Crowdfunding real estate is a relatively new method, which utilizes crowdfunding to raise capital for real estate investments. Through this type of real estate investing, investors are able to invest in a wide variety of properties without having to deal with mortgage brokers, real estate agents or contractors.
Instead, the crowdfunding platform will take care of the day-to-day tasks to ensure successful completion. Thus, allowing you to gain the returns without all of the hassle of “fixing and flipping” homes on your own.
Furthermore, within these real estate investments, there are typically two distinct types of investments an investor can make. These two types include, equity and debt investments, which you can learn more about here.
Of course, you can learn more about how crowdfunding real estate works here.
Before crowdfunding real estate was an option, investing in real estate depended mostly on business connections. It was all about who you know and how much money you had. Under the Securities Act of 1933, private securities could not publicly solicit investments. Plus, the minimum threshold to invest in these deals was usually in the six-figure range. The high amount needed to invest coupled with a ban on investment solicitation made it impossible for any average investors to earn a spot in the real estate market. For developers, the pool of investors was very restricted which made earning capital difficult.
When the Jumpstart Our Business Startups Act of 2012 was passed everything changed. Now, developers can directly market to accredited investors. Real estate developers have adopted the crowdfunding model to find new investors who are eager to enter the market. Potential investors can literally choose where to invest their money from their smartphones and tablets. Plus, they don’t have to fork up $100,000 or more. While the SEC is still reviewing a few materials in this process, the hope is that this method of investing in real estate development will continue to thrive. Even more so, that it will provide some great alternatives for investors in the future.
However, the great news is that you can now gain access to the real estate market without having exclusive business connections. Additionally, by participating in crowdfunded real estate ventures, investors now have a voice in the development process and can be more involved than ever. With so many more options available and all at different price points, investors can now be choosey about where they want to invest their money.