Advice on Crowdfunding and/or REIT

[Soomin Kim]

Hi BP family,

I have some questions on crowdfunding and REIT. What are the difference between these?

Anyone tried RealtyShare, RichUncles, PeerStreet? What are differences between buying REIT from market and invest with these individual companies? These companies also buying properties and managing them anyway.

I want to build passive income. People say these are better option than owning a physical property to be 100% passive. If anyone has experience with REIT or crowdfunding, can you please share your stories and advices?

Thank you so much!

[Ian Ippolito]

@Soomin Kim , I have both crowdfunding/syndication deals and public REITs in my portfolio. In my opinion, both of them have pluses and minuses and a balanced portfolio should have both.

A REIT gives you the ability to instantly liquidate at any time. And there's a lot of public information on it that you can look at if you like to analyze that sort of thing. The also very low borrowing costs because they are so big. Also, they have a lot of properties in them which is good for diversification (although there are also some crowdfunding/syndication deals that do too).

However, their size is also a weakness because they have to compete against all the other huge REITs and together they tend to bid up the prices that they all have to pay. A crowdfunding/syndication deal can often come into a property that is smaller, and get a better price. Also, you pay a premium for the ability to liquidate instantly, which can be pretty expensive. For example a crowdfunding/syndication deal might throw off 9 to 10% per year versus 3 to 5% on a public REIT.

The other advantage of crowdfunding/syndication deals is that they are not very correlated with the stock market. On the other hand, every time the stock market takes a dive, you can expect your REIT to do the same. So volatility is very different between the two.