Younger Investors Hold The Key to Crowdfunding

With the implementation of the JOBS act in 2013, crowdfunding has seen an exponential increase in activity. The law opened the doors for non-accredited investors to put money into equity-based ventures — including the sale of securities within real estate. Many companies have risen to facilitate the investment demand within the market, but with the concepts being so new, the long-term financial effectiveness is still a toss-up.

Image by Basheer Tome via Flickr

The benefits are simple for most of the platforms — automated analytical technology paired with a knowledgeable team that makes the transaction as simple as possible. In essence, crowdfunding is a great way to invest your money without having to do an excessive amount of learning on your own.

We’ve already seen this model perform relatively well within the stock market, and real estate’s adoption of it is just another sign that the future of investment lies in crowdfunding — at least for the average person. For younger investors who may not be able to contribute large sums of money at a time, smaller (even micro) investments are the best option. Acorns perfected the “invest your spare change” model for Wall Street, incentivizing newer investors to contribute pennies at a time. And Fundrise has come the closet within real estate, offering the lowest minimum investment requirements among the bigger platforms, citing $500 as the cheapest offering.

Despite the short track record, there is some merit to this model. Fundrise’s 2017 Q3 numbers showed an annualized dividend yield of 8.23%, which is more than double the Public Real Estate gains of 3.91%. Their success shows a simple, yet valuable lesson in what could be the future ecosystem of real estate investing — the more capital that a company can raise in a timely manner, the easier it becomes to diversify short-term portfolios, and increase returns for the typical investor.

So before you decide to take your money to the bank, or pick up day trading on your own dime, look into crowdfunding real estate.

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