What is Crowdfunding?
Crowdfunding is a marketplace with a transactional platform.
For instance, imagine sitting at a table in a Golden Corral restaurant and the buffet is filled with platters of colorful food of virtually every type. Well, crowdfunding is much like a buffet for investors. Instead of ordering off the menu, the buyer or “investor” goes to where the “food” is and selects what he wants.
Unlike the traditional way of investing – when the sponsor (real estate developer or entrepreneur) sought out the investor for funding – investors can now log into a network and view a vast selection of real estate sponsors seeking funding. This allows investors to select from deals that catch their interests and fit in with their investment portfolios.
The Benefits of Investing in Real Estate Crowdfunding
Investing in crowdfunding for real estate is a safer and smarter approach for those looking to diversify their portfolios and grow wealth. This is because the real estate market has less volatility than the stock market and offers higher rates of return than government bonds and savings accounts. Combine that with the tax advantages, and it becomes an essential part of any smart investment strategy.
Since the JOBS Act of 2012, real estate sponsors have been able to successfully crowdfund their projects by raising capital in small amounts through a broad number of individuals that provide access to a wider pool of potential investors. Likewise – with the buffet example – investors have the opportunity to mitigate the risk and invest in several deals in lieu of a single opportunity.
Due to advancements in technology, self-directed IRA investors are able to participate in real estate crowdfunding with their retirement accounts and at the same time realize significant tax advantages.
“Those who want to be more in control of their financial future and enjoy more flexibility in the investment types, use self-directed IRAs.” – Dan Summers, CEO at RealtyeVest
Investing with a Self Directed IRA
Investing with a self-directed IRA is not overly complicated.
To make an investment using an IRA, you’ll need a self-directed IRA custodian who can hold the new property as an asset in your account. Once you’ve found a custodian, you open a new account and transfer your retirement funds into it. There are no tax penalties involved in the transferring of funds to the account.
A self-directed IRA can be structured as either Roth IRA or traditional IRA and allows the owner to invest in alternative assets such as real estate crowdfunding. As an investor, you can have a much more diversified portfolio than those invested exclusively in publicly traded securities.
Self-directed IRAs are also protected under federal bankruptcy laws, plus, real estate investments are insurable, which means they cannot disappear into thin air like some traditional Wall Street investments.
The real-estate crowdfunding platform is predicted to reach $150 billion over the next five years.
How to Invest
Although a self-directed IRA involves more of a hands-on approach, if you do your due-diligence and partner with a reputable crowdfunding company, the rewards can significantly outweigh the risks.
Investing with a self-directed IRA with RealtyeVest is as easy as four steps.
- Register to view investment offerings.
- Choose investments that suit your preferences.
- Invest with as little as $5,000 per deal.
- Receive scheduled payments.