Crowdfunding is a concept that’s been coined over the past decade by money-raising campaigns for more off beat ventures – quirky business ideas, travel adventures and even headphones for cats. Now, the idea has made it’s way into real estate. It allows average people to pool their money together and invest in apartment complexes, office spaces and even commercial shopping centers.
A change in federals laws in May opened up the concept of getting money back on crowdfunding investments. As a result crowdfunding real estate companies have been popping up everywhere offering ordinary citizens the chance to become real estate moguls.
But be wary, if you choose to participate you’ll basically be gambling on projects that may never get constructed or rake in profits. Crowdfunindg can be very risky and your chances of losing your investment are greater in crowdfunding than other forms of investing.
How it works
Instead of getting a token for your cash contribution (like on Kickstarter or Indiegogo), you will get an agreed-upon amount of money back from your investment or a percentage of the profits if the project is successful. But, if they don’t turn a profit you can kiss that cash goodbye.
On websites like Fundrise, iFunding or CrowdStreet you can put money down on an array of real estate projects from hotels to malls. Different companies and projects require different minimum investment, charge a variety of fees and offer varied returns.
Fundrise boasts 12-14 percent average returns on investments as small as $1,000. Neiss, the venture capitalist, says if the projects are successful investors can pocket returns from 8-12 percent or even higher over a span of several. There are about 150 crowd funded real estate platforms in the U.S and that’s just the beginning.
The advantages to this new concept allows amateur financiers to put their cash into a variety of projects all over the map and they can choose where their money goes.