A new investment that is growing in popularity is called real estate crowdfunding. This type of crowdfunding is the same as investor crowdfunding, in which you and a group of other investors pool your money together to help fund an endeavor, except this type of investment is in the form of real estate. Real estate crowdfunding is perfect for anyone who is interested in investing in property, but who does not want the stress associated with the upkeep and energy required to maintain real estate.
The money is crowdfunded until the goal is reached. If the project is not fully funded, your investment is returned to you in full. Just like any other investment in real estate, a drawback is that the investment may flop, yielding you no return, or even a loss of money.
Where can someone begin an investment in real estate crowdfunding?
The premier platform to place a real estate crowdfunding investment is through Realty Mogul. Realty Mogul was created by Jilliene Helman in Sept. of 2012. She was 27 at the time and saw limited initial success with the company; it was not until the Jumpstart Our Business Startups Act was passed (which helped reduce the restrictions on an investor’s ability to invest in companies via real estate crowdfunding) that the company was able to generate a great deal of success.
Today, investors claim to make anywhere from 8 to 15 percent return on investments annually, as reported by Fox Business.
A setback you may encounter when attempting to invest through Realty Mogul is that you need to be an accredited investor, which requires a net worth of $1 million and an annual income of $200,000. Luckily, there are other platforms such as Fundrise, and iFunding designed for the everyday person to make an investment in real estate.
Real estate crowdfunding vs. CDs
How much can a person make from real estate crowdfunding as opposed to a CD investment?
The return on investments made through real estate crowdfunding as opposed to even the highest yielding CD investments is significantly different. Let’s use current GE Capital CD rates to compare how much can be made between these two types of investments. For this example, we will use the lowest expected return on investment for crowdfunding in real estate, 8 percent.
- A $200,000 CD investment from GE Capital with a 2.25 percent APY would grant you a total of $223,536 over the course of five years.
- A $200,000 real estate crowdfunding investment with an 8 percent annual return on investment grants you a total of $280,000 over the course of five years.
The difference between these two types of investments is $56,474 in the favor of real estate crowdfunding. While no type of investment is ever secure and there is a chance you won’t get a return on your initial investment, you may want to consider looking into this form of crowdfunding as you plan your portfolio for the future.
Do your research and consider investing through reputable crowdfunding platforms such as Funrise or iFunding.
Additionally, review any investment plan to ensure your money is going into a promising endeavor. This means getting familiar with the local economy of the investment location, as well as the qualifications and reputation of the management team behind the project. Doing your homework ahead of time can help you place your investment into the right hands.
Gerald is a staff writer at MyBankTracker.com. He is an expert in real estate, mortgages and credit.