How is Real Estate Crowdfunding different from REITs?

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an image that shows people investing in real estate crowdfunding vs reits

You probably already know that there’s a myriad of investment options out there in terms of real estate. You already know at least something about real estate crowdfunding, otherwise, you wouldn’t be here. But, given the wide variety of investment opportunities, styles and methods – never mind all the advisors, websites and information out there – where do you begin to decide to invest?

We are here to explain, in simple terms, the benefits and advantages of Smart Crowd real estate crowdfunding over the other investment vehicles. You might have funds already invested in properties using other methods.

Let’s take a few key points in terms of investment, and examine the differences. We will compare Smart Crowd to four other major real estate investment options: direct real estate investment, Public REITs (Real Estate Investment Trust), Private REITs and Private real estate funds.

Access

You like the idea of investing in real estate. Do you try and save for many years for a deposit, in a market where prices are likely to rise? Do you place your hands in the trust of a trust or a fund?

In all but the real estate crowdfunding option, you are expected – and required – to make a medium or high capital investment to get on board. This means most traditional real estate investment opportunities are only readily available and accessible to the wealthy, or those who have toiled in the long-term to raise the capital investment required. Smart Crowd offers far more accessible investment options, with mitigated risk, too.

Control

You might be willing to relinquish control over your investment, but really? With so much real-time information available to all in the current era, we are easily armed with information and empowered to make our own decisions. Put your money in a fund or trust, and you are giving control of your hard-earned wealth to others. What if you disagree with where and how your funds are invested? You are left with two options – invest in your own property – with all the associated time and risk that comes with – or invest a small, manageable amount of money into a real estate crowdfunding. Offering you full control over where, how and when you invest is surely a good option.

Liquidity

Cash, of course, is the most liquid asset. If you want rapid access to funds, real estate investment isn’t perhaps where you should be looking. A crowdfunding investment is a low liquidity one; as you are ‘buying in’ to an investment where every investor depends on the other. This mitigates risk and allows you to take a share of a potentially much larger investment opportunity that if you were a solo investor. A public REIT offers the highest liquidity but comes with the associated risk of creating a distortion in the market value and Net Asset Value (NAV).

Management Fees

Of course, there are fees involved with investments, but surely you want to opt for the lowest fees and potential best return option? Crowdfunding and direct real estate investment offer the lowest management fees. Opt for a REIT or private real estate fund, and you’ll be hit by higher annual management fees.

Transparency

Trust is vital in any investment relationship, but REITs and fund investments offer little to no transparency. Your questions might remain unanswered, with the prevailing attitude being that these companies know what they are doing, and we should trust them with our hard-earned wealth. We disagree. Short of buying, managing and overseeing your own direct property investment, crowdfunding offers the most transparent real estate investment option.  With Smart Crowd, you’ll receive full visibility of all property details and ownership, with the ability to monitor your property investment via a Smart Crowd personalized dashboard.

Diversification

Pick your product, pick your region and pick your goals, said André Bueno, Founder of The Bueno Group, a company specializing in revitalizing urban communities, when talking to Forbes magazine about property investment diversification. He believes less is more, and property investment is a local game. We agree. Using advanced real-time market data and a host of tools via your own personalized dashboard, you can choose to diversify your portfolio across our range of trusted property investments. Other property investments often offer low-to-no-chance of diversifying your investments, and while a public REIT offers high diversification opportunities, this is not necessarily a good thing – spreading your investment too thinly, and in unfamiliar markets.

Efficient/ Flexible Commitment

A final point to consider is the flexibility of your investment. Crowdfunding, by its very nature, sits within the medium to high flexibility category, especially given that you can have control over your investment, and access a dashboard to manage your portfolio. Give the nature of the current market, offering flexibility in your investment is a great way of reducing risk and providing peace of mind when it comes to allocation of wealth.

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