Thoughts on Crowdfunding Realestate?

Question

Has anyone here invested in real estate crowdfunding? If so, what were your initial investment, return, and overall thoughts on the experience? I'm planning to invest in real estate crowdfunding instead of stocks in the near future.

Ian Ippolito · Answer

To backup a second: You can find virtually every type of real-estate investment strategy ( core, core plus, value-added , opportunistic) and asset type ( multifamily , self storage, office, mobile home parks etc.) via syndication/crowdfunding. and you can find an almost unlimited variation on risk ( from low to high leverage, both floating and fixed rate debt, from no to high skin in the game, etc). And there are sponsors that have survived multiple cycles with little to no money lost and sponsors that are brand-new (and everyone in between)

So these all come with a wide range of projected returns, actual returns and experiences. So there is no single projected return, no single actual return, no single experience (and it instead is a huge variety).

I feel one of the main advantages of passive investments (via syndication/crowdfunding) is that I can hire a manager who has years more experience than I can ever hope to obtain myself. And once I finish the due diligence, my work is done: it's completely passive. Also, rather than taking a large amount of money and investing into one single directly owned property, I can split it up into much smaller chunks across many different passive investments. This gives much better diversification protection across geographies, asset types, strategies, investment subclasses etc. versus putting all the eggs into one basket.

The downside is that it's not for everyone, and a person has to be comfortable with turning over control to someone else. That means learning how to vet a manager. Not everyone has the time and ability to do that and not everyone feels comfortable turning over control. So I feel it's not a fit for everyone. Also there is a management fee to pay for all of the above. So someone who is looking purely to maximize potential return (and has unlimited time) is unlikely to find this a good fit.

Chris Seveney · Answer

@Kylie A.

Crowdfunding is just another way to raise $ / conduit for a sponsor. Nothing wrong overall based on a company that goes through reg cf crowdfunding.

It boils down to the sponsor and their experience that is why I would focus on.

Kevin Hintz · Answer

I've tried real estate crowdfunding and found it pretty interesting. I started with around $1,000, and my returns have been decent, usually around 8-12% a year, which feels nice compared to the ups and downs of the stock market. I like that I can invest in actual properties without the landlord headaches. Just make sure to research the platforms and projects because some are better than others. Overall, I think it’s a good way to diversify your investments if you're looking for something different.

Kylie A. · Answer

yah ill shoot u a dm im definitely interested

Ian Ippolito · Answer

@Kylie A. , somehow when I replied to you via my phone it didn't tag you on the reply. So letting you know I responded (on the post just above this one).

Ian Ippolito · Answer

Yes, I feel that directly owned single-family rentals are really a business and not a passive investment.

There are a lot of things that can be done to automate it like taking rent over the Internet, using Zillow and other apps to bring in new potential renters, etc

But others require manual labor. And a property manager is expensive and profit margins on rentals are fairly small. That’s especially the case of someone holding a mortgage. And the manager is not financially aligned (and in my opinion, doesn’t do as good a job of screening tenants, etc., as I can). Others will disagree with this and think that hiring a property manager is fine.

To answer your other question: yes I do diversify into a lot of different asset classes. I have my public market portfolio, which is the usual stocks and bonds, etc. And on the alternative investment side, I have real estate, private equity, venture capital, GP Stakes, music royalties, litigation finance, etc.

I don’t feel comfortable, sharing my portfolio amounts etc on the public Internet.

If you want to hear how they’ve done, you can private message me and I’ll send you more info.

Kylie A. · Answer

You can also hire a property manager for direct real estate and have someone oversee them, making direct ownership more passive. I don't think it's a bad approach for passive investing—you could get it down to just an hour or so of work. But if you think about it, nothing is truly passive unless you completely hand over your business, which is rare.

I’m a big fan of diversification, so I’m curious—do you diversify beyond real estate? Also, if you don't mind me asking, how much have you invested in and gotten back from syndication real estate? I'm just starting out.

You can also hire a property manager for direct real estate and have someone oversee them, making direct ownership more passive. I don't think it's a bad approach for passive investing—you could get it down to just an hour or so of work. But if you think about it, nothing is truly passive unless you completely hand over your business, which is rare.

I’m a big fan of diversification, so I’m curious—do you diversify beyond real estate? Also, if you don't mind me asking, how much have you invested in and gotten back from syndication real estate? I'm just starting out.

Thoughts on Crowdfunding Realestate?

Most Popular Reply