Crowdfunding’s impact on commercial real estate

On Behalf of | Mar 25, 2016 | commercial real estate

Commercial real estate has traditionally been an area that could be difficult for the average Florida investor to become involved in. However, as crowdfunding has opened interesting doors for entrepreneurs, it has also begun to create opportunities for investors who previously lacked the resources needed to add commercial properties to their portfolios. Whereas it might have been necessary to have $50,000 or more to invest in this area in the past, some crowdfunding opportunities make this area accessible with as little as $5,000 in available capital.

Commercial real estate is considered to be an excellent avenue of investment because it tends to be less volatile in comparison to stocks. It is also less influenced by inflation because of the greater amount of time during which a property tends to be held. Meanwhile, statistics indicate that the annual return in this market was nearly 13 percent in 2015. Commercial property investments also provide a means of diversification while allowing tax benefits such as depreciation to be used to offset income.

Crowdfunding does have some challenges for an investor to consider, including the fact that commercial real estate is not a liquid asset and can’t be traded in the same way that stocks are traded. Further, in general only accredited investors as defined by federal securities law are allowed to participate. However, this method of investing in commercial real estate is in its early stages and holds great potential for increasing opportunities for potential investors.

The type of commercial property held by an investor could be affected by numerous issues, including the need for renovations, potential conflicts between intended use and existing zoning laws, and local market changes that could reduce demand for the type of property in question. Reliable legal advice can be crucial for navigating these issues successfully.