Key Highlights
- Micro-investing in real estate helps skirt prohibitively high and skyrocketing investment price minimums
- Offers investors options to build diversified portfolios
Micro-Investments or Crowd-funding Investments in Real Estate Gaining Traction and Popularity
Most people, experienced/novice investors and non-investors alike, agree that real estate investments can, over time, generate wealth. In fact, according to Wealth, more than 65% of the world’s wealthiest people have a solid slice of their assets invested in real estate.
But what about the rest of us…the rest of us who simply haven’t the resources to pay the skyrocketing price tags involved with both residential and commercial real estate investments…the rest of us who are simply not “invited” to invest in a real estate project that could become quite lucrative over time…the rest of us who haven’t the access to real estate investments that offer advantageous tax benefits?
Micro-investing or crowd-funding investing in real estate is now available to rest of us.
How Real Estate Micro-Investing Works or Micro-Investing for Dummies
Though not new and traditionally done via real estate investment trusts (REITs), real estate micro-investing has fewer restrictions today due to the Tax Cuts and Jobs Act of 2017. Micro-investors own shares of specific properties. The number of shares they own is determined by how large or small their investment is. When the properties are built and sold down the road a few years, profits are distributed among all the investors based on the number of shares each investor owns.
For as Little as $5.00
The San Francisco startup called Fintor enables investors to put in as little as $5.00 toward investment properties in Houston and Kansas City. (The company is expanding its locations as of this writing.
Fintor’s founder, Farshad Yousefi, wanted to give younger investors an opportunity to involve himself or herself in and learn about real estate investing. “It’s like the stock market,” said Yousefi. “If you invest $5.00, it doesn’t really do anything but someone who is in their 20’s and interested (in real estate) should be able to learn the system and enter this asset class without having to have $20,000 to $30,000 to spare.”
Most Micro-Investing Shares Have Minimums Between $20,000 and $30,000
Brent Hieggelke, chief marketing officer of CrowdStreet, told Inman that shares start at $25,000 toward commercial projects such as senior/student housing complexes, storage units, offices, etc. The average “hold period” of a micro-investment averages 2.3 years and a blended IRR (internal rate of return or percentage of interest earned on each dollar invested) at 18%.
Jillian Helman, CEO of the crowd-funding platform RealtyMogul, is working with a Miami-based developer, Rilea Group, to crowd-fund as much as $40M of a $100M luxury development from the platform’ s +200,000 interested investors. The price of each share is $35,000.
Helman told Inman, “…our investors are looking for…opportunities and the chance to deploy capital into real estate allocations. A lot of them have money in stocks and bonds and they’re looking for that real estate allocation.”
Thanks to Inman, Fintor, RealtyMogul and CrowdStreet.
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