Written by: Omar Amanat
Summary: Real estate investments have proven to be valuable in itself, with high returns and minimal effort on the investors end.
For decades, investors have kept a very profitable secret to themselves – real estate crowdfunding. They’ve enjoyed massive returns of 9.2% and expose themselves to market that’s less volatile than the stock market by investing directly in real estate. Unfortunately, individual investors have been left out of this financial payday for years. Institutional investors have billions of dollars that they use to diversify into hundreds of properties. Now, individual investors may only have enough for one or two huge, undiversified investments. If there happens to be a failure on these properties, it becomes a huge risk and one could potentially lose their entire investment.
An Open Door?
This all changed in 2013 when the JOBS act and legalization of crowd investing real estate came into play. Crowd investors will essentially pool their money into a single investment, which drastically lowers the price of entry. Now, a single apartment complex may cost a few million dollars. However, with a crowdfunding investment, investors might only have to pay $5000 apiece.
This low cost allows investors to diversify over dozens or even hundreds of investments. Furthermore, it protects against the failure of one or two properties. It’s a safe bet for the real estate investor and it also boosts valuable returns as well.
There is a catch however, real estate crowd investing sites are only available to accredited investors (those that have over $1 million in assets or are making $200,000 for the last three years). But regulations are expected to change that will allow the average investor to take advantage of these amazing opportunities – it’s only a matter of time before sites begin to adapt to this change and let any investor buy into the market.