What are the Pros and Cons of Crowdfunded Real Estate?

Hi, this is Frank Chen with REIClub.com, your link to creative real estate. Today I’ve got a quick video covering the Pros and Cons of Crowdfunding Real Estate.

Crowdfunding, generally speaking, is a way of spreading the risk – and the rewards – of an investment over a larger pool of people.

Pros:

1. if you're limited on time, it is a good alternative to real estate investing
2. Crowdfunding real estate offers most all of the same benefits
3. Broaden your investment options – 100K vs 4x25K
4. Accessibility to accredited investors nationwide
5. Able to browse pre-vetted real estate investments
6. Easy online tracking of your investments
7. No toilets, tenants, and trash
8. Lower fees means better returns; some sites provide removal of middlemen, saving investors money
9. depending who you crowdfund with, you could potentially say goodbye to indefinite holding periods

Cons:

1. Most crowdfunding require a minimum investment
2. Depending on the deal, chance you won’t get a return on your initial investment for 12 months or more
3. Not a good venture if you're a control freak
4. Lack of liquidity, as the absence of a secondary market restricts easy selling access for investors
5. risk of investment default (from real estate developers) is higher for crowdfunding compared to peer-to-peer and direct real estate investment funding
6. less experienced investors are more likely to get stuck in a crowdfunding campaign that they cannot afford
7. some companies have trouble finding funding – less business savvy owners with proper experience to manage the process efficiently, resulting in future funding troubles
8. the taxation and regulations of crowdfunding can be difficult to work with
9. If a company's due dilligence process is not extensive enough, it can cause poor vetting to future investments

Crowdfunding real estate, as with any investment strategy, it is essential that investors do their homework before investing their hard earned cash. This means looking into the experience and track record of the real estate developers that are soliciting crowdfunded money.

Don’t be immediately fooled by the returns, and all the shiny objects being waved in front of you. Get down to the numbers, get the details of the deal, and assess your risks. Remember, there is no such thing as a sure thing, especially when it comes to real estate.

Again, this is Frank Chen with REIClub.com. Please take the time to leave your comments for this video below and please subscribe to our YouTube channel so you’ll be automatically notified when we upload more quick video tips for you. Take care and good investing.