What is real estate crowdfunding 5 ways to invest in crowdfunding

What is real estate crowdfunding?

For those people who have no idea what is real estate crowdfunding?

Let me tell you how that works first.

So, a lot of people know to crowdfund for the topic of like Kickstarter or GoFundMe.

Those are the kind of general, the more popular crowdfunding platforms. But those aren't real estate crowdfunding.

That is just where people come together and they fund something. Like make roads, solar panels that both light up and they melt snow and produce more energy than our world could ever use and it is a cool idea. So they put this on Kickstarter or one of you know IndieGoGo or one of those crowdfunding sites to raise money for and everyone Chinese ships in.

So, that's what most people think of when they think of the crowd and crowdfunding that is not what we're talking about today but it is kind of related.

Definition

In real estate crowdfunding, the same ideas lots of people get together and their goal is to invest in real estate. They are gonna fund a real estate together hence the name crowdfunding. The crowd is funding it.

So you got a property that is worth the purchase price is a hundred thousand dollars the investors trying to raise a hundred thousand dollars. Now the investor could go to a bank and the banks gonna make him paperwork and appraisals. Put a 20% down payment or whatever or they might not even be able to get bank financing or for whatever reason, they do not want to go to the bank.

So instead they use, crowdfunding sites and they raise the money internally. So rather, than give in to a bank they let other people raise that money for them.

like the crowd essentially raised the money and so you might put in $5,000 the guy next door might put in $5,000 that guy might have put in 500 that person might put in 20,000 and then the people will earn a piece of the pie.

Crowdfunding Site

Now there is a lot of crowdfunding sites out there I mean a couple that comes to mind is like

Realty shares is a big one, the patch of land is another one.  There're probably twenty crowdfunding companies out there. I mean there are different ways that everyone structured. Some of them are a debt when you are investing with them.

Some of them you get a piece of the debt mean you are basically a part of the loan you do not actually share in the property which is the equity side.  The debt is as if you have a loan and that is it, the other side is equity where you actually get part of the proceeds. So, if the property does really well, you make more money. Some of the crowdfunding sites do both, some do a mixture, some do kind of weird hybrid versions of that.

The first thing I will say is if you are considering investing in crowdfunding, really do your research in your homework and look at

what the actual crowdfunding site is?

how they actually operate?

what are you actually getting?

what are you promised?

are you risking it?

what you are gonna get at the end?

So make sure you understand that as well before you do crowdfunding.


The question should you actually do it is another story.

Here I am going to share the five ways of crowdfunding.

How to Make Money with Real Estate Crowdfunding

In this article, I am going about to write a few different ways you can actually make money with real estate crowdfunding. Honestly, I am surprised by how well some of the platforms are doing.

For example crowd Street recently reported crapping on insider that they've posted over 1.7 billion with 60 real estate crowdfunding offerings through their marketplace. Also, they've seen over 400 million in investor funds with sponsors who use their sponsor direct program platforms.

like realty, the mogul has signed up more than 80 thousand investors on their website which has translated to over 200 million in investment in debt and equity transaction. They've also lost mogul REIT which is similar to fund Rises.

So how can you actually get a piece of the action that's what I'll be talking about?

First way

In this article, the first way is to start an entirely new real estate crowdfunding platform. It is still not too late to start your own.

You could have access to a network of investors or maybe you want to build a marketplace of investors and sponsors given the growing popularity of REITs.

You could also use regulation A+ of the JOBS Act to offer this kind of investment vehicle to your investors and

I go through a lot of different technical ways to do this.

I will discuss the bare basics of a business plan for the website. It is really important to have the right technology to ensure secure transactions on the platform. It is also important to have a very strong marketing plan as the industry becomes more and more crowded.

You are going to have to design a platform that has major competitive advantages to the other platforms out there. Otherwise, how are you going to stand out?

In my opinion, crowdfunding is still really in the early stages. Education should be the top priority and this is honestly why I'm dedicated to putting out the best information out there on crowdfunding you are going to have to educate investors and property owners as to how they can use your platform.

 The second way

The second way to make money in this industry is to provide ancillary services be they legal tax etc.

Whenever a company raises a major round of funding, then there will always be legal and tax implications to take into consideration. There are also be other service providers who help with various aspects of the transaction.

For example, mark Roderick is an attorney who is cashing in on crowdfunding with his blog crowd fund attorney. He is one of the leading lawyers in the U.S. in this area. Recently was selected to keynote and moderate real cap Chicago a real estate crowdfunding conference.

He represents platforms portals issuers throughout the industry any time a new industry emerges there is always room for experts. If you decide that you want to provide key services to players in the space you could turn out to be the go-to service provider and get a piece of the action.

Third way

The third way to make money in this industry is to join a platform and invest.

Not every platform is open to non-accredited investors but many are. Now adopting REIT style products, like fun rise, you can incorporate these investments as part of your overall portfolio.

Keep in mind that many of these investments are illiquid meaning that there is no publicly traded market place to redeem your shares. Depending on the type of investment, you might have to wait for a liquidation event like the sale of a property or the opportunity to sell your shares to other investors on the platform.

There are also platforms open there for accredited investors like realty shares and some debt or fixed income-focused real estate crowdfunding websites.

If you are interested in like passive land, they advertise that you can earn upwards of twelve percent of your investment per year. Others like fund rise out a 13 percent approximate average net returns in 2015. Realty shares also compare the difference between investments in the S&P 500 and real estate. In 2001, real estate would give you a 10.75% annual return versus a 5% annual return for the S&P 500.

What I like about investing through one of these marketplaces is. You do not have to commit huge sums. You can invest less than five thousand dollars to get a feel for the marketplace and it will not break the bank.

Fourth way

The fourth way that you can make money in the real estate crowdfunding industry is to refer investors to crowdfunding websites.

These crowdfunding sites are always looking for new investors to join their platform and you can make money as an affiliate by doing that.

If you have access to a pool of accredited or non-accredited investors. You might be able to make out a deal with a crowdfunding website and be compensated for referrals.

For example, Realty shares have an awesome affiliate program that will compensate you for qualified investors that you refer to their marketplace.

Your relationship with investors is paramount.

We tend to invest in companies or buy products that we know like and trust. I'm a huge fan of a win-win scenario where everyone gains.

Investors make money

sponsors make money

the platform makes money.

And you are getting a cut for referring that investor.

The Fifth and Final

The fifth and find a way to make money in the real estate crowdfunding industry is to build a brand on a platform.

One of our marketplaces emerges there are a lot of winners and losers.

For example, if you browse the Kickstarter marketplace it's very easy to see which companies have absolutely crushed it and are raising bunches of money. As long as it didn't have any fulfillment issues have officially gone down in crowdfunding history as a success story.

They continued to profit from the positive brand attention real estate managers. Or developers have the opportunity to build a strong relationship with these growing platforms.

They can also put themselves in the position of developing a relationship with a community of investors. This is important for a few different reasons;

Easier to get future Funding

First of all, it makes it easier to get future rounds of financing you've already delivered a profitable deal with great ROI. Investors are much more likely to trust you and put money into your next deal.

Begin to see side benefits

Second, as you build up your brand in the marketplace, you begin to see side benefits that also emerge. You could take the form of new connections. It could take the form of introductions or access to insider knowledge about the industry.

This is extremely valuable because it's a competitive advantage. You'll basically have a leg up on your rivals.

It’s Profitable

Naturally, the more deals you do on a particular platform the more you are going to grow your revenue in the long term.

You'll also be able to carefully analyze the sticking points of your operation. Maybe you overestimate the return that you bring to various investors. Or you aren't particularly accurate about the completion of property by having a dashboard that tracks all of the information related to the investment. You'll be able to see where you need to improve going forward.

Conclusion

In conclusion, real estate crowdfunding I think is really prime to disrupt the entire real estate financing ecosystem.

I think gonna be on everyone's radar in the next few years. And for now, it's kind of more of a fringe activity. It's a kind of alternative investment activity. But there is a lot more to be learned and there is a lot more to go.