Transparency & Control
Investing in commercial and residential properties through crowdfunding allows for some key advantages over a typical REIT (Real Estate Investment Trust). First, both private and public REIT investors are limited in the information they receive about specific properties held in the REIT. In addition, REITs typically limit investors to properties held in a basket portfolio that of properties located in various areas throughout the country. REITs are also focused on large, commercial deals and therefore rarely invest in smaller (and sometimes more ROI positive deals) retail or multi-family buildings with less than 50 units. Finally, REITs don’t allow for investing in local properties in your own region, which effectively further separates the investor from his/her investment.
In the case of crowdfunding for real estate, investors typically own shares in a structured entity (such as an LLC or C-Corp). The entity becomes the sole investor in the deal with all the individual investors infusing capital to help perform the equity financing. Structuring the deal with an entity helps protect investors from liability and helps to streamline distributions and reporting from the property.