The Greatest Myth About Real Estate Investment Life

October 18, 2016 Marketing

As an investor, your primary contribution is financial. But that doesn’t mean you just get to throw money at something and leave. You also have a managerial role of sorts, tracking where your money goes, when, how, and why. If you don’t guide this process intelligently, your financial contributions won’t go nearly as far as they could, nor will your returns — and the whole project will suffer.

The myth that many developers and stakeholders will want you to believe is this:

“Investors get to throw money at stuff, be passive, and make a ton of money.”

Real estate involves plenty of marketing. And what gains people’s interest (no pun intended) more than selling them free money?

Don’t get duped. As an investor, you have a responsibility to be a good steward of your money. You are allowed to let anybody use it as they please. But you probably don’t want to do that. The only way to make sure your money is being used wisely for worthwhile projects is by being involved.

Many developers are not transparent with investors about the latter’s roles, rights, and returns. There are some firms that act as a liaison between developers and investors, but these can often sugar-coat things as well. Before you invest, do your due diligence on the developer, the property, and the legalities involved. Also don’t neglect to investigate your own assets: What are you willing to risk? What is your investment style? Is the project a good fit?

One program I would suggest is real estate crowdfunding. RE crowdfunding is a new industry that allows a “crowd” of accredited investors to all own a share of a property, catalyzing development and reducing risk for investors. The success of RE crowdfunding platforms depends on the success of the project, and whether the funds are used well. So these firms tend to be incredibly honest with investors about what is involved in a project. Since they have access to a large pool of investors with varying interests, they won’t pressure you into a decision.

But don’t take my word for it.

If you haven’t looked into RE crowdfunding, I’d suggest you do some research and look into sites such as Patch of Land, Fundrise, RealtyMogul, and RealtyShares.

Yes, in REI, you get to make a ton of money. But only if you are smart and participate actively. Just as a passive father won’t enjoy a close relationship with his children, so being uninvolved in your investments will have a toll.

Don’t be fooled; you reap what you sow. Plant the financial seeds, put in the effort of watering them actively. The sun and the soil will do their work, but only if you do yours. If you do, everyone will be better off.

Meg Baatz is on the marketing team at Patch of Land, a platform that’s growing out of new RE solicitation and crowdfunding laws to help fulfill RE opportunities formerly impossible with REITs, mutual funds, and traditional investment. Save time and be in control of your investment shares at PatchOfLand.com.

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