Crowdfunding and Single Family Rentals are two viable investment options. Which one works best for you?
Investing in real estate isn’t a one-size-fits-all endeavor. Understanding your financial options and envisioning the short- and long-term ramifications of each can determine your ultimate success.
For starters, crowdfunding and single family rentals (SFRs) are two commonly-leveraged approaches to investing in real estate. While both are a means to an end goal of establishing financial freedom and building wealth, they differ in several critical ways.
Crowdfunding versus SFRs
The term “crowdfunding” sounds like what it is… relative to real estate, it means you contribute with other like-minded investors to a fund used for buying properties. The cost of entry is palatable, ranging from $5,000 to $10,000, and the process is fairly straightforward—although one drawback is that you must be an Accredited Investor. And while the concept sounds crowd-pleasing, an array of fees can undermine the positives.
According to an article on Forbes.com by Nav Athwal, “Real estate crowdfunding continues to be a dynamic and ever-evolving industry, growing to an estimated $3.5 billion in 2016. By 2025, the crowdfunding industry as a whole is anticipated to be valued at more than $300 billion and online real estate marketplaces are primed to capitalize on that explosive growth.”
For many serious real estate investors, crowdfunding is simply too…. limiting. Instead, SFRs are their investment vehicle of choice. In short, this approach means that you own the investment property. As with crowdfunding, the process of investing is easy; however, the cost of entry is higher at $25,000. Financing can help defray this sum, and tax benefits also ease the burden of the initial financial output. With SFRs, you have the ability to exercise more control over your investments. For this reason, and others, SFRs continue to gain traction as the best choice for those who are committed to building a profitable real estate portfolio.
Media Planet’s Modern Wellness Guide underscores that there is a shift in new demand for single family rentals, making this type of investment very attractive. “Market volatility, tied to macroeconomic events in places like China and Greece, and abysmal fixed income returns have lured 14 million U.S. investors to single-family rental (SFR) portfolios as a private wealth management (PWM) alternative. This migration is fueled in part by the fact that demand for rentals has surged, growing from 40.7 million in 2010 to a projected 47.9 million in 2020—and 53.7 million in 2030.”
Which one fits you best?
Whether you choose to invest in real estate via crowdfunding or SFRs greatly depends upon your individual financial goals and your financial situation.
If you have less to invest, crowdfunding might be the more attractive option. But if being a sole property owner fits into your investment strategy, SFRs will most likely appeal to your sense of independence and your “pride in ownership.”
Should you decide to go in the SFRs direction, HomeUnion® is available to be at your side from start-to-finish. We make investing in single family rentals a simple process, by first identifying the most profitable properties for you and helping you acquire those properties. Once your purchase has been made, we’ll manage all aspects of your property for you. You can be completely hands-free when you invest with HomeUnion®, although you are free to take the reigns at any point.
Interested in learning more about single family rental investing? Schedule a consultation with one of our Solutions Managers at HomeUnion®.