Traditional real estate investing requires a tremendous commitment of time, money and resources. As a result, most investors shy away from considering real estate as a investment option. Recently, real estate crowdfunding has emerged as a viable alternative for the average investor. Real estate crowdfunding allows investors to buy shares in single-family homes, multi-family apartment buildings, and commercial properties.
Crowdfunding in real estate offers two primary advantages.
- Investors are not required to make a large capital investment. The minimum investment for some deals is $500.
- Investors are not responsible for property management. The crowdfunding platform’s management team handles the upkeep and management of the property.
There are over 100 real estate crowdfunding platforms to choose from. Here are six crowdfunding platforms that cater to the average investor.
Fundrise offers investment in real estate projects ranging from single-family rental homes to commercial property renovations. Investors can invest for as little as $500 with Fundrise’s Starter Portfolio. For a minimum investment of $1,000, you can upgrade to one of three Core Plans — Supplemental Income, Balanced Investing, or Long-Term Growth.
RealtyMogul allows investors to invest in multi-family properties and debt securities through their two Real Estate Investment Trusts (REITs) — MOGULREIT I and MOGULREIT II. MOGULREIT I requires a $1,000 minimum investment. MOGULREIT II requires a $5,000 minimum investment.
Investors can invest in multi-family properties and student housing through Rich Uncles’ BRIX REIT. The NNN REIT gives investors the opportunity to invest in commercial, industrial, and retail properties leased to corporate tenants. Both REITs only require a $500 minimum investment.
The 1stREIT Office REIT provides investors the option to invest in commercial office properties for a minimum investment of $1,000. Since its inception, the fund has returned a dividend of 10%.
The Upside Avenue REIT gives investors the chance to invest in multi-family apartment buildings, senior living facilities, and student housing for a minimum investment of $2,000. The REIT has been in existence since 2002 and has averaged a 15 percent return on investment since inception.
Unlike the other crowdfunding platforms mentioned, Groundfloor uses crowdfunded investments to provide real estate investment loans to borrowers. The rate of return on these loans ranges from 5.5 percent to 26 percent, based on the risk level.
These are 6 of the best crowdfunding platforms for main street investors, but there are so many more out there. Before committing to one, make sure you do your research. Feel free to consult your colleagues on which one is their favorite. Hopefully, you will have a better sense of what crowdfunding are available and can make an informed decision on which one is the best for you!
Unfortunately, no one knows when the next recession is coming. This can be daunting for real estate investors and the well being of their career. Smart real investors prepare to take advantage of the discounted real estate deals that become available during an economic downturn.
Purchase Well Now
Buying the right properties today will put real estate investors in a good position during a recession. Not overpaying for properties is important. An appropriate purchase price keeps more funds available for the future. Also, properties must provide a positive cash flow.While the location of properties is always an important factor in real estate, owning properties in the wrong location could mean financial disaster in an economic downturn. Investors should select properties in communities that aren’t dependent on one industry or employer. A recession increases the probability of a single industry or employer to fail, and as residents leave the community in search of economic opportunity, investors’ rental units become vacant and unprofitable.
The other location consideration is the neighborhood. Like school teachers, real estate investors classify neighborhoods with the letters A, B, C, or D. For many investors, properties in A-class neighborhoods are too expensive for positive cash flow. During a recession, properties in B-class and C-class neighborhoods should continue to provide positive cash flow because these communities tend to attract employed, long-term renters. Landlords who want to get ready for a recession should avoid D-class neighborhoods, which will likely see an increase in evictions during an economic downturn.
Get Access to Funds
Purchase prices usually drop during a recession. Investors need to be ready with access to funds
. Some investors may be able to save up cash. Other investors should start networking now and build relationships with lenders. That way when the recession comes the lenders will already be familiar with the investor and his or her work. However, investors need to be careful that they don’t borrow so much now that they’re overleveraged when the recession hits.
Become a Real Estate Investor Before the Recession
A recession isn’t the time to start a real estate investment business
. It takes time to establish a network, generate leads, learn how to buy the right properties, and find financing. When economic conditions lower prices in the real estate market, newcomers may find that experienced investors were ready and have taken the best deals. The most essential preparation for a recession is having expertise as a real estate investor before the downturn begins.
An economic upswing that began in 2013 has North American baby boomers searching for buried treasure. It comes in the form of an inventory of affordable properties in several tropical regions that are suitable for both retirement and investing. Savvy investors are taking advantage of the opportunity to invest in rentals for snowbirds and furnish themselves with a second home in a Caribbean paradise. Experts in the following locals say now is the time to start digging for investment treasures that will pay off big time in the future.
Belize is located in mid-Cental America and is only an hour and 45-minute flight from Miami. Buyers can rest assured that the economy is stable, and the real estate market has matured. Investors will find no international pitfalls to trap them legally since Belize is a part of the British Commonwealth and there is no capital gain tax. Properties are less expensive than many other places in the Caribbean. Hot spots include the Cayo District and San Pedro.
The Cayman Islands also have a favorable economic forecast along with a popular vacation lifestyle. Their rules for international transactions strict and the British colony’s government is friendly to foreign investors. Titles can go in company or personal names. The Caymans have a housing inventory that is affordably priced. The average price of a two-bedroom condo is $350,000. Rented out at $2,500 net, the return on investment will be seven percent over time. Additionally, there is no income tax, property tax, or capital gain.
A varied natural landscape and a politically and economically stable country make Costa Rica a popular investment choice. A rising GPD is fueling investor interest. Canadian and U.S. tourists and snowbirds keep the rental market strong. Property can be bought easily with a simple tourist visa, and foreigners have the same rights as locals in terms of property ownership. Hot spots include the Southern zone and the northern Pacific coast.
The Turks and Caicos Islands
Located north of the Dominican Republic, the Turks and Caicos Islands have one of the Caribbean region’s fastest growing real estate markets. Depending on size and location, investors will pay between $250,000 and $800,000 for a condo and $250,000 for a home. Most properties come fully furnished because there is no room to store furniture. The Turks and Caicos have relaxed rules for conducting business. There are no taxes, but there is a one-time stamp duty payable at the time of purchase. These islands have a bright future as a vacationer’s paradise.
How you prepare for taxes can be the difference between making a huge profit or ending up in the hole following a real estate investment. Due to some reforms to US tax regulations, real estate investors now have even more opportunities to save money, but there are also some new challenges they may encounter. These changes are likely to make a big difference for real estate investors in the upcoming years, so it is important to fully understand them.
Deducting Loss Is More Difficult
Most investors end up with losses in the first few years of owning a property, and they used to be able to deduct this loss on their taxes. However, with the new legislation in place, people will not be able to deduct a loss for the tax year it occurs. Instead, they have to wait and carry over the loss to the next year. For new investors, this can make finances a little harder to keep up with especially without the cash flow from their investment.
Tax Brackets Are Slightly More Favorable
The adjusted tax brackets for the tax law mean that some people do not have to pay quite as much taxes as they used to. The savings are only very high for those in the highest tax brackets, but even people in lower tax brackets can still expect to save a little money with the new tax law.
Doubled Deductions for Depreciation
Real estate investors now have the option of doubling up to $1 million for certain properties. The regulations for using Section 179 deductions are a little complicated, but if you qualify, you can deduct things like furnishing, real estate depreciation, and interior improvements.
Investors Are Offered a QBI Deduction
A new advantage for investors will be the Qualified Business Income Deduction. This lets people take a 20 percent deduction on certain types of income, so it can provide big savings. Any investment operated as a sole proprietorship, partnership, trust, estate, or S corporation may qualify.
More Properties Qualify for Improvement Expense Deductions
Changes to regulations mean that investors may be able to offset up to 100 percent of their expenses for improving certain types of properties. Not all properties qualify now, but investors can use the deduction for many types of restaurant, retain, and leasehold properties.
With the new regulations in place, real estate investors need to be wary of what an impact these changes make on their investments. Make sure to brush up on your research to find out how these new tax regulations will affect you.
3 Ways to Invest in Commercial Real Estate
When the topic of real estate investing comes up, most people think of fix and flip opportunities. While that was once considered a valued method for building wealth, it’s certainly not the only way to get started in investing in real estate. By looking at several options, you may identify a method that best appeals to your skills and resources.
Directly Investing in Commercial Property
The fix and flip is starting to die out as people realize this isn’t the get rich quick scheme that television suggests. However, buying into a commercial property and holding onto it as a source of rental income is a legitimate way to make money in real estate
. It requires patience and commitment because it will require you to maintain the property in good condition. You will also have to manage tenants and ensure each unit is consistently providing income. If you have the time and passion to devote to a commercial rental property, this may be the investment for you.
Becoming a Limited Partner
As a limited partner, you invest capital into a commercial rental property, while allowing another partner to manage the day to day operations. While you may get a say in how major decisions are handled, you leave many of the operational decisions up to the general partner. You simply invest capital along with other investors and, in exchange, you own a percentage of the property. If you want the perks of real estate investing without having to get your hands dirty, this is one way to accomplish that goal.
Invest in an REIT
Also known as a real estate investment trust, an REIT is essentially nothing more than a mutual fund that invests in real property assets. Each REIT focuses on a certain type of asset, so you can choose a REIT that invests in commercial shopping centers or one that invests in multi-family homes. The benefits here are that you don’t have to devote much personal time to the investments, while the REIT diversifies your holdings to maximize your potential for growth.
These are a few of the most common ways to invest in real estate. As mentioned, each type of investment requires a different level of personal involvement. This may be one of the deciding factors in determining which type of investment is right for you. Alternatively, you may choose to try multiple types of real estate investments to maximize your earnings. Your personal tastes and needs will determine which strategy is best for you.