Most paths to real estate investment present high hurdles to smaller investors. There’s high down payments to contend with, financing to set up, agent commissions to pay, and the inevitable repairs to be made. If you’re looking for real estate investments that avoid those hurdles you’re likely left with REITs and things like tax liens. However, these online real estate investment platforms offer another way.
REITs are great if you’re interested in investing predominantly in commercial property, but you’ll need to trust the management as investors have very little say in where to invest next.
Tax liens, while potentially profitable, allow you to collect back-taxes when paid but require you to make legal filings if you’ll ultimately be foreclosing on a property. After that, you have to contend with any other lienholders.
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Fortunately, there are online real estate investment platforms that can allow you to participate in the red-hot housing market without a 20% down payment.
The Newest Online Real Estate Investment Platforms
The internet has changed almost every aspect of our lives, so why shouldn’t it be changing the way we buy real estate? The rise of social media has paved the way for the newest online real estate investment platforms:
Real Estate Crowdfunding. Crowdfunding is another way to buy physical real estate. It came into being with the Jumpstart Our Business Startups (JOBS) Act of 2012. Crowdfunding is sort of like a mutual fund, where investors pool their money. It’s driven by investors who find each other via social media. In the beginning, only accredited investors like banks, pension plans, insurance companies as well as affluent, sophisticated investors, were allowed. Individuals had to earn $200,000 and have a net worth more than $1,000,000. The SEC has since reduced those restrictions and now individual investors need as little as $500-$1,000 to participate.
But there are some limitations:
If either your annual income or your net worth is less than $107,000, then during any 12-month period, you can invest up to the greater of either $2,200 or 5% of the lesser of your annual income or net worth.
If both your annual income and your net worth are equal to or more than $107,000, then during any 12-month period, you can invest up to 10% of annual income or net worth, whichever is lesser, but not to exceed $107,000.
Here are some examples of online real estate investment platforms for non-accredited investors:
|Platform||Website||Min Investment ($)||Fees (%)||Avg Returns (%)||Investment Options|
|RealtyMogul||realtymogul.com||5,000||1.0-1.5||4.5-8||REITs, individual properties, 1031 exchanges|
Source of data: Investopedia.com
Note: eREITS are REITS sponsored by an investment company platform (like Fundrise). eFUNDs allow investments directly into a diversified portfolio that aims to develop new homes.
Please understand that I am not endorsing these platforms specifically, so I’m not recommending them. I am just bringing them to your attention as one of the examples of new online real estate investment platforms.
*This post has been excerpted from a previously published edition of Financial Freedom Magazine. To gain access to other insightful articles on financial health and a variety of investment types subscribe today!
Have you considered online real estate investment platforms as a means of diversifying your financial portfolio?