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Real Estate Crowdfunding: A Practical Guide to Passive Investing

Real estate investing has been known for many years as an excellent means of building wealth and growing a lucrative property portfolio. An increasing number of investors from various financial brackets are also diversifying their portfolios with income-generating properties.

It is true that real estate investing has always been a reliable vehicle for increasing the net worth of many wealthy people and companies. Purchasing homes, multifamily properties, office buildings and other types of commercial properties requires adequate and steady funding. Yet, large rental properties can create a dependable stream of revenue for significant cash flow.

Purchasing a property through a loan may result in the borrower needing to repay the loan before they gain an outstanding return on their investment (ROI). For some individuals, repaying the loan may require several years. For this reason, many of them turn to crowdfunding as a way to acquire the funds needed.

Real Estate Crowdfunding: A Practical Guide to Passive Investing

Crowdfunding Property Investments For Great Returns

Real estate crowdfunding makes it possible for many people to make property investments that they could never afford on their own. Crowdfunding platforms are structured to include from dozens to hundreds of investors in a single large property deal. This enables investors to participate in large commercial property investments with a capital investment of as little as $500.

Even when investing with small amounts of capital, investors can enjoy lucrative returns on high-quality property investments. By investing in attractive REI (Real Estate Investment) deals involving large multifamily properties, retail space or industrial buildings, investors can get ongoing payouts and dividends on these investments.

This profitable type of property investing can build and grow an impressive real estate portfolio. The periodic returns on any investment can also help fund a college education or an advanced degree for you or a family member. These desirable payouts on your crowdfunding investment can also enable you and other investors to travel, rent a new apartment or even purchase a spacious new home of your own.

Crowdfunding: Income-Generating Investments

When you join with other investors to fund a property investment deal through a crowdfunding platform, you are a passive investor. Once you have pooled your capital with the other passive investors’ funds for the REI deal, your work is virtually over.

If the property that you and other investors are considering for an investment deal is a multifamily rental property or a complex of retail stores and restaurants, it qualifies as income-generating real estate. The monthly rental fees from this property can boost the amount of yearly income for investors considerably. Crowdfunding is one method of participating in large real estate investment deals without breaking the bank or having to wait for multiple long months to receive attractive ROI.

Why Crowdfunding Is Popular Among Real Estate Investors

Crowdfunding rates very highly today as a popular means of investing in large multifamily and other types of commercial real estate. Major reasons for this high rate of popularity include the following:

  • Wide Variety of Investment Choices. Crowdfunding platforms are sources for a wide array of different real estate investing opportunities. Even property syndicators who often have difficulty locating serious property investors for their deals visit these platforms often. They want to view each platform’s investment offerings while attracting investors to their own property deals.

Many accredited investors who typically contribute relatively large sums of money to syndication property deals also visit popular crowdfunding platforms frequently. They like to scout out any attractive investing opportunity that these innovative platforms may have to offer.

  • Diversified Portfolios. When investors have the majority of their capital invested in stocks and bonds, they often have frequent thoughts and strong intentions concerning diversifying their portfolios. Adding ideal large commercial real estate properties to their portfolios can greatly minimize risk.

Yet, in today’s inflationary economy, even small studio apartments can be costly for some investors. Also, many individuals who want to invest in real estate that generates profits do not want to deal with the hassles of being a landlord and collecting rents. These investors are attracted to crowdfunding platforms that allow them to invest alongside many other like-minded property investors.

  • Attractive Investments for Every Budget. Property investors who have small or moderate amounts of investing capital scout out the most lucrative REI opportunities that align with their budgets. Crowdfunding allows them to invest in larger, more profitable real estate deals and gain a greater ROI than they could otherwise receive.

Some wealthy investors may have plenty of financial resources to cover their investments in large commercial properties. Yet, they may frequent online crowdfunding platforms to determine whether there are suitable property deals to meet their needs and desires. In addition, some wealthy real estate investors may lack the necessary skills and experience to manage property assets. They want and need a general partner to manage and maintain their property holdings and raise capital for investing in attractive REI deals.

  • Larger Property Investing Opportunities. A primary benefit of many investors pooling their capital for real estate investing is having access to larger properties. Typically, larger investment properties return higher profits while the tenants pay higher rental fees. The investors will all receive larger periodic payouts and dividends from these investment properties. When a property is finally sold, they will also gain higher profits.

  • Property Deal Transparency. Most crowdfunding operators are quite transparent with interested investors about the property deals offered. Accredited investors are especially appreciative of this transparency since they typically invest a significant amount of capital in their real estate deals.

When valuable information is provided by crowdfunding platform operators, these investors are guided in making better informed decisions according to their investing goals and the risk profile of each property deal.

  • Degrees of Accessibility. Another important aspect of real estate investing is accessibility. There are three choices for investing in properties:

  1. Direct Ownership. This means purchasing a property directly.

  2. Passive Ownership. This refers to being one of the property deal investors, as in syndication.

  3. Stocks. This means purchasing stocks in a real estate company, an REIT or mutual funds that are in the real estate industry.

Of these three choices, stocks are the most accessible in terms of real estate investment forms. Although direct ownership is frequently preferred, it is costly. Passive ownership through syndication rewards investors with equity, profit sharing and control of the time to raise the rent or sell the property.

  • Diversified REI Portfolio. Syndication via crowdfunding platforms is ideal for REI portfolio diversification. The majority of real estate investors tend to invest in one type of property asset. For example, if they invest in commercial office buildings, they most likely do not invest in industrial complexes as well.

By combining their investment capital, crowdfunding investors can gain access to multiple types of property assets for investing and diversifying their property portfolios. In this way, they gain better protection against any potential investing losses.

For these reasons, crowdfunding platforms are generally preferred by investors as investing vehicles or methods. These platforms join like-minded property investors as passive investors who seek a wide variety of investing opportunities. Because they desire the same objective, these investors are unlikely to have any serious disagreements. This makes the investing process smoother for all concerned.

Final Thoughts

Crowdfunding is a popular and practical way to invest in real estate today. It appeals to many investors, experienced and new. It enables investors with modest amounts of investing capital to pool their funds for investing in large multifamily, retail and other types of commercial properties. Crowdfunding platforms also offer a wide variety of property asset types, which makes the platform attractive to more investors.

Crowdfunding helps new investors connect with more experienced ones, which is always helpful to beginning investors. Even experienced accredited investors with larger amounts of capital to invest than the average crowdfunding investor are attracted to these convenient and easy-to-use online platforms.

Through crowdfunding, many investors meet like-minded investors with similar investing goals, needs and net worth. This helps new investors to feel like they are part of a larger investing group, which puts them at ease to make clear-headed investing decisions. Crowdfunding encourages regular stock market investors to expand their portfolios to include some property investments as well. By diversifying their investments, these investors add a level of safety and security to their financial future as successful and satisfied property investors.



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