If you’re trying to decide between investing in real estate through a crowdfunding site or individual properties, there are a few key criteria to consider, chiefly your liquidity needs and your available investment dollars.
Liquidity Needs
If you want easy access to your cash or the flexibility to buy and sell real estate-related investments at your whim, a REIT offered through a crowdfunding site or an exchange-traded REIT from a brokerage will be a better choice.
Exchange-traded REITs offer the highest liquidity as there’s always a market through the stock exchanges, but some proprietary REITs through crowdfunding sites come in a close second. When investing in individual properties, your ability to buy and sell relies heavily on market conditions.
Available Investment Dollars
If you’re new to real estate investing, crowdfunding platforms can be a great way to whet your whistle. For non-accredited investors, it’s possible to find platforms with low minimums that can help you learn the sector without risking too much of your total portfolio.
For example, new investors may find that coming up with the cash to buy an individual property is too big an ask. That’s where investors of all net worths could benefit from real estate crowdfunding platforms. Between access to REITs and private placements where multiple investors come together to fund single-property deals, crowdfunding sites can help find the type of real estate investment that aligns with your available funds.
However, it’s important to keep in mind that when investing in any single asset class, you expose yourself to sector risk. Real estate is no different. Since there’s no investing crystal ball, not even expert analysts can say for sure where real estate is headed next.
If you’re considering investing through a real estate crowdfunding site, the wisest move is to limit your investment to a fraction of your portfolio—especially if you’re investing using retirement funds.
