marriage and children and a place to settle are becoming common for them. It doesn’t hurt that many of the new jobs being created are for those in the millennial age range, and the average wage for those jobs is expected to rise as well.
For baby boomers, a large portion of them are retired or about to retire, their children have moved out, and they are looking for homes that take less work, are not as big, or are in areas that are close to their children and grandchildren. As the housing market recovers, they can now sell their homes without taking a loss. Smoke said: “While a sizable number want to downsize to control expenses, we’re seeing others move to the biggest house they’ve ever owned because they’ve got children and grandchildren and they want those people to come visit.”
The suburbs now become hot properties since buyers get more for their dollar on the edges of the cities rather than living where land and home values remain at a premium. There’s also less available in the cities, even at higher prices.
Midwestern cities will pull millennials to them. Realtor.com thinks the top draws are likely to be Madison, Wisconsin; Omaha, Nebraska; Columbus, Ohio; Minneapolis, Minnesota, and Des Moines, Iowa. According to Smoke, “I don’t think it’s so much about millennials moving to those cities. It’s more about millennials deciding to stay and deciding that this is where they want to buy a home.”
Buying on the West Coast will become even more expensive. Those homes, especially in Northern California, Portland, and Seattle (as well as Tucson, Phoenix, and Denver) saw the fastest and soonest-to-arrive job growth at the end of the recession, so home prices started to increase in those areas ahead of the rest of the nation. As Smoke pointed out, when jobs increase, then so does population, making homes in higher demand and driving the prices up.
Is it time to buy or sell your home?
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.