Crowdfunding is gaining in popularity in recent years. These investment platforms are opening up opportunities that weren’t previously available to average investors. By using a shared pool of resources, it is possible for people to get started with relatively small investments. While there are many opportunities to profit, it is important to learn about crowdfunding risks before getting started.
Crowdfunding Risks You Need to Know
Even though earnings potential is high with the right commercial real estate investment, you need to learn the pros and cons of each deal. Understanding the possible crowdfunding risks will help you determine if this investment opportunity is a good fit for your portfolio.
Here are some of the potential drawbacks that might be experienced. Keep in mind that these risks are higher when choosing an unproven investment company:
- Due Diligence: Most of the time, inexperienced investors are participating in real estate crowdfunding deals. These investors usually don’t know much about real estate investing or personal finance. As a result, it can be a challenge to do your due diligence if you don’t know the right questions to ask. If you are just entering in the real estate investing world, then it is important that you lean on the advice from industry professionals, such as your accountant, financial advisor, trustworthy real estate investors, and other professionals.
- Investments are Unsecured: These investments are typically unsecured, which means that you could potentially lose your money if the platform goes down. Even though this risk is present, the ownership of a hard asset can help to offset the losses if something went wrong. Since you are placing your money in an unsecured investment platform, the due diligence of the company should never be overlooked.
- Government Regulations: Some investors feel like government regulations make it harder to manage the assets. But the laws that have been defined are written to protect the investors. Instead of viewing these laws as limitations, see the protections that are offered through these regulations.
- Poor Investment Decisions: When millions of dollars are spent on commercial real estate properties, it is important that an experienced, knowledgeable manager is overseeing the transactions. This risk can be minimized by choosing the right crowdfunding platform with a team of real estate investing professionals.
Always remember that the key to success in real estate investing is largely found in the choices made by the management team. So, it is easy to see that the management team that you choose is the most important factor that will determine the success of the investment portfolio.
Even though there is a risk in all investments, there is an upside potential as well. Finding the right investment opportunities can be a valuable way to grow your assets and build wealth for the future. If you are interested in learning more about crowdfunding risks and opportunities, then you are welcome to talk to our experienced team for more information. First National Realty Partners is here to answer your questions, guide your decisions, and help you determine the optimal opportunities that are available for your investments.