In the four years since my brother and I started Fundrise, we’ve gotten a lot of questions from investors about what they need to know before they start investing.
We’ve created a list of tips for anyone interested in investing through crowdfunding -- and some of the major questions to ask when evaluating an opportunity:
1. Vetting: Look into the due diligence process. Does the platform look like they know about real estate underwriting? How much information are you provided on their process? How extensive is their underwriting process?
2. Research the Market: If you don’t live in the area, do you have friends or family who do? Call them and ask about the neighborhood, pricing, etc. Use online tools to take a tour of the streets around the property. Look at the neighborhood’s walkability ratings. Compare the property to other properties in the neighborhood using online property listings.
3. Research the Sponsor: What is their track record? What other projects have they done? Do they have experience with this type of project? How well are they capitalized? How long have they been in business? How many millions of dollars worth of properties and other assets do they have under management? How much did they co-invest?
4. Evaluate the Risk/Return Profile: Does the return offset the risk? Remember, high return equals high risk.
5. Read the Fine Print: Every project is unique and it’s important to understand what will happen in the event that something goes wrong.
6. Look at the Pro Forma: What assumptions are the platform and sponsor making? Poor assumptions lead to unrealistic projections.
7. Take a Step Back: Does the deal make sense? 22% in six months may sound great, but how realistic is it?
The Fundrise Investments Team is always around if you have questions about real estate crowdfunding. You can reach them at firstname.lastname@example.org.
Disclaimer: This information is provided for informational purposes only, and should not be viewed or construed as investment advice.
By: Dan Miller
Co-Founder | Fundrise
Follow Dan on Twitter: @dan_miller
Visit Fundrise's Website: www.fundrise.com
Visit the Fundrise blog: blog.fundrise.com
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