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A Guide to Crowdfunding for Non-accredited Investors

Real estate investing is a world of its own, and it can take many forms. From multifamily real estate investments to commercial real estate investments and many more, the business of real estate investment is exciting, pooling together hundreds of investors across numerous markets. 

Not many people are aware of the gross profitability of real estate investing, especially in the sphere of real estate crowdfunding, which allows investor groups to pump in funds into the flourishing and appreciating commercial real estate market. With less effort and more credibility, investors can turn in massive returns from crowdfunding ventures due to their easy accessibility online.

This article is aimed at shedding light on the concept of real estate crowdfunding for non-accredited investors. However, before sharing the nitty-gritty involved in real estate crowdfunding, it’s essential to understand the idea of crowdfunding as a tool for succeeding in the real estate industry.

What Is Real Estate Crowdfunding?

Real estate crowdfunding is an investment avenue that allows investors to collectively join small amounts to generate significant capital for investment in real estate assets and other landed properties such as retail centers, office buildings, and many more. Essentially, real estate crowdfunding involves a collective effort of raising capital for investment purposes.

There isn’t much difference between traditional real estate investing and crowdfunding, except crowdfunding involves a collective activity. Another difference is that real estate crowdfunding is typically conducted online via social media platforms and software applications created specifically for such purposes.

Real estate crowdfunding for non-accredited investors provides accessible investment opportunities among a wide range of properties without the need to carry out the purchases in person, despite the common misconception that most real estate crowdfunding deals are reserved for wealthy, accredited investors. 

On the other hand, many of the known real estate crowdfunding platforms seek non-accredited investors by offering a variety of opportunities for profitable investment. The process is usually done with the aid of operators and developers responsible for the daily management of the property.

How Does It Work?

As said earlier, real estate crowdfunding allows for investments in multiple properties without the need for whooping large sums of money. The investment form also provides an added benefit of not having to stress oneself from the hassles of sourcing for, acquiring, and managing commercial real estate properties. 

In real estate crowdfunding, investors in a crowdfunded property follow a deal to receive distributed rental income monthly or quarterly. When property appreciation occurs, the investors are entitled to receive a share of the growth in appreciated value upon the sale of the property.

The Difference Between the Accredited and Non-Accredited Investor

For accredited investors, that is, those who have special status within the regulations and systems set by financial regulations, one must possess a net worth of $1,000,000, excluding the value of the investor’s primary residence. Alternatively, the investor is required to have at least $200,000 in income per year for the past two years. For married couples, it’s placed at $300,000.

With the introduction of the JOBS Act of 2012, crowdfunding opened a new method for real estate investment, allowing non-accredited investors to be part of the market via digital platforms by investing low investment amounts for risk reduction. REITs (Real Estate Investment Funds), operating similar to stocks, are corporations that own and manage properties and mortgages, allowing anyone the opportunity to purchase publicly traded REITs.

Non-accredited investors often have limited investment possibilities to ensure their safety in the industry. As a non-accredited investor with an annual income or net worth below $100,000, you are only capable of investing less than 5 percent of your yearly income, be it in commercial properties or residential real estate crowdfunding.

Advantages and Disadvantages of Crowdfunding

In the game of life, every existing activity comes with its risks and disadvantages, regardless of the amount of good it may bring. So it is in real estate crowdfunding. Here are a few of the pros and cons of this form of real estate investing.

Positives

  • Real estate crowdfunding offers easy access to investment opportunities which serve as an avenue for portfolio diversification
  • Most real estate crowdfunding platforms serve as arenas for retrieving trusted information relevant to the market, thus allowing potential investors to make careful decisions before investing
  • These platforms offer quality information and market analysis, and they also provide a range of investment options. There is also the presence of various media, giving you the freedom to conduct your research before picking the corporation that appeals to you

Negatives

  • Research has shown that the utilization of real estate crowdfunding simplifies the totality of investments, thus fostering the risk of involving unsophisticated investors who may be oblivious to the risks and rewards involved
  • Due to the presence of an array of real estate crowdfunding platforms online, it may be difficult for first-time investors to make good choices. Most times, they end up with the wrong corporations, which in the end, build losses for them
  • The easy access to and simplicity of these online platforms makes it less possible for many investors to appreciate the true nature of the deals before they get on board. The above is primarily due to the digitalized nature of the processes
  • The possibility of real estate crowdfunding being used by fraudsters to cheat unsuspecting investors out of their money is very high

Trusted Real Estate Crowdfunding Platforms

With all the administrative, legal and financial bottlenecks associated with the real estate crowdfunding industry, the number of real estate crowdfunding platforms that allow non-accredited investors is smaller than those allowing accredited investors. Listed below are a few of these platforms offering the best real estate crowdfunding non-accredited services.

Holdfolio

This platform is widely recognized for its wealth of experience in the multifamily real estate crowdfunding niche. Holdfolio aims at combining its expertise and strong partnerships with proprietary technology to engineer high-yield, expertly managed non accredited investor opportunities to passive investors.

Fundraise

This platform can easily be recognized as the most popular of all real estate crowdfunding sites, garnering a massive presence both online and in financial media. Fundraiser popularity may stem from being one of the first crowdfunding platforms to delve into the real estate world.

Start Crowdfunding Today!

Starting your real estate crowdfunding investing journey may not be easy. However, at Holdfolio, we make the process easy for you. By supporting our capital with yours, we profit together from the expert decisions of our team. Contact us today to start your journey in real estate crowdfunding for non-accredited investors.