Over the past few years, crowdfunding has affected numerous industries, but none more than the real estate market. Since the passing of the JOBS Act of 2012, which eased restrictions on fundraising by small companies, it is now legal for entrepreneurs to publicly advertise their efforts to raise money. In the case of real estate, individuals or developers can now go to a real estate crowdfunding platform like Loquidity with their project proposal, which will then be presented to accredited and unaccredited* investors. Real estate crowdfunding is appealing to both sponsors (those bringing the deal to Loquidity) and investors for a variety of reasons.
For investors, real estate crowdfunding is enticing because it is different than a REIT (real estate investment trust). A REIT is a security that sells like a stock on the major exchanges and invests in real estate directly and indirectly, either through properties or mortgages, and typically offers high yield. The downside of putting one’s money in a REIT is that there is very limited information on the various investments that make up the fund or trust and no discretion offered to the investor. With Loquidity’s real estate crowdfunding platform, however, one can invest at low minimums and virtually own a piece of tangible real estate. Unlike REITs, Loquidity provides specifics about projects in which one invests, which affords the investor the opportunity to visit these projects if he or she wishes to do so.
For both sponsors and investors, Loquidity is an attractive investment option. The crowdfunding platform allows the investor the opportunity to participate with like-minded individuals to invest for cash flow and appreciation. On the flip side of this, sponsors can benefit by having a group of individuals invest in their project not merely because they want to make money but also because they care about bettering their community’s economy. One of the greatest perks of real estate crowdfunding is something called “local vesting,” which is essentially neighbors investing in neighbors.
Loquidity provides the platform for investing, but the fees are much less than that of a private or publicly traded REIT. Our platform affords a group of investors (the “crowd”) to invest in a variety of prescreened equity and debt real estate assets. All of Loquidity’s deals undergo a rigorous underwriting process, with a focus on quality, not quantity. Loquidity believes in full transparency with each of the deals presented to investors. This is great for both the investors and sponsors in that investors can rest easy knowing these are legitimate and fundamentally sound deals, while sponsors can be confident in the fact that the crowd knows as much about the project as they can.
Another advantage of using crowdfunding for your next real estate investment is that, as an investor, you’ll be able to diversify your portfolio. Investors can build a handpicked, diversified portfolio of debt and equity real estate assets with varying risk profiles and geographic locations.
An attractive quality of real estate crowdfunding is that it is easy. Loquidity takes the hard work out of the process for both the sponsor and investor. We only post an investment opportunity on our site once it has undergone our due diligence process. Members of Loquidity view live deals and learn more about specific investments (i.e., the estimated annual return, projected length of the investment, property and location information, risk profile, and market analysis). Loquidity also provides a verification service to certify investors’ accreditation status, so sponsors know that those who are investing in their projects are legitimate.
For investors, the allure of real estate crowdfunding is the ability to own a piece of real estate—Loquidity places an emphasis on commercial and multi-family assets—without having to deal with the annoyances of owning a property. In other words, investors don’t have to worry about finding a plumber to fix the pipe. While it is a hands-on investment in that investors can actually visit the property, it is also hands-off because the sponsor handles the property management aspect.
Rather than applying for a bank loan or investing your money in a REIT—both of which have heavy fees attached—opt for crowdfunding your next real estate investment.
* Unaccredited investors can currently invest in projects that are only offered under specific state crowdfunding exemptions, such as Michigan, Wisconsin, Indiana, Kansas, etc. and must be residents of such state.