What is real estate crowdfunding?
Crowdfunding is combining money from a group of investors to make an investment in one of the hundreds of available real estate transactions. Crowdfunding companies have lists of pre-curated investments.
By the year 2025, the total crowdfunding industry will be worth $93 billion, according to a prediction by the World Bank.
Do you want to get in the hot property market but are lacking in funds? Crowdfunding real estate sites can make it happen. Here is how they work.
What You Need to Know About Crowdfunding Real Estate Sites
There are rules on participation in crowdfunding real estate sites, different ways to invest, varying fees on the investment, and several different sites from which to choose. You’ll want to compare before making your final decision.
What are the Rules?
You must have $1 million in assets not including your primary residence. If you don’t have that amount in assets, you need to have a $200,000 salary.
Types of Investment Projects
Debt-based projects are those in which you are providing money in the way of a loan that is secured by the property.
Another debt-based project is that which you’re investing in a third-party note that is related to the performance of a real estate investment.
Equity-based projects are tied to REITs, or Real Estate Investment Trusts. In this case, you are investing in a fund that is holding property and you can expect cash flow and some money from the appreciation of the property.
Minimum Investment and Fees
Many crowdfunding companies require a minimum $5000 investment, though the minimum investment varies from company to company.
A fee of up to 3% is charged and is taken out of any payout prior to you receiving the money.
New crowdfunding real estate investment sites are literally launching every day.
Which ones are going to give you a return on your investment? Rich Uncles vs Fundrise? RealtyMogul vs Peerstreet? The list goes on.
There are two ways to make money investing in any one of these companies:
- Appreciation of the asset
- Income from the asset
When a property appreciates, there is equity in the property, and that translates into money for the investors.
Income from an investment property comes from rent collected.
What are Some of the More Popular Companies?
Do your research and read the fine print before investing. Here are some of the popular and top-rated companies.
The minimum investment is $1000 and the fees are 0-3%. They are very particular on the projects accepted, choosing only about 5% of projects.
Their minimum investment is also $1000 and fees are in the range of 0.25%-1.00%. They allow experienced private lenders only.
Have you always wanted to own single family rentals? RoofStock allows you to invest in already-occupied rentals. Investments start at $5000.
Are You Ready to Invest?
Now you’ve learned all about crowdfunding real estate sites and how they work, are you ready to get started in investing?
If you don’t have the money just yet, we can help you with that too. Visit us for tips on saving money as well as many other topics.