Crowdfunding Investments

PROS:

  • many have low minimum requirements to participate ($1,000 – $10,000)
  • easy to diversify portfolio as far as asset class, geography, sponsor
  • passive investment and less personal liability exposure
  • opportunity for debt as well as equity investments

CONS:

  • may or may not have the same tax efficiency as direct real estate ownership depending on type of deal you are investing in (consult with your own CPA)
  • illiquid investment, but some may have a term as short as 12 months
  • generally will have less direct access to the sponsor regarding operations of the property than you would if investing directly with a sponsor through syndication

Who might this type of investment be suited for? 

  • someone looking for a passive investment for relatively small investment sums ($1,000 – $10,000)
  • someone who wants to access large scale commercial or multifamily projects in a passive way yet may not qualify as an accredited investor
  • someone wanting to emphasize diversification within their real estate portfolio (asset type/size, geography, sponsor)

Process

  • start by becoming familiar with some of the various aspects and differences in real estate crowdfunding platforms:  how they select sponsors/projects on their platform, fee structures, typical offerings, investment minimums, etc.
  • sign-up online with the platforms you feel have offerings consistent with your goals and strategy; by creating an account you will be able to review offerings as they become available
  • make sure to discuss with your tax advisor regarding the tax implications for any investment you choose to make
  • once you have found an investment you would like to participate in, the platform will take you through the registration and funding process
  • ongoing communication and reporting about the project will generally be directly from the crowdfunding platform

Partners