Investing in real estate is becoming an incredibly popular option for professional and novice investors alike. After all, there are a variety of ways to get stared with real estate investing, and the variety of real estate options can be quite enticing for investors looking to diversify their portfolio.
However, if you aren't interested in becoming a landlord or flipping houses, you may find the rising popularity of real estate crowd funding options may be up your alley.
Now, while many crowdfunding platforms are only open to accredited investors which have their own set of criteria, there are a growing number of ways to start investing passively in real estate without needing any sort of accreditation.
So, if you’re looking to dabble in real estate investing to start diversifying your portfolio, these are the best ways to get started with real estate crowdfunding for non-accredited investors that you can consider.
But first, let’s look at a few of the benefits of why you might consider real estate investing in the first place.
The Benefits of Real Estate Crowdfunding:
Diversifying Your Portfolio – Investing in real estate is an appealing option for many non-accredited investors since it makes diversification easy. No need to dabble in cryptocurrency, speculative stocks, or other alternatives that may present or risk or volatility.
Low Minimums – Many real estate crowdfunding platforms allow you to get started with relatively modest investments (some platforms are as low as $5, but most will not exceed $500 or $1,000).
Passive Income – When you invest in real estate crowdfunding you can reap the rewards of owning a stake in property without carrying the responsibilities of management.
Now, for every pro there are naturally some drawbacks, so let’s analyze those as well.
Cons of Real Estate Crowdfunding:
Limited History – Real estate crowdfunding platforms are still in their infancy, and just like any new fund or company, you have limited history to analyze when analyzing performance and risk.
Risk – All investments have a degree of risk, but again, real estate crowdfunding platforms are in their infancy. Platforms have shut down before, and in these events, investors can lose absolutely everything. Anyone considering investing in real estate crowdfunding should do their due diligence and ensure they understand exactly what sort of real estate you are investing into.
For further reading, I suggest checking out the difference between real estate crowdfunding and REITs.
Popular Real Estate Crowdfunding Platforms:
Fundrise is one incredibly popular crowdfunding option, and the company has been in operation since 2012.
Investors can start with as low as $500, although this locks investors into a beginner portfolio that is a mixture of real estate properties. Investors who contribute $1,000 or more can actually choose between balanced, supplemental income, and long term growth plans.
For a 1% fee per year and access to a variety of Fundrise eREITs and eFUNDs, this isn’t a bad option to consider!
Groundfloor has one of the lowest minimum investment requirements around of just $10, but the platform is slightly different than many other real estate crowdfunding platforms.
On Groundfloor, investors can invest in individual projects that can be as short as just 6 months in length. Considering the low investment minimum and variety of projects you can choose from, it’s easy to create a diversified investment portfolio through Groundfloor if you are willing to put in the research.
Investors with Realty Mogul have 2 different options for investment: MogulREIT1 and MogulREIT2.
REIT1 invests in commercial buildings and pays monthly returns, wheras REIT2 invests in longer term family apartment units. Minimum investments range between $500-$1,000 for each of the REITs, and fees range between 0.3% - 0.5% annually.
I've just mentioned 3 of the more popular crowdfunding platforms out there, but there are several other contenders in the market that also have lower investment minimums to allow for a low barrier to entry. Additionally, there are plenty of other ways to get started in real estate investment (as I mention in my first blog post), such as buying and renting out property yourself.
Whatever the case: always remember to do your research.
Crowdfunded real estate platforms might be a relatively new and alluring option to start investing, but you need to do your due diligence, Additionally, you should never risk more money than you can afford to lose, and should also consider the importance of diversification when planning out your investment strategies.