Historically, everyday investors had few options to invest in real estate other than in their homes. Only the wealthiest and most sophisticated investors had the ability to make money from real estate, and for the rest it was too difficult to access and afford. So only the few investors with both the capital and access to real estate experts have reaped the benefits – regularly earning higher returns than “traditional” stocks and bonds.
In this article, we’ll provide you the basics of real estate investing and explain how online real estate platforms such as stREITwise are changing the game to make it simple and accessible to everyone.
But first thing’s first: what is real estate investing?
What is Real Estate Investing?
Real estate investing is the ownership, rental, or sale of land and any buildings on it for the purpose of earning a return on investment. There are two main types of real estate: residential and commercial.
- Residential: Residential real estate consists of single family homes, multifamily homes, townhouses, condominiums, and multifamily homes (of more than four units). Examples include freestanding homes, townhouses, and condominiums that occupants can own.
- Commercial: Commercial real estate is property that is used for the purpose of business. Commercial real estate is classified as office, retail, industrial, hospitality or multifamily. Specific examples of commercial real estate properties include business offices (office), restaurants (retail), warehouses (industrial), resort hotels (hospitality), and large apartment buildings (multifamily).
In addition to the property types, there are two main ways to make money from real estate: rent/dividends and appreciation.
- Rent/Dividends: The owner of a property earns income by leasing that property, which depending on the term of the lease, can provide a regular revenue stream, which can then turn into income or dividends.
- Appreciation: Real estate investment also provides the potential to generate profit from selling at a higher price than what you paid, or “appreciation.”
What Are the Ways to Invest in Real Estate?
There are generally two broad categories of real estate investments: “active” investments requiring dedicated time, effort, and expertise, and “passive” investments requiring limited effort, knowledge, or involvement.
- Active Investments: House “flipping,” or buying a single home with the intention of renovating it and selling for an immediate profit, is the most relatable “active” real estate investment. You’ve probably heard those advertised “get-rich-quick” schemes involving house flipping that make it sound easy. But if you’ve seen any do-it-yourself home renovation show, you know that house flipping requires a tremendous amount of time, and can turn costly if you don’t know what you’re doing.
- Passive Investments: On the other end of the spectrum are ‘passive’ real estate investments, where investors commit their money to professionals who are well-versed in the nuances of real estate ownership and management to invest on their behalf.
While the concept of sitting back and letting your money work for you sounds enticing, passive real estate investments have their pitfalls as well. Passive real estate investments are often:
- Not accessible to everyday investors (given the sizable investment minimums);
- Not registered with, or regulated by, the SEC, often leading to limited transparency;
- Not diversified because they are frequently limited to a single property; and
- Not as profitable because of the fees and profit share collected by the professionals running the investment.
The most common form of passive investment has historically been the “private equity fund” where high net worth investors pool their money together into a single fund to make investments. But everyday investors don’t have the wherewithal to meet the investment minimums, which can start at $100,000 and grow exponentially. And to make matters worse, the fund manager typically charges high fees and takes a sizable share of the profit, and is often operating with little or no oversight by the SEC.
But thanks to technology and the advent of online real estate platforms, “passive” real estate investing is evolving and becoming less expensive and more accessible to the everyday investor.
What are Online Real Estate Platforms?
Online real estate platforms pool investments from everyday investors into real estate opportunities that would otherwise be difficult to find or out of reach. Similar to how retailers are now going “direct to consumer,” online real estate platforms have become the most efficient way for real estate professionals looking to raise capital from you – the “consumer” and aspiring passive real estate investor.
But the key to success in online real estate investing is finding the right opportunity with the right platform. Many real estate investment platforms carry restrictions such as accreditation requirements and high investment minimums. Others only invest in a single investment and lack the diversification benefits that a larger pool of properties provides. And lastly, many platforms are run by companies with little or no real estate expertise that are charging excessive fees and taking more than their fair share of the profits.
stREITwise was formed to be the online real estate platform of the future. Founded and run by seasoned real estate professionals, regulated by the SEC, and differentiated by a pioneering low fee structure, it provides everyday investors the opportunity to collect dividends and generate appreciation from a diversified portfolio of real estate investments. All for just a $1,000 minimum investment. The comparison is easy – stREITwise checks ALL the boxes!
So are you stREITwise? Join the revolution and invest.
Eliot Bencuya is the co-founder and CEO of stREITwise. Eliot has extensive experience identifying, underwriting, and executing value-add real estate investments.
Prior to forming stREITwise, he was a Vice President of Acquisitions for Canyon Capital Realty Advisors and the Canyon-Johnson Urban Funds, where he was responsible for originating, underwriting, structuring and executing transactions in the Pacific Northwest, Northern California and Midwest regions. Mr. Bencuya also held positions at Sovereign Investment Company (a subsidiary of the Marcus and Millichap Company) and the investment banking division of Merrill Lynch & Co. He holds a Bachelor of Arts degree in Economics and International Studies from Yale University, and a Masters of Business Administration degree from the Haas School of Business at the University of California, Berkeley. Mr. Bencuya is a member of ULI.