Volatility in the stock market and inflationary pressures may have you searching for alternative investment options.
For the past few years, Regulation Crowdfunding (Reg CF) has shown to be a popular tool for investing in local, mid-market real estate. This rise in popularity can be attributed to two main factors.
First, investments in this asset class through Reg CF must occur on an SEC-registered intermediary, increasing investor protections. Second, it opens up new opportunities for everyday investors.
In this article, we’ll discuss the basics of real estate investing and how Reg CF is making it more accessible to a wider range of investors.
The Crowdinvesting Basics
I may have mentioned Reg CF in previous articles.
But hey, knowledge is power, and the more you read and learn about Reg CF, the better positioned you’ll be to diversify your portfolio with alternative asset classes like mid-market real estate. That’s one of our goals here at Vicinity: investor empowerment.
So, repeat after me: Reg CF is a securities regulation that allows private companies to raise up to $5 million in capital, from both accredited and non-accredited investors.
In other words? Reg CF = the democratization of real estate investing.
Reg CF opens up the world of real estate investing to a wider audience, as smaller investments can be easily made through an SEC-registered platform (like Vicinity). Completely cutting the hassle of purchasing and managing a property individually, Reg CF allows investors to pool their funds to invest in a project they believe in, and see a future in.
Why Real Estate Generally?
Keeping your investment portfolio diversified is a smart way to balance risk.
“Diversification” may seem like a fancy word, but it’s rather easy to understand through the metaphor of a smoothie.
The perfect smoothie is all about finding the right mixture of ingredients and tailoring the portions to meet your unique goals and dietary preferences. A little bit of banana. A few strawberries. Perhaps some oats. A dash of almond milk. Throw it in a blender, and BOOM—a balanced and healthy (i.e., “diversified”) smoothie.
Investing is rather similar. Diversification means mixing together different investment asset classes in your investment portfolio, but doing so in a way that works for you.
And while real estate investing isn’t the only alternative investment out there, it provides investors with a unique set of benefits.
Physicality
With intangible assets, you don’t own anything…a piece of paper at most.
In real estate, you can actually see and touch your investment. On an emotional level, this carries weight, but it also offers you additional benefits as an investor. For one, your investment is backed up by the asset itself—it won’t just disappear.
If the markets crash, your intangible assets can fall to zero—if your real estate investment loses value, it’s still always worth something.
Appreciation
Once you invest in real estate, the investment stays there. And, whether it’s a house, a building, a park, you name it, there’s a good chance that its value will appreciate over the years.
This happens naturally, as people will always need places to sleep, shop, eat, and just generally live. If people are there, so is the demand. Makes sense.
In Raleigh, NC, for example, there has been a 73% accumulative appreciation rate over the last ten years.
Options
Real estate investments come in all shapes and sizes.
Do you want a house? Would you rather invest in a restaurant? Or maybe a hotel? All at your disposal. You can invest big amounts or small amounts, and do so where it matters most—your backyard.
Plus, technology helps you manage and find the right real estate investment for you. At Vicinity, we leverage technology to bring local investments right to your screen.
Why Mid-Market Real Estate Specifically?
Broadly speaking, real estate investments can be categorized into three segments: residential, commercial, and industrial.
In addition to the property’s purpose, its value also helps to orient the type of investment.
Small properties tend to be for homeowners, and larger ones are owned by institutions. In between sit the mid-market real estate investments, with values of less than $50 million.
If anything, just because of its size, mid-market is the place to be: it accounts for almost 95% of transaction volume.
Investing in mid-market real estate offers a good risk-reward balance. It’s not as volatile as smaller property investments, and its potential for returns is higher than institutional assets. There are also some additional advantages to note.
Affordability
With the ability to invest an amount comfortable to you, Reg CF makes mid-market real estate investing more accessible and affordable to a wider audience. Say goodbye to the days of having to save for years to invest in real estate.
And remember, even a small portion of your investment portfolio in local real estate could make a huge difference.
Local Advantage
Mid-market real estate opportunities don’t attract too much attention, as they are usually specific to a certain area. That’s why they’re also referred to as local real estate.
At Vicinity, we want to help you be among the first to learn about and invest in your local projects.
Oversight
By investing in local, mid-market real estate, you have a greater level of both insight and oversight of your investment, as you can inspect the properties in which you’re invested, with your own eyes and hands.
In other words, local real estate is a transparent and tangible investment that positions you to better engage in your due diligence.
Remember that it’s important to carefully consider your investment goals, risk tolerance, financial situation, and the Reg CF rules before making any investment decisions. A little bit of research and due diligence goes a long way in ensuring success in any investment.
What to Look for in a Reg CF Investing Platform
OK—so what should you look for in a Reg CF investing platform?
Below, we discuss a few boxes that a platform/company should check before you consider investing through them.
1. Reputation and Experience
Take a look at who are the founders and managers of the platform. Check out what the website has to say about them, Google them, and see what their experience on Linkedin shows.
What you want to know here is the level of expertise they have in these key areas: finance, business, real estate, and technology. The more combined knowledge they possess, the greater the chances that they run a trustworthy and reliable platform.
Vicinity Advantage: we (i.e., co-founders Josh and John) have years of experience, which provides Vicinity with a rock-solid foundation for success. Check out our LinkedIn profiles here and here.
2. Customer Service
A no-brainer when it comes to any service-related industry, the customer service of your Reg CF platform should be nothing short of superb.
And we’re talking about the whole process, from when you sign up, to after a deal is fully funded. You need to know that the platform is there for you at every stage of your investing journey. Think response times, FAQs, tutorials, and guides.
Vicinity Advantage: Reg CF platforms rely heavily on technology, many times to the detriment of investors. Yes, technology is essential, but so is a white-glove approach to investor support—one that values facetime, high-touch interactions, and trust. This is the level of customer service investors receive when investing through Vicinity.
3. Transparency
Investing in any asset class has its risks. As an investor, especially if you’re new to the game, you need to fully understand not only what you have to gain, but what you have to lose (and the chances of that happening).
A good platform will not only emphasize investor education but also guide investors through their investments, to make sure they have all the information and tools they need to make informed decisions.
Vicinity Advantage: we are fully committed to your investor education and overall Ref CF experience. As such, we not only provide detailed guides to every deal (including historical financials and background), but we also make it easy for investors to connect with issuers and project leaders.
Leverage Reg CF and Real Estate to Invest in Your Vicinity
Today’s takeaway?
Reg CF has made investing a reality for almost everyone. It has opened the doors to mid-market real estate opportunities and democratized the investing experience.
It’s up to you to take the next step and diversify your investment portfolio.
But you don’t have to take them on your own. Vicinity is here to bring you local opportunities, walk you through the process of investing in them, and support you as you learn, grow, and build wealth.
We believe in our local deals, and we know you will too.
If we’re still not up and running in your vicinity and you’d like to learn more, let us know here.