5 Questions to Ask When Considering Real Estate Crowdfunding
Estimated reading time: 2 minutes, 33 seconds
If you’re on our website, then you probably know you aren’t limited to stock market-based assets when investing with retirement funds. You can invest in a wide variety of assets, including residential and commercial real estate. You may even be considering holding this type of alternative asset in your retirement portfolio.
Did you know you can log on to various websites and view a vast array of investment properties? These crowdfunding portals allow investors (be they retirement investors or otherwise) to choose the properties they’re most interested in and which fit their particular investing needs and goals.
Real estate crowdfunding is growing in popularity, thanks in significant part to the JOBS Act of 2012. The legislation and subsequent rulings have opened this investment type up to a larger pool of potential investors (and no longer just accredited investors). Both sponsors and investors now have the opportunity to work with others outside their local city or region on an investment in real estate.
But when contemplating an investment in real estate crowdfunding, consider asking yourself these five questions.
- Which real estate crowdfunding structure best suits my needs? An equity investment could result in interest income and return of capital, while a debt investment could result in a share of the profits earned. The former is usually short-term and generally is secured. Conversely, the latter structure is usually a long-term, and generally unsecured, investment.
- Which type(s) should I invest in? Commercial or residential? Do you or your team of professionals have more knowledge in one type over the other? Do you believe one will yield better long-term results?
- What location(s) should you choose? Do you prefer properties in metropolitan areas, beachfront locations, or some other specific area? Or is location not necessarily important?
- How much are you willing to invest? Because these are crowdfunded assets, fractional ownership is a possibility. But nonetheless, knowing how much you’re willing to invest should help you narrow down investment possibilities.
- Which platform is right for you? Performing due diligence on the companies that own these websites will be key. What is their reputation among experienced investors? What is their financial stability? What’s their market share? What types of investment opportunities are available on each? What is their vetting process like?
Your answers to these questions will help you iron out which investments you’d like to make and which platform(s) you should work with.
Keep in mind that you can’t invest in real estate crowdfunding opportunities with just any custodian. You’ll need a Self-Directed IRA custodian like Kingdom Trust. In fact, we were one of the first alternative asset custodians to enter the crowdfunding space.
For several years, Kingdom Trust has been a leading service provider for those seeking to use retirement funds for crowdfunding investments.
When you’re ready to invest in a crowdfunding asset, follow these simple directions:
- Choose a crowdfunding platform (ensure it allows crowdfunded investments in retirement accounts);
- Open a Kingdom Trust account if you haven’t already;
- Fund your Kingdom Trust account via transfer, rollover or contribution; and
- Tell us what you want to purchase via a completed Investment Direction Kit.
Getting started with investing in real estate crowdfunding can really be that simple!