Real estate investing has been building the wealth of property owners for centuries. Between the long-term appreciation, passive cash flows, debt leveraging, and tax breaks, real estate has made millionaires of countless individual investors!
But traditional ways to invest in real estate have a few potential drawbacks. First, you typically need substantial funds to purchase, renovate, market, and maintain a property. Then, you need the industry knowledge to choose properties with the greatest potential and add value in a way that maximizes profitability. And you also need to either have the time to manage your real estate investments yourself or the money to hire a property manager to handle it for you.
Online real estate investing platforms are addressing these traditional investing drawbacks while maintaining the traditional benefits. And investing in real estate online comes with the additional advantages of making investments more accessible, faster, and easier to manage.
In this article, we’ll look at:
- How to invest in real estate online,
- The benefits of investing in real estate online, and
- What to watch out for as you invest online.
How to Invest in Real Estate Online
It’s important to note that there’s more than one way to invest in real estate online. Let’s look at three of the most desirable ways to invest in real estate online.
1. REITs (Real Estate Investment Trusts)
REITs are perhaps the most common way of investing in real estate without buying property. REITs are publicly traded companies that invest in income properties and share the profits with shareholders through dividends.
Investing in a REIT is similar to the process of investing in stocks or bonds. In fact, when you invest in a REIT, you’re really just buying a share of your chosen REIT’s stock.
To invest in a REIT, you need to open a brokerage account online, select the specific REIT(s) you wish to invest in, and choose how many shares you wish to own. Then you purchase your shares through your online account and monitor the performance of your investment through the dashboard.
One potential perk of REIT investing is the automatic diversification. Since REITs are made up of multiple properties, your investment capital is instantly spread across multiple properties. However, some investors see this as a downside because they prefer to exercise control over their portfolios by choosing their investment properties individually.
What is real estate crowdfunding? Real estate crowdfunding is when multiple investors come together to purchase an investment property.
Long before the Internet came along, wealthy investors crowdfunded real estate projects. They would pool their capital together to purchase high-value properties and share in the benefits. But these joint ventures had to be arranged privately because the SEC had banned soliciting the general public for real estate investment projects in the 1930s. This meant that the benefits of purchasing real estate with like-minded investors were reserved for those who already had connections to wealthy investors.
Then the JOBS Act of 2012 changed everything. In an effort to revitalize the struggling, post-collapse economy, congress changed the rules to allow individual investors to take part in real estate crowdfunding. And online real estate crowdfunding platforms started springing up to help investors get started with this new investment opportunity.
To invest in a crowdfunded project, you need to choose a crowdfunding platform, then choose the project(s) you wish to invest in. In many cases, you can choose how much to invest as long as you hit the minimum investment amount (which will vary by project).
If you think this might be a good option for you, be sure to review the real estate crowdfunding pros and cons before getting started.
Real estate syndication is very similar to crowdfunding. As with real estate crowdfunding, real estate syndication allows multiple investors to join together to purchase a single real estate project and share in any profits generated by the asset.
What sets syndication apart is the stable ownership structure. With a syndicate, a legal partnership is created between the syndicate sponsor (the party that manages the project) and the investors in the form of an entity like a Trust or an LLC. All the investors own a share in the entity that owns the subject property.
Take Gatsby Investment, for example. Gatsby is an experienced LA-based real estate syndication firm that offers investors the opportunity to become members of the LLC that owns the property. Through this structure, you have an ownership stake in the underlying real estate, as well as proof of ownership.
Gatsby Investment has an exceptional track record and makes it easy to invest in real estate online. You simply create a free account and choose the properties you want to own a share of. You get deal-by-deal control with the ability to review property addresses, financial estimates, and renovation and/or rental plans.
Benefits of Investing in Real Estate Online
Investing in real estate online comes with all the same benefits as traditional real estate investing:
- Appreciation. Because of the natural scarcity of real estate, the property grows in value over time.
- Passive Income. If you own a rental property, you can collect regular passive income through rents.
- Tax Benefits. Real estate allows you to take advantage of depreciation, deductions, and deferments.
- Debt Leverage. Because real estate is considered a low-risk investment, it’s comparatively easy to get a loan to cover a portion of the investment.
- Protection Against Inflation. Property values tend to rise with inflation, keeping your net worth growing with inflation.
- Portfolio Diversification. Adding real estate to your stock and bond holdings maximizes the resilience of your investment portfolio.
- Flexibility. You can choose the asset class, property type, and investment duration that best suit your goals.
And online real estate investing adds a few benefits that traditional real estate investing doesn’t offer:
- Accessibility. Where traditional real estate requires good credit, large investment amounts, and substantial leg work, online real estate investing does not depend on your credit score, offers low minimum investments, and is often vetted by experts. This makes real estate far more accessible than it was for previous generations.
- Speed. Purchasing a property through traditional means still takes months of active work. You spend weeks (or months) researching neighborhoods and analyzing properties, then you navigate the escrow process for 30-60 days before the property is officially yours. With online real estate investing, you can own an investment in just days.
- Ease. With user-friendly websites, it’s never been easier to search offerings and place investments.
- Location. Online investing does not require you to be on-site, so you can access prime real estate markets from wherever you happen to be!
What to Watch Out for When Investing in Real Estate Online
Real estate is generally considered among the safest investments available, but no investment is 100 percent risk-free.
Here are a few potential pitfalls to watch for when you’re learning how to invest in real estate online:
Lack of True Ownership
With many online real estate investing platforms, you don’t actually own the underlying real estate. Lots of crowdfunding sites only offer ownership of the debt used to fund the project. It’s worth noting, however, that with Gatsby Investment, you do own an undivided share in the actual real estate as a member of the ownership entity.
Some platforms provide minimal data, creating a concerning lack of transparency. If you can’t access property data, projected financials, and status updates from your account, that’s a red flag.
Security comes in a few different forms, and your online real estate investment needs to be secure on all fronts. First, the technology needs to be secure to prevent a data breach that could compromise your personal information. Secondly, you should feel secure in the investment decisions of the group managing the project. Look for a proven track record of success. And finally, proper oversight and accountability provide security. Gatsby Investments, for example, is registered with the SEC for the comfort and security of its investors.
Sadly, the Internet has made it possible for technologically savvy scammers to prey on the general public as we learn to navigate the changing tech landscape. Before investing money online, look the company up on the Better Business Bureau’s website.
Accredited Investor Requirements
Many crowdfunding sites can only offer investments to accredited investors. To be accredited means that you have either the income, the wealth, or the experience to make sound financial decisions. This can be frustrating for investors who want to take advantage of these investment opportunities but don’t yet qualify as accredited. However, it’s generally seen as a good protective measure for investors.
So while this is something to watch out for if you’re not yet accredited, it’s actually a good sign that the investment platform is behaving responsibly and trying to do right by investors.
Invest in Real Estate Online with Gatsby Investment
Your online real estate investments are only as good as your investment platform. For the full benefits of investing in real estate online (while minimizing your investment risks), consider Gatsby Investment.
Gatsby Investment is a Los Angeles-based real estate syndication company with a proven track record of successful investments. With Gatsby, high-value LA real estate is made accessible with low investment minimums. This is ideal for people who want to start slowly, but it’s also good for experienced investors who want to spread their cash across multiple properties for an instantly diversified real estate portfolio. And our user-friendly online platform makes investing quick and easy!
Gatsby is always working to maximize returns and provide an enjoyable experience for investors. With Gatsby, you get:
- Deal-by-deal control; you get to choose the exact project(s) to invest in.
- True ownership of the underlying real estate.
- Transparency; investors have access to our project financials.
- A secure online platform, with oversight by the SEC.
- A reputation for excellence in the real estate industry.
- A team of analysts, architects, contractors, designers, and property managers to expertly handle every detail of your real estate investment.
Investing with Gatsby is easy! Simply sign up with Gatsby Investment, have your accredited investor status confirmed, and choose your investment projects. Then you’ll be able to kick back and monitor your investment through your online dashboard.
Don’t settle for just any platform when you invest in real estate online. Invest with the best. Join Gatsby Investment today!