June 13, 2018
Have you ever wished you could invest in real estate but didn’t know where to start? You may think the only way is to own properties, but did you know that you can invest in real estate online?
Predating modern stock markets, investing in real estate is one of the oldest forms of investing and is one of the five basic asset classes that every investor should seriously consider adding to his or her portfolio for the unique cash flow, liquidity, profitability, tax, and diversification benefits it offers. The trouble is, investing in real estate requires a significant amount of capital and isn’t as widely available as other investment vehicles like funds and equities.
There is a common misconception that property ownership is a requirement to invest in real estate. But there are many real estate investment opportunities that don’t require you to have hundreds of thousands of dollars on hand or the ongoing responsibilities of building maintenance, being a landlord, and other obligations of property owners. And these options still offer lucrative, steady cash flows and far less maintenance from an investor.
Real estate investments required huge amounts of money or the right contacts to access deals. These are multi-million dollar assets and regular investors were never able to participate.
Until now– thanks to crowdfunding real estate platforms like DiversyFund that are disrupting real estate.
Crowdfunding real estate lets investors own an interest in real estate with as little as $5,000 and unlike Real Estate Investment Trusts (REITs), investors can choose the properties to invest in.
Read the bios of senior management and look for real estate expertise. After all, crowdfunding may be relatively new, but real estate isn’t and it’s an industry where experience really counts. Make sure the website is informative and easy to use. Are the investments clearly explained? Is there enough information for you to make an informed choice? Is there investor support if you have questions?
While the type of property, expected return, and investment period are all important to consider, don’t forget the most important item: fees.
In other words, how much will it cost to hold this investment? Fees reduce your investment return and set you back before you’ve begun. Some crowdfunding real estate platforms charge a 2% property acquisition fee, so for every $1,000 you invest with them, only $980 gets invested in real estate. This might not sound like a lot, but it means the first 2% the property earns doesn’t benefit you, it just gets you back to where you started.
Since fees are a drag on returns, what should a savvy investor do?
DiversyFund has pioneered the first no-fee crowdfunding real estate funds: the DiversyFund Income Fund and Growth Fund. Just as crowdfunding disrupted real estate, DiversyFund is disrupting crowdfunding through a vertically integrated structure that controls costs and allows better control of outcomes.
Vertical integration is nothing new. Fast fashion retailer Zara uses vertical integration to adapt quickly to new fashion trends and keep stores current. Most of Zara’s merchandise is manufactured in their own factories, allowing them to introduce a new line of clothes in weeks, instead of the months many traditional retailers take. Similarly, DiversyFund “manufactures” or develops their projects in-house, maintaining the highest standards of quality control and keeping costs down.
To recap, do your homework. Decide if real estate could help you meet your investing goals, then look for a reputable crowdfunding site with an experienced real estate team. Look for solid investments with low, or NO fees. Make sure you fully understand what you’re investing in, then take the plunge. Congratulations – you’re a real estate investor!