Ready to invest in real estate? Using crowdfunding to finance your investment can open many doors for you that you hadn’t previously thought possible. Learn more about how to crowdfund your real estate investments in our latest post!
Using other people’s money to grow your investment portfolio is the secret of many top investors. Crowdfunding your deals will help you make investments you never could have imagined otherwise. Below, we offer some tips to help you crowdfund your investments and build a portfolio worthy of envy by anyone interested in real estate.
Creating Your Business Plan
Just like any other business, your investments need to have a plan and strategy to create success. You will want to create a formal business plan that covers your goals, funding, strategy, and exit should the need arise. In order to attract the right investors, you’ll want to be as detailed with your plan as possible. Showcasing what you know, how you plan on doing it, and your projected outcomes will help gain the attention of some of the savviest investors you can partner with. If you aren’t sure where to start, seek the help of others who have been where you are.
Finding The Right Investors
A team is only as strong as the weakest link. If your investment partners are silent, much of the decision making will be left up to you. However, if you will all be working together as a team you’ll really want to make sure you are working with people with similar investment styles. You should have similar goals and aspirations for your business, as well as a shared vision of how to get there. Just like in any business, having the right partners is critical to your success. This is no different when crowdfunding your real estate investments in . You should always try to find partners who are on the same page as you.
Creating A Legal Agreement
This is when it is time to get the lawyers involved. Before crowdfunding your investments or partnering up to buy real estate in , all agreements should be reviewed, if not drafted up by a lawyer with a real estate specialization. Your agreement should include who pays what, when, and what will qualify a good investment. The agreement will clearly state how profits are paid out and what your fellow investors should expect when working with you. This is where you really need to cross your t’s and dot your i’s. Making a mistake on this agreement can cost you in ether penalties, lost profits, and sometimes even both.
Creating An Entity
Your investment company can take the shape of an LLC or an LP. You’ll want to review with your lawyers and accountants which set-up will be in your best interest. Setting up your business in this manner not only helps when it is time to pay taxes, but it will also help to protect your personal assets from being seized n case of a lawsuit. Many investors choose to set up their investment businesses in this manner because of all of the extra protection provided.
Dividing The Profits
Once you’ve done all of the work, you’ll be able to reap the rewards. Using crowdfunding to finance your investments will open doors and provide you with profits you may have thought to be unimaginable previously. Your legal agreement will specify how profits are divided, but if you are spearheading the projects, you’ll want to plan ahead as to how you will divide the profits.
Following The Rules
When using crowdfunding to finance your investment property in , make sure you are familiar with the JOBS Act and The Securities Act. These acts will provide guidance on what you can invest in, how much, and how frequently. As your investment company grows and you are utilizing crowdfunding to finance more and more deals in , you’ll want to be sure everything you are doing is right under the eyes of the law. Avoidable penalties and fines can negate thousands of dollars in profits from homeowners in .
Using crowdfunding to finance the purchase of investment real estate is hotter than ever. Whether you are collecting funds from only a few trusted partners or hoping to get thousands of people involved, it is important to always play by the rules. Violating the rules in these areas can result in fines, jail time, and sometimes even both.
We can help you learn more about how to use crowdfunding to finance investment properties in . Get in touch to get answers to all of your questions regarding crowdfunding and how to find the best investment properties currently available in and the surrounding areas.