Last Updated on May 17, 2017 by John Fischer
Real estate investments always seem to inspire speculation and generate interest among investors. Even during turbulent market fluctuations, real estate investors keep their eyes on prices and stay up-to-date on their research. Real estate remains popular because in the eyes of many investors a piece of land carries great symbolic value. Land is a tangible asset. It’s there, and it’s not going anywhere. Investors may use real estate to diversify their portfolios. Similarly, companies can use property to leverage other assets. A quick research trip will yield a number of attractive tax benefits for landlords. There is value in real estate, surely, if proper precautions are observed and due diligence undertaken. The collapse of the housing market in the 2000’s dealt the industry a serious blow, but in recent years people are returning to the market, and we’ve seen a definite increase in our sales of real estate investor leads.
Sources at Business Insider are skeptical about the American Dream model of real estate investing: single-family homes in highly prized neighborhoods or cities. A recent report argued that too many investors can let their enthusiasm for the American Dream cloud their vision, distract them from other investment opportunities that consistently show more generous rates of return, e.g. stocks, bonds, and ever popular precious metals — like gold. Owning a home may carry an aesthetic value, but we’re reminded that home ownership can carry high associated costs that cut into the overall property investment.
It’s good to know this, because home ownership is only one example of real estate investing. There are other opportunities in the real estate market that warrant a second look, especially since the JOBS Act was enacted in 2012. A number of property management companies are taking advantage of the new SEC regulations concerning private placement offerings (Regulation D Rule 506C) to initiate serious business transactions. These adjustments have specifically taken effect on internet “crowdfunding” offerings, as long as due diligence is taken to make sure that investors are accredited. (Good thing all of our real estate investor leads are broker-surveyed accredited investors!)
As an alternative to American Dream home ownership, a number of savvy real estate investors are taking an interest in rental property offerings.
Recently, a real estate firm in Grand Rapids, Michigan, created their own crowdfunding Internet platform to compete in a booming rental market in that area. A source at mlive.com reports that investors from virtually anywhere can join in for a $5000.00 minimum toward renovations on an apartment complex in the West Michigan area. The on-line platform is called Loquidity, and the business plan generated by the real estate firm estimated a “7-year cash-on-return of 13.25 percent.” After renovations are completed, a rent increase on the property is expected to yield profitable returns for the investing parties.
The same source indicates that this kind of investment activity is becoming an item of interest in the Midwest, which is said to be experiencing a handsome “economic recovery.” The aforementioned crowdfunding enterprise is setting their sights on a number of investment opportunities in states all over the Midwestern region, including: Kentucky, Illinois, Ohio, Kansas, Iowa, Nebraska, and Minnesota. Looking east, Tennessee, Pennsylvania, and Virginia are included in Loquidity’s purview.
Crowdfunding in the real estate market has many investors setting their ears to the ground to hear the beat of the street. The Wall Street Journal recently ran a story about new crowdfunding ventures and the focus was, of course: real estate. The report indicated the rather surprising turn that the benefits of the JOBS Act, which were expected to apply mostly to technology startups, have seemed to apply most generously to the real estate market. The prognosis is hesitant, but interesting. People are making money, but crowdfunding as an investment platform is still new and as yet “loosely regulated.” Said the Journal, “many landlords and developers are turning to crowdfunding because banks or other traditional financing sources turned them down.” So, again, people are making money, which is good for business, but companies and investors alike must — as always — use caution and do their due diligence.