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Purchase Investment Properties On A Budget Using Crowdfunding

Purchase Investment Properties On A Budget Using Crowdfunding

What is Crowdfunding?

If you are tired of low returns from Certificates of Deposit, Thrift Savings Plan and other Equity Investments, check out Crowdfunding for double digit returns. Crowdfunding is gaining in popularity as an investment strategy for many investors. It is a unique process to raise capital through family and friends, potential customers and individual investors looking for different investment venues. To promote Crowdfunding, advertising is a focused approach utilizing social media and real estate investor forums and associated networks.

What Platform is Right for Me?

My preference is Crowdfunding with real estate investments which I will discuss here. There are many different strategies and models of crowdfunding platforms so you want to be sure that the platform you select is a good fit for you. Ask the question: Am I comfortable with the amount I'll be investing? Do we share the same values? Are you in agreement with their investment strategies such as flipping houses or buy and hold for long-term passive income? The amount required to invest will vary with each venue so shop around until you find one suitable for your investment portfolio.

Do Your Homework

Do your homework before investing. Historical performance is a good indicator of future performance. Get to know the management team and see what they are doing on social media. How transparent are they and how willing are they to talk to you and answer your questions, including the hard ones. Those that a more willing to share beliefs, management and goals tend to do better for themselves and their customers over the long term. Also reach out to other investors to get their input and endorsement.

Do the Math

I have seen many attractive returns advertised to only find out they were tickler rates to get you to call. Do your homework to see if the numbers are realistic. Ask how much detail is provided on the business? How can I access my investment and returns after I have committed? How and when are investment returns distributed? What type of reporting (personal and legal) is provided to the investor? Make sure you are comfortable with the management team and security of your investment before taking that first step.

Crowdfunding Example

I personally invest with Holdfolio. Their buy-and-hold platform consists of 10 rental homes within a single portfolio. These houses are purchased, reconstructed for rental ready use and then leased. 60% ownership is provided to investors (the crowd) with a $10,000 minimum investment. 40% ownership is held by the Holdfolio management team. Advertised returns when I invested over a year ago were 10% to 14% and am currently realizing 11% returns annually. With each new portfolio, 10 additional houses are offered to investors at an average crowdfundng pool amount of $320,000 which is usually filled within 4 to 5 days. Holdfolio just finished Portfolio 10 and is beginning Portfolio 11 soon. This is just one example of many crowdfunding platforms.

Summary

Real estate crowdfunding is quickly becoming more popular today as investors move away from equities to search for greater returns in other markets. Be sure to do your homework and narrow your search to a top three. If this is your first time, once you make your selection start with a smaller amount until your comfort factor allows you to do more.


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