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Real Estate Crowdfunding Investments

Real estate crowdfunding investments are a rapidly-growing area of the real estate market, as more and more investors are seeking alternative ways to participate in this lucrative industry. Unlike traditional real estate investing which typically involves large sums of money and more hands-on management by individual investors, real estate crowdfunding allows investors to pool their funds together and invest in Real Estate Investment Trusts (REITs), Real Estate Operating Companies (REOCs), or privately held properties.

These investments offer many advantages over traditional real estate investing methods, including greater liquidity, wider access to deals, and the ability to diversify across a number of properties without needing a large amount of capital. Overall, with its flexible requirements and impressive track record of delivering consistent returns, online real estate crowdfunding is an exciting opportunity for investors looking to gain exposure to the booming real estate market.

In this post we will cover: 

  • The Concept of Real Estate Crowdfunding
  • Similarity Between Crowd Real Estate and Equity Investing
  • Types of Crowdfunding Investments
  • Best Real Estate Crowdfunding for Non-accredited Investors
  • Property Crowdfunding Investments Using Stairs

The concept of real estate crowdfunding mushrooms from traditional crowdfunding. Crowdfunding is where a small amount of capital is used by a wide group of individuals to finance business ventures. In this case, vast networks of people are used through different platforms on social media and other crowdfunding websites to bridge the gap between entrepreneurs and investors.

The Concept of Real Estate Crowdfunding

Real estate Crowdfunding Platforms work at raising money for investors. The popular social platforms used include Meta, LinkedIn, and Twitter. Other platforms include private lenders such as Groundfloor.

The whole idea that makes real estate crowdfunding sites work is the fact that so many people want to invest a small portion, fund, and want to earn easy returns. On the other hand, these smaller funds help in creating larger pools of money that in turn help raise money in a shorter span of time.

This has been one of the best ways companies can create and access capital. With this, investors become a part of real estate properties and enjoy the returns associated with them. 

Similarity Between Crowd Real Estate and Equity Investing

There is a lot of similarity between crowd real estate and equity investing. With both, you are essentially buying a piece of something that will generate money over time. 

In the case of equity investing, you are buying into a company and becoming a part owner. With crowd real estate, you are buying into a property or portfolio of properties and becoming a tenant/co-owner. 

Avoiding Risks - Real estate crowdfunding allows investors to reduce all risks associated with having equity portfolios. This is done by diversifying the risk in the portfolios having both combinations. You don’t have to have all your funds within the equity market, instead have some investments in the real estate sector as well. 

Both have their pros and cons, but it’s important to understand the basics so you can make the best decision for your individual circumstances. 

Types of Crowdfunding Investments

There are different types of crowdfunding investments that you can consider. These include:

  1. Direct equity investment: in this platform, accredited investors can fund real estate projects directly as sponsored by the platform. The minimum amount that one can invest depends on guidelines set by the platform or the sponsor.
  2. It helps to have some real estate knowledge, even in the most basic form, because sponsors usually set the terms and structure of the project. The sponsors handle accounting, and the platform is responsible for the management including reporting.

Direct investment in a new entity: in this case, platforms manage investors by creating a new entity that deals with something specific like real estate. This means that the people are provided a platform for investing in an entity instead of the project itself. 

As a result, securities are used, and all accounting and payments are taken care of by the platform. The platforms can invest in equity or debt, and a minimum limit is set for investing. Debt is the best real estate crowdfunding form because it is not as risky as others. This is because it focuses on debt and preferred equity. Groundfloor also deals in debt investments. With our app- Stairs, investing and saving becomes easier. Available for both iOS and Android platforms. 

  1. Auto investments in debt: this is a common type of crowdfunding for real estate projects. These are platforms that make the entire property investment crowdfunding real estate simpler. The investors can set a criterion for investment where a certain amount is allocated towards investments. 
  2. REITs: Real Estate Investment Trusts focus on debt investments. REIT crowdfunding is innovative as the model offers investors some fixed return rates, low investment fees, and quarterly distributions. In many cases, no fee is charged until the investment earns a certain percentage. 
  3. Funds of funds: Here, you can invest in other crowdfunding platforms. This way, you diversify your holdings and get better real-estate crowdfunding returns. This success depends on how well the team can handle the deals. You can invest in low amounts. Funds of funds make it possible to access portfolios with different assets even with limited capital. These are assets that would otherwise be unavailable.

Best Real Estate Crowdfunding for Non-accredited Investors

Crowdfunding investments are very popular today. Companies and Individuals are using these platforms to raise capital for projects. 

These platforms are also helpful when it comes to Real estate crowdfunding for beginners. Groundfloor is one of the platforms that provide an opportunity to beginner investors, as well. Our platform is approved and very functional, which makes it possible for accredited and non-accredited real estate investors to fundraise. Here are the benefits of investing with Groundfloor- 

  1. Groundfloor targets residential development projects. Offering both investing and lending in these projects. 
  2. When it comes to lending or borrowing, our loan grading algorithm is in place to help give loans a letter grade.
  3. Groundfloor offers investments to many users, with the minimum investment being 10 dollars. Many things would attract you to this platform, one being that it is the best alternative to the public markets. 
  4. It is a good place for beginners to start and learn more about investing in real estate. This platform means that you don’t have to rely on brokers. It is the best way for individual investors to access the organization’s opportunities. You would have to buy REIT, which means a real estate investment trust. You also don’t have to buy an entire rental property to invest. 
  5. Groundfloor eliminates concentration and operational risks, which is a better deal for investors regardless of how big or small they are. 
  6. There are several projects that Groundfloor has facilitated to completion. This shows the company's commitment to giving the best to its client base. In addition, the company understands all the regulatory frameworks that must be adhered to.

Property Crowdfunding Investments Using Stairs

There are new investment products that Groundfloor has added, and this includes the introduction of our app- Stairs which facilitates investing and saving. Stairs offer an innovative investment platform backed by real assets and your money, which you can withdraw anytime without fees.

So far, millions of assets have been invested, and the users can earn interest of between 4-6 percent on the cash held in the checking account. In addition, the capital tapped from the app is used to facilitate the loans extended to the investors. 

Those using the app can enjoy constant liquidity, and they are allowed to withdraw money from the app at will. This structure is unique, one of a kind that took a long time to qualify. 

Crowdfunding real estate development makes it easy to raise capital. It is not so much about affluent circles. Crowdfunding makes things more accessible for investors who want a project without involving banks, especially for commercial projects. This makes property crowdfunding for beginners possible. But, at the end of the day, it is about finding a legitimate platform where you can invest and also save. Groundfloor is one of the best real estate crowdfunding for non-accredited investors and has some of the best terms in the market. 

Clinton Dugan

SR. Organic Growth Manager

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