If you're trying to decide whether to invest in real estate through crowdfunding sites or individual properties, there are some important criteria to consider. Primarily liquidity needs and available investment funds.
liquidity needs
If you want easy access to cash or the flexibility to buy and sell real estate-related investments on a whim, a REIT offered through a crowdfunding site or a broker-traded REIT may be a better choice.
Publicly traded REITs offer the highest liquidity as there is always a market through stock exchanges, but some proprietary REITs through crowdfunding sites come a close second. When investing in individual properties, whether you can buy or sell them depends largely on market conditions.
Available investment amount
If you're new to real estate investing, crowdfunding platforms are a great way to hone your skills. For non-accredited investors, it is possible to find platforms with low minimums that can help you learn the sector without putting your entire portfolio at too much risk.
For example, a novice investor may find it too large to set aside funds to purchase individual properties. There, investors of all net worths can benefit from real estate crowdfunding platforms. Between access to REITs and private placements, where multiple investors fund a single real estate transaction, crowdfunding sites can help you find the type of real estate investment that fits your available funds .
However, it is important to note that when investing in a single asset class, you are exposed to sector risk. Real estate is no exception. There are no crystal balls in investing, so even expert analysts can't say with certainty where real estate will go next.
If you're considering investing through a real estate crowdfunding site, it's best to limit your investments to a portion of your portfolio, especially if you're using your retirement funds to invest.
