Investing in a crowdfunded real estate investment does not actually make you an owner of real estate. You become a member of a Limited Liability Company that in turn holds title to real property (in the case of equity) or makes a loan secured by real property (in case of debt). Your ownership in the LLC is considered personal property rather than real property and your right to share in the income generated at the property is set forth in a governing document for the LLC called an Operating Agreement.
Real Estate Crowdfunding vs REIT Investing
Investing in a crowdfunded real estate investment is not like investing in real estate stock. When you invest in real estate stock, or more formally known as a REIT, you are investing in a company that owns and operates various real estate investments. You do not choose the specific properties. Both types of investments have their pros and cons. REIT’s offer instant liquidity whereas with crowdfunded real estate you’re locked in until an exit event such as loan maturity or the sale of the property (which can range from six months to seven years). On the other hand, crowdfunded real estate offers more control and transparency and greater diversification from the stock market whereas REIT’s are more correlated with the stock market and thus experience similar volatility.
Building Wealth With Real Estate Crowdfunding
Crowdfunding is continuing to evolve and it will be exciting to see what changes come about in the real estate crowdfunding industry over the next year. One thing is certain, investor confidence in real estate is back and investors are looking for new and creative ways to participate and real estate crowdfunding is one of the major ways for non-accredited investors to participate in real estate investing with out the traditional barriers to entry that has prevented people from using real estate as a wealth building vehicle.
It is now more important than ever for investors to understand exactly what they are purchasing when participating in a crowdfunded real estate investment. As this sector of the real estate market grows and evolves you must continue to educate yourself on the direction of the market and the vehicles the market takes to finance real estate deals in the future. If you want to learn more about real estate crowdfunding please visit ProjectCrowd.co