So-called micro-investing in private real estate is an increasingly accessible option for investors looking to diversify their portfolios with small dollar value investments.
Micro-investing allows investors to buy shares of properties and real estate portfolios with buy-ins as little as $5 in some cases, according to Yahoo Finance. The investments work much like real estate investment trusts, but don’t allow investors to buy in specific properties and do not require the high dollar commitments needed to participate in most REITs.
“The best portfolios are diversified, and real estate performs very uniquely, in a way that is uncorrelated to the stock market and bonds… We want to offer the same asset class at a lower price point,” said Janine Yorio, founder and CEO of the micro-investment app Compound.
Compound buys and flips properties and shares those profits with investors. The startup also brings in cash acting as a buy-side broker for purchases and charges a fee to the seller. The New York-based company offers investors the option to invest in four properties in Brooklyn, Austin, and Miami.
Portland-based CrowdStreet has a similar model — the startup allows investors to buy shares in commercial real estate in the United States. Co-founder Darren Powderly says it’s better for diversification than REITs because those investments are tied to property performance whereas REITs are subject to stock market volatility. The firm recently said it hit a milestone, with $1 billion raised through its platform.
The micro-investing model is being applied in the private equity sector as well. Startup RealBlocks, which allows investors to buy micro-shares in private equity funds using government-backed currency and cryptocurrency, raised $3.1 million in a fundraising round last year. [Crunchbase, Yahoo Finance] – Dennis Lynch