5 Tips on Investing on a Real Estate Crowdfunding


Everyone wants to secure their future by making sound investment decisions today. Unfortunately, some investments require a considerable amount of capital that a single investor cannot afford hence the need for pooling funds of other investors. Ensuring that the projects are prosperous can be challenging so here are 5 tips on investing on a real estate crowdfunding.

1. Prepare for the illiquidity

Different real estate projects have a variety of liquidity periods which also carry different returns. Investing in real estate does not afford you the luxury of buying back your shares and selling them if you feel the project could be a white elephant. Instead, real estate crowdfunding locks in your money until the business begins to make profits. Therefore, as you invest in real estate crowdfunding, make sure you have sufficient funds to cater for your needs during that time when you cannot access your money.

2. Weigh the risk involved

All investments have a certain amount of risks, and even if you are a risk seeker, you must not put all your eggs in one basket. As much as real estate can have high proceeds, there is always a degree of risk that you should prepare for, to avoid frustrations. Therefore, look at the projected risk against the expected returns and determine if the equity you are injecting is worth it. Still, even if it is a profitable project, diversify your portfolio.

3. Due diligence on a platform

Real estate crowdfunding platforms are not the same with some offering better services than others. Before you choose your platform, do some thorough research, or rather a SWOT analysis on a platform to identify mostly its strength that could facilitate more profits, and weaknesses that could threaten your investment. You should, therefore, check on the track record, management credentials, company funding, number of successful deals, and how the returns perform. Remember that some platforms do not give you any payment at all if they make a loss.

4. Check on your eligibility

The Securities Exchange Commission (SEC) has your best interests at heart and will not permit you to make irrational decisions. Therefore, if your annual income is less than $100,000, you can invest a higher amount between $2000 and 5% of your income. For a yearly salary of $100,000 to $200,000, you cannot invest more than 10% of your income. Consequently, no matter how much you would like to go into real estate crowdfunding, the cap set by SEC could hinder you from doing so.

5. Analyze the investments

Regardless of how good a platform is after your research, it cannot advise you on your investment decisions. Besides, some do not vet deals before availing them to investors meaning you could land on a deal that seems lucrative but which will drain your bank for nothing. To avoid such situations, when you find a deal you feel is worth investing in, you should consult with a qualified financial advisor who might point out problems you may encounter in future. As they say, you better be safe than sorry.