Real estate crowdfunding has grown rapidly, becoming a popular form of online direct real estate investment. This chapter explores the ten primary reasons why investors are turning to real estate crowdfunding and offers guidance on how to begin with as little as $25,000.

Are you looking for a new investment opportunity that offers a potentially high return on investment? Have you considered real estate crowdfunding? Real estate crowdfunding has become an increasingly popular investment option for investors of all levels, offering a range of benefits and advantages.

In this blog, we will explore the top 10 reasons why investing in real estate crowdfunding may be a smart financial move. From lower investment minimums and access to more diversified real estate portfolios to passive income generation and potential tax benefits, we will cover it all. Whether you are a seasoned investor or just getting started, read on to discover why real estate crowdfunding may be a worthwhile addition to your investment portfolio.

Online convenience

Now, real estate crowdfunding platforms such as Vairt enable investors to view a wide range of live deals across the U.S. With just a few clicks, an investor can access investment opportunities in any market of their choice, breaking down geographical barriers. For sponsors, this has opened the door to a national investor base.

The ability to invest in deals that one would have no knowledge of otherwise is one of the key reasons why investors are turning to online platforms like Vairt. This article will delve into the top ten reasons why investing in real estate crowdfunding is a compelling choice. The days of stumbling upon local real estate deals by word-of-mouth are long gone.

Real Estate Investing Approach

The old-fashioned approach to real estate investing was inefficient, and access to private real estate offerings was limited. Online real estate investing has transformed the game by democratizing access and offering transparency to investors. Now, real estate crowdfunding platforms such as Vairt enable investors to view a wide range of live deals across the U.S. With just a few clicks, and an investor can access investment opportunities in any market of their choice, breaking down geographical barriers.

For sponsors, this has opened the door to a national investor base. The ability to invest in deals that one would have no knowledge of otherwise is one of the key reasons why investors are turning to online platforms like Vairt. This article will delve into the top ten reasons why investing in real estate crowdfunding is a compelling choice.

Compare and contrast multiple competing investments.

With the availability of private real estate investment opportunities across the nation, the next step for investors is to evaluate them. Thanks to quality online real estate investing platforms, comprehensive offering information is readily available in an easy-to-understand and consistent format.

This allows investors to quickly compare and contrast competing offerings and filter through them to find a project that meets their investment criteria. Moreover, investors can register to receive notifications when new offerings that match their criteria become available.

Vairt ensures that all of its offering information and documents are presented in a uniform format. To familiarize yourself with the process of reviewing an investment offering on the Vairt Marketplace, you can refer to our instructional video, “How to Review an Investment Offering.” With increased efficiency, scalability, and options, consumers, including investors, generally benefit in any market.

As the online real estate investing industry continues to expand, the quality of investment opportunities and terms available to investors will undoubtedly improve, with more investors joining online marketplaces and more sponsors entering the competition to attract them.

Directly invest in commercial real estate

Investors can now directly invest in commercial real estate through online real estate investing, which differs from buying shares in a publicly traded real estate company or a mutual fund that holds multiple real estate companies. With direct real estate investment, investors have a stake in a specific property or a fund with a particular investment focus. This approach provides investors with the flexibility to choose the property type, location, and operator that best aligns with their investment strategy and objectives. For more detailed information on the differences between direct and indirect (REIT) real estate investments, read our article titled “What are the Differences Between Direct and Indirect (REIT) Real Estate Investments?”

Cash flow

Private real estate investments usually offer consistent cash flow distributions to investors that are designed to increase over the holding period of the asset. These distributions often start at 6% to 9% annually, are paid quarterly, and can even reach double-digit yields in just a few years. In today’s low-interest-rate environment, investors increasingly realize that investing in cash-flowing commercial real estate offers an attractive option to earn strong returns as well as equity appreciation upon sale.

Lower minimum investment amounts

Online real estate investment platforms have made it easier for individual investors to pursue direct real estate investment opportunities. In the past, investing in a private real estate offering required a minimum investment amount of $100,000 or more. However, with these platforms, investors can now access institutional quality real estate offerings for as little as $10,000. This has opened up the world of private real estate investment to a wider range of investors who may not have had access to these opportunities before.

Diversification

The principle of diversification is a fundamental concept in Modern Portfolio Theory, which suggests that by diversifying your investments, you can achieve optimal returns while also mitigating exposure to market risks. Online real estate investing platforms have made it possible for individual investors to build a diversified real estate investment portfolio with relatively low minimum investment amounts. Rather than investing $100,000 into a single property, investors can now invest smaller amounts of $10,000 or $20,000 into five to 10 different deals that vary in geographic regions, sponsors, investment structures, asset classes, risk profiles, and holding periods. To learn more about the rapid diversification now available through real estate investing online, please read our chapter on “How to Build a Diversified Real Estate Portfolio Using Crowdfunded Real Estate.”

Robust reporting platforms

Online real estate investing platforms provide investors with access to user-friendly dashboards that can be used to manage their investments, whether it is a single property or a larger portfolio of real estate assets. These dashboards offer a range of features, such as accessing quarterly reports, storing investor documents, receiving and storing K-1s, and viewing distributions.

For instance, Vairt is consistently improving its investor dashboard by introducing new tools. The upcoming version will feature comprehensive portfolio analytics. The rapid expansion of the real estate crowdfunding sector indicates why investors are more attracted to this area.

Title II of the Jumpstart Our Business Startups or “JOBS” Act, passed in September 2013, paved the way for the emergence of online marketplaces that focus on direct real estate investment. Thanks to the tremendous efforts of several online platforms, online real estate investing have become a reality and is fast approaching mainstream status just two and a half years later. In this chapter, we will explore the top ten reasons why investors are drawn to this industry.

Dissatisfaction with equity markets

Investors are increasingly interested in direct real estate investment due to a growing dissatisfaction and concern over equity markets. The domestic markets are at all-time highs, but there is international distress over uncertainty in China, a political roller coaster, and negative interest rates. Investors have been moving out of the U.S. equity markets and investing their capital into direct real estate investments. A well-leased commercial real estate asset with a durable rent roll is increasingly attracting investors as an alternative in a climate of heightened uncertainty. Check out our recent article, “Negative Interest Rates’ Effects on U.S. Real Estate,” for more information on this topic.

It’s the same as it has always been, just better

Ultimately, the emergence of online real estate investing is a tale of modality rather than a fundamental shift in action or structure. As investors grasp this narrative, their scepticism fades, and they begin to recognize the benefits of online investing platforms.

Once investors better understand online real estate investing, they realize that it is not different or riskier than offline real estate investing, which is a common myth. Instead, online real estate investing is a form of syndication, which involves pooling individuals to invest jointly in a property that no single investor could afford to invest in alone. Syndication is the purest form of online real estate investing, where a group of investors can collectively invest in real estate deals.
Syndication, a method of pooling capital to invest jointly, has been in practice for centuries offline. However, prior to the passage of Title II of the JOBS Act in 2013, it was limited to private syndication under Section 506(b) of Regulation D. With the implementation of Title II, syndication can be conducted publicly under Section 506(c) of Regulation D and now also online. This shift to online syndication has enabled the emergence of technology companies like Vairt to make the process more efficient, scalable, and transparent.

Vairt’s Marketplace has a stringent and impartial screening procedure for all investment proposals. Only 2% of the applicants who undergo this process are accepted to appear on Vairt’s platform. For detailed information about Vairt’s vetting process, please watch the Vairt Marketplace Screening Process video.

Putting it all together

Investors who explore online real estate investing realize its potential to transform their portfolio strategy. To fully harness the benefits of direct real estate investing, it’s essential to utilize the tools, resources, and efficiencies offered by online real estate marketplaces. As more investors join the Marketplace, it becomes even more powerful.

Previously, commercial real estate investment was only accessible to wealthy investors who could afford a minimum investment of $250,000 for each deal. However, due to the JOBS Act and the development of software that allows real estate syndications to occur on a larger scale, Vairt can now offer access to high-quality commercial real estate investment opportunities with a minimum investment requirement of as low as $10,000.