Is Crowdfunding A Smart Way to Invest in Real Estate?

Performance Property Real Estate Question

Q: Gerald, is crowdfunding a smart way to invest in real estate? Kathryn, King Of Prussia, PA

A: The main benefit that real estate investing via crowdfunding offers is undeniable–the ability to invest passively in real estate with less capital. This is undoubtedly why real estate crowdfunding has received so much attention. However, if you invest in a real estate deal that is crowdfunded, you are at the mercy of the judgment and experience of the people who buy and manage the real estate in the crowdfunded deal or deals you are invested in.

The fundamentals of real estate investing don’t change because crowdfunding has ushered in another way to fund investments. As far as I’m concerned, the jury is still out on crowdfunding because it hasn’t been around long enough to analyze over time so I don’t have a strong opinion about it–I am interested to see how crowdfunding does during the next real estate downturn however.

As with all things real estate, there is no substitute for due diligence, so make sure you don’t skip that critical step in any investment you make regardless of how that investment is funded.

Thanks for your question, Kathryn. For more real estate information and tips visit my blog at geraldlucas.com.

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