If you’re interested in adopting a long-term strategy to generate passive income, you might want to look into investing in real estate via crowdfunding.
If you’re interested in adopting a long-term strategy to generate passive income, you might want to look into investing in real estate via crowdfunding. Crowdstreet

Are you interested in creating a new income stream for yourself, without adding hours to your day with a side gig? If you scour the Internet, you will find no shortage of websites and blogs that say passive income can be a great way to grow your wealth. If you're interested in adopting a long-term strategy to generate passive income, you might want to look into investing in real estate via crowdfunding.

Real Estate Crowdfunding: What Is It?

Crowdfunding is a fairly ubiquitous term these days and is a method of collecting small amounts of capital from different people to meet a larger financial need. This term is often used on websites like Kickstarter, where people ask for help launching new business ventures. Real estate crowdfunding, however, is a more sophisticated concept that can be used as a strategy for portfolio diversification.

Instead of helping other people start and grow their businesses, with little to show for it other than possibly some limited edition swag, real estate crowdfunding is a way to put your own money to work for you, with the potential to earn passive income and/or a return on your investment.

Investing in real estate with crowdfunding isn't about assembling a giant team of landlords to share in the responsibilities of owning a property, like finding dependable tenants or fixing plumbing issues at all hours of the night. It's a way for individual investors to contribute a percentage of the overall funding for a real estate project, alongside others who are doing the same thing. This approach affords investors access to projects that they may otherwise be unable to afford.

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Real Estate Crowdfunding: How Can You Earn Passive Income From It?

Depending on the business plan of the individual investment, there are generally two ways real estate investments generate passive income. The first is with ongoing distributions paid to investors by the real estate firm behind the project. This tends to be more likely in properties with strong tenants and steady monthly rents, for instance, an office or apartment building. The second is through a share of the final sale price of a property, which is often the case when properties are under construction or undergoing major renovations.

As always, all investing involves risk. There is always the chance the project underperforms and you lose your initial investment. You should not invest unless you can withstand the loss of total principal. You should always research any potential investment and evaluate if it will work for you and your portfolio and meet with your financial professional prior to investing.

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Isn't Investing in Real Estate Expensive?

While it may be true that investing in real estate used to be reserved for wealthy, well-connected individuals, and large institutional investors (i.e. pension funds, university endowments, and hedge funds), things changed about a decade ago when the 2012 JOBS Act took down some of the red tape surrounding the securities industry. This opened the door for real estate firms to raise money for their projects through crowdfunding platforms. In turn, individual investors were given a new way to add private equity (meaning not traded on the public market) real estate to their investment portfolios.

Real estate projects typically need a large amount of funding to be successful, but with crowdfunding, no one person is responsible for providing all of the needed capital. This gives individual investors the freedom to invest in smaller increments based on their financial situation and goals.

Real estate crowdfunding platforms also give investors a wealth of options to choose from. From apartments in growing cities to hotels in the top travel destinations in the U.S., you can find a project to invest in through one of the largest online real estate crowdfunding platforms, CrowdStreet.

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How Does CrowdStreet Work?

If you are interested in real estate crowdfunding, CrowdStreet is the place to start. Pioneers of this space, their online marketplace is now one of the largest, offering individual investors access to real estate projects in nearly every asset class (i.e. property type) and large metro in the U.S. Their marketplace also offers projects in a range of risk profiles, making it easier for individual investors to find the right project for their investment strategy.

Every deal (real estate project) that is offered on their online marketplace has undergone their objective review process. Out of every 100 deals that their Investments team reviews, approximately five make it to the Marketplace for investors to compare and review.

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In addition to their objective review process, CrowdStreet also publishes comprehensive details on each project, including the business plan straight from the developer, on each deal, making it easy for investors to compare and review individual offerings. They even offer live webinars and Q&A sessions with the real estate firms ahead of each deal launch, so you can fully understand and decide whether an investment will suit your investment strategy.

CrowdStreet has been bringing investors and real estate developers together since 2014 and has funded over 618 deals since its inception. They have raised and invested an impressive $3 billion dollars, with investors receiving $508 million in distributions. Some of their recent funding projects include a hotel renovation next to the Utah Jazz NBA team, a new life sciences lab space in research-centric Boston and an apartment building in Nashville's famous music row.

Browse through CrowdStreet's online real estate marketplace today.

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