What is crowdfunding?
Great question. This is where people who don’t know each other, or perhaps they do, invest together for a common goal, and they are mostly doing this on line.
You might have heard of the site or platform called GoFundMe.com, which is a website that allows people who have something devastating happen to them, like cancer or a car accident, ask for money from people all over the country, a lot of times from strangers who feel for their cause.
The donations can be $45 or more, and the site collects a fee for accepting, processing, and delivering the money to the cause’s recipient.
For example, last year a friend of mine was in car accident, and because she is self-employed and a single mother, she was 2 days away from rent, when then would be mostly out of money. So I set up a GoFundMe page and posted it on Facebook.
Within days she had over $3000 donated and could pay the bills for the 2 months she couldn’t work. People from all over the country, mostly who knew her, supported her and sent good wishes. For all the bad things that happen on social media, this was really good. An easy way for her friends and family to help.
Another type of crowdfunding funds real estate, such as notes and property flips and the purchase and rehab of apartment buildings.
An example is Patchofland.com which today sent an email for a flip and slip in Encino where you can get 11% interest and the note is for 1 year.
There are also crowdfunding sites for personal loans like Prosper.com in which both pay interest to the investor. You can own the whole note or part of the note or property. These are becoming more and more popular as the “sharing” economy grows.
Who is eligible for these high returns and special real estate investments? Only Accredited investors are eligible to use these investment vehicles. Meaning a single person who makes $250,000 or a couple who makes $350,000 or a person who has $1,000,000 in investment assets, not including the including the equity in their homes.
Since a lot of crowd funding is online, all you have to do is click a button saying you meet these requirements and you are in. Unfortunately, some people who are not accredited investors do participate in these investments. Buyer beware.