Adding commercial real estate to an investment portfolio used to be reserved for the very wealthy. Thanks to new technology, anyone with a couple hundred dollars and an appetite for risk can find an entry point for investments these days. Given the greater accessibility and with the commercial real estate market making a comeback in key cities, it may be time for you to consider this type of investment.
Companies like ours (Ignite Funding) use a type of “crowdfunding” method to aggregate capital from multiple smaller investors and pool the investor’s capital to directly fund commercial real estate projects.
If you are thinking about investing in commercial real estate, here are the three most important things you need to know:
· Accredited vs. Non-Accredited: If you are not an accredited investor, your options may be limited. Accredited investors are defined as investors with assets of $1 million or more – excluding their primary residence – or an annual income of $200,000 for at least the two previous years and that is projected to be the same or higher for the current year. To invest at Ignite Funding you do not need to be an accredited investor, however you do need to meet suitability requirements.
· It is important to understand your portfolio strategy and to determine if a long-term or short-term investment is right for you. When you think of investing in real estate, you think long-term. At Ignite Funding, investors can invest in short-term real estate investments known as “Trust Deeds”. Maturity rates vary from 6 to 18 months, with an annualized return rate of 10% to 12%. Also, it is important to remember when investing in Trust Deeds there is no liquidity, so your money will be locked in until the maturity date (which may be extended by the borrower, depending on the project.)
· Depending on which company you invest with and the structure of the investment, the risk you take on as an investor can be crucial to your capital investment. For example, if the borrower defaults on the loan, the servicer could pass the loss directly to you as an investor. At Ignite Funding, that is NOT the case. In the case of a default, Ignite Funding works on the behalf of the investor with the borrower to resolve any default issues that may occur. In some cases, a foreclosure may be the best option to ensure zero investor capital is lost. To learn more about how Ignite Funding handles default situations, click here.
For investors who want control over their own portfolios, real estate investments like Trust Deeds are a great option. Investors can browse opportunities based on location (including across state lines), project type, risk and return profiles. They can manage and track investments through an online client portal, automate distributions and access regular financial records. For more information about Trust Deed investments or if you wish to schedule a FREE consultation with an investment agent, please click here.