108: How Crowdfunding Offers a Smaller Real Estate Investment with Amy Kirsch

One of the biggest hurdles to real estate investing is the cash needed to flip or buy rentals. Investors must put more money down than owner-occupied buyers, which makes it tough for many people to ever buy an investment property. Not only are there higher down payments for investment properties, but if you want a really good deal, you may also have to spend money on repairs. It also takes time to find good deals, find contractors, manage properties, and sell properties. Crowdfunding is one way to invest in real estate with less money and less work.

Real estate crowdfunding involves a group of people pooling their money to invest in a fix and flip, an apartment complex, or some other type of property. Amy Kirsch is the Director of Investor Relations with Realty Shares, a crowdfunding company. On this episode of the InvestFourMore Real Estate Podcast we talk about how crowdfunding works. We talk about the pros and the cons for people investing in projects and for those looking to get funding for projects.

How does real estate crowdfunding work?

Crowdfunding is a relatively new way to invest in real estate, or even other investments. Companies like Realty Shares create a platform where people can invest in real estate projects. They also vet investors who are looking for funding. Amy says that they have programs for investors looking to share equity or investors who are looking for just an interest-rate return. Returns can range from 7 to 11 percent for investors who put money into projects that only pay interest. In some equity deals, returns could be as high as 16 to 20 percent. Investors can invest as little as $1,000 with Realty Shares, but they must be accredited investors. Accredited investors are those who made at least $200,000 per year for the last 3 years or have a net worth of at least one million dollars.

How can someone obtain crowdfunding for a real estate project?

Not only can crowdfunding offer a low entry point for investing in real estate, but it is another source of funding for some investors. Amy openly states that most people are not approved for funding on her platform because Realty Shares is very careful about the projects they offer. She estimates they approve 5 percent all who apply for funding through their site. Rates can vary from 8 to 12 percent for those looking to get funding for their projects. The loans also come with an origination fee of  around 2 points. Realty Shares has funded over 300 million dollars in real estate projects. Investors can use crowdfunding dollars to fund a percentage of the purchase price plus repairs.

How safe is it to use crowdfunding to invest in real estate?

With any investment comes risk, and that holds true with crowdfunding as well. Amy discusses how Realty Shares does as much as they can to secure investments. Not only do they vet the real estate projects, but they secure the investment with first Deeds of Trust. If a project does go bad, Realty Shares can foreclose and work to get most or all of the investor’s money back. Realty Shares makes sure the projects that they approve have enough profit built in to succeed.

How can you start investing in real estate with crowdfunding?

Realty Shares can help you get into crowdfunding very quickly. They usually have a 30-day vetting period for new investors, but that time can be reduced with a simple phone call. You can sign up or find more about Realty Shares here.