Smaller investors who try to use their good credit rating and savings to acquire large real estate investments fall short, because the profitable world of commercial real estate traditionally requires millions of dollars in capital, barring many would-be investors from the game.
But as Bob Massie with Fox News reports, all of that is changing, and investing in commercial real estate is no longer “just for millionaires.”
Crowdfunding Investment Opportunities
Crowdfunding as it currently exists is a relatively new fundraising method, and operates by collecting small contributions from a large number of individuals to create one larger pool of cash. And now, this popular method of fundraising has popped up in the real estate world with companies like Fundrise and Realty Mogul.
These real estate investing crowdfunding sites work similar to other crowdfunding companies, in that they fund large and expensive projects through the efforts of a large number of small contributions.
But instead of collecting charitable contributions or start-up capital, real estate crowdfunding sites collect funds for investing in commercial real estate. And through companies like Fundrise, just about anyone can add commercial real estate to their investment portfolio.
Crowdfunding Advantages, and Commercial Real Estate Drawbacks
Traditionally, only accredited investors, defined by the SEC as individuals with assets of one million dollars or 2+ years with a 200,000+ income, have been able to access commercial real estate opportunities. Recently, though, new SEC rulings have opened the market up to just about anyone, with crowdfunding commercial real estate companies taking investments as low as $100 in some cases.
While it won’t take crowdfunding investors a great deal of money to invest in commercial real estate, there are still some unique drawbacks related to commercial real estate investments. Typically, investments take quite some time to mature, and aren’t liquid during the project’s “build” phase. Additionally, developers can push back deadlines, tying up funds for an extended period of time. But despite these risks and drawbacks, commercial real estate can have very high returns.
What’s Next for Non-Millionaire Investors?
Who knows what will happen next in real estate investing. But one thing is for sure, an increasing number of Americans prefer real estate investing, and more people will find a way to invest in real estate in upcoming months.
One way smaller and larger investors alike are profiting from real estate is through residential rental properties, which continues to grow in popularity. Maybe someone will find a way to use crowdfunding for investing in single-family residential rentals in the future.