Crowdfunding Property Investments Good Idea or Not?

By Michael Mackinven | Property

Oct 04

Crowdfunding is a big part of start-ups for businesses, charities and small projects that can help the smallest of consumers wanting to market and get their idea off the ground.

You may or may not know it yet but crowdfunding is starting to creep into real-estate investing.

Some of these projects work to crowdfund available real estate investments, allowing investors (you) to put in as little as $5,000 into single-family homes, multi-family homes, and even commercial real estate projects (those range from $100,000 to the tens of millions.)

This is big in the US at the moment and small in New Zealand but I can see this moving to NZ at a fast pace with property prices increasing every month.

Since the 2007-2008 global collapse which wiped out a number of financial companies, the relationship is now tainted with investors looking for other options to invest their money.

Banks have tightened up their lending requirements with higher LVR restrictions and stricter rules on income than they used before the crash.

As a result, investors are turning to non-traditional lending avenues like crowdfunding as a way to get into property investing.

While this may be an answer for some investors – a word of caution.Property crowdfunding

Property investing is great if you know what you’re doing.

Growing your portfolio through a crowdfunding source may not be your answer.

First, they entice you with a low initial investment, too good to be true scenario.

Second, just like investing in kiwi-saver, you have no control of the property investment.

Third, this type of investing is a capital gain strategy as opposed to a cash flow strategy.

You would have learnt from my last blog about investing for just capital gains, (buy and hope strategy) this is only for non-educated investors.

Right now there are a number of property investment deals out there offering:

  • Low deposit
  • Guaranteed equity on settlement
  • Rent guarantees or advertising the highest rent possible
  • Exempt from LVR restrictions, this might be true on new builds but it doesn’t change your personal circumstances with banks, they make the final decision on your lending criteria

If it sounds too good to be true then it probably is.Property crowdfunding

If you want to generate true wealth for you and your family then you need to learn the rules of the game and then play it yourself. This is the only way to be truly successful.

If you’re just starting out investing in property, you are best learning and finding someone to help you get educated rather than going it alone.

There are too many properties that you could potentially purchase that will stop you from purchasing your second or third investment property.

Buying right is very important to make sure you can purchase again without being in negative equity or massive negative cash flow. There are honest and dishonest people/companies out there who are just working to make money off you.

Do you remember the Blue Chip apartment company in New Zealand, if not google them or click on the link provided.

Before you invest any of your hard earned money into property investment, get some advice and or start reading or learning from someone who has more experience than yourself and that you trust.

Being in full control of your investment is a much better place to be rather than going along with the ‘crowd’ in crowdfunding projects.

Wealth Ladder is here to help you.

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About the Author

I have been a property investor for over 13 years and have created a multi-million dollar portfolio including residential and commercial. I could go on about this but I’m not here to impress you but to impress upon you that YOU TOO can create wealth through property whether that be $100K or $5 million. I’ve been through the boom – bust – boom so I know what it takes to stay in the market. I live locally in Otahuhu with my wife and new baby boy. I love to help and teach people about buying well and for long term. We can all make a quick buck but the real strategy is creating long term wealth.