How investing in real estate online is unique
As an accredited investor, you probably recognize the benefits of diversification — such as holding real estate in your investment portfolio. Historically, investors’ options for investing in real estate depended on who they knew and how much money they had to invest. Real estate crowdfunding changed the game for many investors, allowing them to gain access to a desirable asset class from the comfort of their homes.
One important distinction for anyone investing in real estate online is understanding the difference between debt investing and equity investing. Debt investing, also known as debt lending or debt crowdfunding, is how passive investors with Greater Akron Home Buyers are generating income. An investor invests in a type of security, for example - a secured promissory note - with a fixed interest rate, and the investor earns money from the monthly interest on the loan. When the property is sold or refinanced, the investor is returned his or her principal.
Debt crowdfunding can be an attractive investment option for investors who are looking for a fixed return. Moreover, debt investments are generally considered to be less risky than equity investments, since they are secured by the first-lien position on a real asset.
With equity crowdfunding, an investor owns a stake of the investment with the anticipation that they will receive a greater dividend when its value goes up. Within real estate, this means the investor owns a piece of the investment and can then earn a portion of the profits. However, the risk is generally considered to be higher with equity lending, as the investment is unsecured, longer-term, and carries a higher risk of failure.