“The best investment on earth is earth.” – Louis Glickman
It seems like every conversation I have about investing eventually transitions to real estate. Which is why I was excited to explore the benefits of crowdfunding for developers with the Patch Of Land team.
While the stock market offers decent returns, and starting your own business can result in a windfall, real estate can offer a consistent, high-yield return. If you discover how to successfully invest in real estate, financial success is just around the corner.
Of course, for most of us, real estate investing tends to remain a dream as we don’t have the financial means to make it a reality. Fortunately, this doesn’t have to be the case. As I’ve mentioned previously, it’s possible to invest in real estate without being rich.
But what do you do if you want to make real money in real estate investing? What if you’re willing to put in some serious time and work to become a real estate mogul? After learning how to become a successful real estate investor, you’ll be ready to go!
One of the most common ways to get started in real estate is to fix and flip. For the young investor with big dreams and a small bank account, buying distressed real estate, fixing it up, and selling it for a profit is a great option for getting into real estate without tying up your finances for an extended period of time.
But this process still requires a significant amount of time and money for the flipper. Specifically, the issues that need to be addressed before investing in fix and flip properties are:
- Is the property a relatively secure investment? In other words, can you buy the property for a low enough rate to make a solid return and sell the property quickly after investing in the repairs? The fix and flip strategy always has risks, but it’s important to make sure that you know enough about the market and real estate to minimize these risks.
- How will you pay for the property? If you have the financial means to buy the property outright yourself, fantastic! If not, then you’ll need to find family or friends to invest – or work through a crowdfunding platform like Patch of Land.
- Who will do the renovations? If you have experience doing construction yourself, then you can invest your time in this project. However, if you don’t have the expertise or time to do the renovations yourself, you’ll need to pay someone else to do this for you.
While you need to have clear and financially conservative answers to the questions above, the reality is, you can make good money investing in real estate – even if you don’t have the funds to afford the project on your own? How, through crowdfunding!
Crowdfunding makes skills and experience more valuable than money
Here on Money Nomad I’ve previously discussed crowdfunding real estate from an investor perspective, but I just recently had a conversation with the Patch Of Land team that revealed how profitable crowdfunding can be for real estate developers.
And although most crowdfunding platforms require borrowers to have the skills and experience necessary to make the deal a success, borrowing from these platforms can be substantially easier and more affordable than other venues. So crowdfunding may be a plausible way to get into the real estate game and start building that wealth.
A real estate developer’s perspective on crowdfunding as a real estate funding option
To learn more about using crowdfunding to invest in real estate deals (something I hope to do in the moderately near future), I reached out to Indar Lange of Our Home Investments – a real estate investor in Honolulu who has used crowdfunding to fund several investments.
No, Indar is not Robert Kiyosaki’s rich dad in Rich Dad Poor Dad – as he’s far too young for that. However, he is certainly another very successful Hawaiian real estate developer and I am excited that he was willing to share a bit about his experience with crowdfunding.
Here are his answers to a series of real estate questions that I sent his way:
How many real estate deals have you and/or your firm been involved in?
I have done five deals in my new company, Our Home Investments – but have rehabbed many other people’s projects as a contractor.
How many deals have you down via crowdfunding?
I have done two large deals with Patch of Land and am working on a third right now.
What is your general impression of crowdfunding as a real estate financing tool?
I can’t speak speak about other platforms, but Patch of Land is really great and easy to work with! They came in on a pinch during my first deal and funded me in two weeks. Now that I have experience with them, it’s become incredibly easy to fund deals. I bet they could fund me in a week if I needed it. As their system is setup more for short-term loans, I only use them for fix and flips – but other platforms may be beneficial for long-term deals.
What have your returns been on crowdfunded back deals?
The first deal I did with Patch of Land was a $705k house with a $650k crowdfunding backed loan. After spending another $130k on renovations we were able to sell the property for $1,025,000 – about a $100K in Profit. Small ROI percent (10%), but I am happy with $100K in my pocket.
A current flip that I am in the middle of with Patch Of Land required a $612k loan. The property was $650k and we’ve put $40k into rehab. The plan is to list and sell the property for $850k – and we expect to make at least $50k on the deal.
The third crowdfunding deal that is in the works is a $322k property that we expect to be able to sell for $440k without putting any work into it! So that will be another solid $50k after paying back the loan, provided all goes well.
These profits are after paying everyone and covering all of my expenses. However, it’s important to keep in mind that about ⅓ of these profits go to taxes.
Real estate crowdfunding: Another great way to make money with other people’s money – while creating a win-win!
The reason I love real estate crowdfunding is that it really greats a win-win for everyone.
I’ve earned 8-10% returns backing crowdfunded real estate in the past, and I know Patch Of Land investors average an 11.99% ROI.
Meanwhile, as we can see from Indar’s interview above, developers can make great returns with crowdfunding – even after successfully paying back the investors.
Now, if you’re a digital nomad traveling the world, it’s much easier to be an investor than a developer. However, for someone interested in returning to the States and building a real estate empire (which could very quickly go international), flipping properties is certainly a viable business opportunity – and one I’m beginning to explore more aggressively myself.
If you’re interested in becoming a real estate investor yourself, I recommend exploring the Patch Of Land blog and BiggerPockets podcast. And keep an eye on the Money Nomad blog! Hopefully I’ll be sharing my own developer success story here in the future.
For the comments: Do you have any experience with crowdfunding (in any form)? How about real estate development? These are two of my favorite subjects and I’d love to hear your thoughts and experiences.
It’s always exciting to work with great brands to share additional content with the Money Nomad community. I would like to thank Patch Of Land for sponsoring this post and providing additional resources and interview connections. It was a pleasure working with their team on this article.