The one U.S. industry that has thrived against all odds during the global COVID-19 pandemic is U.S. real estate. According to the National Association of Realtors (NAR), U.S. home sales rose 22.2% over 2019 to 6.76 million units sold in 2020 and five months into 2021, housing prices are up 12.9%. Driving these increases are a surge in home buyers, lower interest rates and limited housing supply, which is down 23% since 2019. This begs the question: is it a good time to invest in real estate? DiversyFund, which offers non-accredited retail investors a platform for diversified investments that can help them create wealth over time, says it’s never been a better time to invest in real estate.
Diversify Income
All investors recognize the importance of diversification. Diversification helps investors mitigate risk and maximize returns by allocating investments across different industries, companies, markets, and vehicles. Most qualified financial advisors recommend their clients hold both equity (stocks) and debt (bonds) to provide balanced risk within their investment portfolios. Recent advancements in the technology sector might compel an individual to invest in one or several technology stocks, with all available indicators reaffirming the potential of such an investment. However, if the manufacturing sector were to experience an aluminum shortage, production of numerous computers and smartphones would slow or halt and drive the share prices down of the technology companies impacted by the shortage. In this hypothetical scenario, the investor’s portfolio would experience a much more drastic drop in value than if they invested across a variety of markets. For an investor’s real estate portfolio, the same principle applies.
Today, the majority of crowdfunding platforms offer investment opportunities in residential deals. At DiversyFund, we invest in commercial real estate, specifically multi-family apartment buildings. Multifamily apartment buildings have been shown to produce the most consistently high return of any residential property even in times of recession. One example is from 2017, when DiversyFund had an annualized return of 18% from its holdings in multi-family properties. With traditional real estate investing, investors will often need a large amount of capital in order to properly diversify their holdings. However, with DiversyFund, investors can begin wealth creation with an investment of just $500.
Asset Transparency
Real estate investments allow prospective investors to acquire a detailed report of the investment property before they make their investments. Whether it be through real estate crowdfunding or a typical REIT, experienced and inexperienced investors can gain a better understanding of their investment by accessing public or company-acquired property records. For those who may be unaware, REITs, or Real Estate Investment Trusts, are companies that own or finance real estate across property sectors. In order to qualify as a REIT, real estate companies are required to trade on a major stock exchange and comply with regulations pertaining to transparency and accountability. Whether it be through a crowdfunding platform or REIT, investors can expect a greater amount of transparency and investor control over asset selection and property location.
Investment Stability
With traditional real estate investment, investments are directed to a specific property. This is the investment equivalent of “putting all the eggs in one basket” and greatly increases risk: an investor can lose their entire investment if problems arise with the property. Crowdfunding projects, however, let investors own a portion of multiple large projects with a minimum investment.
While investing in real estate may seem like an overwhelming and complicated process, crowdfunded platforms make it easier and more accessible than ever before to dip your toes into real estate investing. With several benefits, crowdfunded real estate investments are a great way to diversify your portfolio and put you on the path to reaching your financial goals. If you’re interested in learning more about investing in DiversyFund’s Growth REIT, click here or email hello@diversyfund.com.
