When you see a new hotel, skyscraper, convention center, or apartment building, do you ever wonder who paid for it… and who might be earning money from it in the coming years?
A group of investors often funds those real estate projects, and a team of professionals manages the project. They’re called real estate funds.
In the past, you would have to be very well-connected to be eligible to participate in this type of deal, and if you didn’t have a highly exclusive amount to invest, it simply was not a suitable option for you. Forget about it! And while investors in a real estate fund must still fit participation criteria, access and entry points are becoming far more widely available.
Investing in a real estate fund makes it possible to profit from real estate projects that are larger than you could afford on your own
Real estate crowdfunding platforms have made it possible for individuals to collaborate with dozens of other investors on more prominent real estate projects than they could on their own.
It’s like owning shares in a company. When the property’s value goes up, your investment becomes more valuable. And you can collect dividends.
Increase your monthly cash flow with passive income
Investing in real estate makes it possible to create cash flow month after month; that’s why it’s such an attractive investment.
Consider this. When you invest in the stock market, you are buying stocks with the hope that the company will become more valuable, and the stock will go up in price. A house can also go up in price over time. And when you live in that house, you will benefit from the increase in value. But when you own a single-family home that you are renting, you can earn monthly income whether the property appreciates it or not.
But how can you tell if you are generating the right amount?
Sometimes people measure cash flow by the amount they earn after expenses per unit. $100 per unit is considered to be a good amount for an average property, as long as that is after all the expenses are paid. Naturally, if you’ve invested a great deal of money in it, say over a million dollars, you will expect to see a heftier cash flow.
But what about when you invest in a real estate fund with other people?
That question leads to a more straightforward and helpful metric for measuring cash flow: A cash-on-cash return. A cash-on-cash return is the amount of profitable cash flow you made during the year divided by the amount you invested.
Long term security
Unlike other businesses and products, you can invest in, real estate is always in demand because people always need a place to stay.
It is difficult to lose money in real estate because it is backed up by a physical asset that not only appreciates but also brings in rental income.
When you own an investment property with tenants, the rent they pay covers the mortgage payments. So, you generate cash flow but also gain equity. Finally, in contrast to other investments, real estate investors can leverage the capital they have to buy more real estate.
These factors all make real estate investing more stable than other options.
Tax advantages
Investing in real estate gives you the option of deducting things like mortgage interest, depreciation, property taxes, insurance, and other expenses from taxes, which saves you money and generates more cash flow.
When you invest in a crowdfunded real estate deal, those tax benefits will be included and accounted for in your tax report.
Diversification
Real estate funds allow you to diversify your investments in two ways:
1). You are adding a safe and stable asset class that behaves differently than the stock market or bond market. This allows you to have a portfolio that won’t be vulnerable to the volatility of the market.
2). You can also own real estate in different parts of the country or world.
Protection against inflation
Rising prices and high inflation can put your financial future at risk because even though you think you are saving money; you lose wealth as your spending power decreases.
That’s why it’s so important to have an intimate understanding of what is going on with your money and make investment decisions that will maximize your return on investment right away and in the long term.
Contact us today to discuss your unique situation. During our one-on-one conversation, we will help you discover ways to transform your life and maximize your wealth. Book a call.
