Real estate investment has typically long been associated with a select group of individuals – those with substantial capital and the financial means to enter the market, or those willing to stick their neck out and pick up a hammer. There are private investors, too, who would be the first to admit that to mitigate the risk requires a lot of effort: Taking the time to undertake property inspections, or pursue foreclosures is a lot. However, thanks to the advent of real estate crowdfunding platforms like Upright, these traditional barriers are being broken down, democratizing real estate and empowering everyday passive investors to partake in lucrative residential property ventures, with most of that effort and risk mitigation outsourced and managed on the investor’s behalf.
Historically, the high entry barriers in real estate investment have limited opportunities for most individuals. Down payments, property maintenance costs, and market access often posed insurmountable challenges for those aspiring to build wealth through real estate. Private (non-bank) lending has long played a part, but those pursuing this route typically find they tap their existing contacts pretty quickly and then struggle to penetrate outside of their immediate networks. And they are left to figure out issues such as underwriting or enforcing liens for themselves.
However, real estate crowdfunding platforms like Upright, propelled by the JOBS Act of 2012, have changed the game over the past decade. Upright and others leverage technology to enable fractional ownership of ‘first lien’ mortgages on residential properties. This provides a bridge to the world of real estate for a much wider and more diverse pool of investors.
Unlike the traditional model where substantial capital is a prerequisite to real estate investment, Upright allows individuals to invest with relatively modest amounts. This opens the door for a broader demographic to enter the real estate market, fostering financial inclusion and leveling the playing field.
Investing through Upright also offers investors the ability to diversify their portfolios easily. Instead of committing all funds to a single property, investors can spread their investments across various residential projects, or through other products such as our Pre-Funding Note Fund or our new Horizontal Residential Income Fund. This diversification helps mitigate risks and provides a more stable and balanced investment strategy.
To further empower investors, Upright is equipped with other robust risk mitigation features. We are proud of our thorough and efficient due diligence process, designed to provide fair risk-adjusted returns for our clients. We have people on the ground who conduct site visits before we commit to lending any of our investors’ funds to developers and most significantly, unlike many other platforms, we originate and service all of our loans ourselves.
Transparency and Education
Democratization is not just about access; it’s also about knowledge. At Upright, we want to encourage more people to invest in residential real estate, full stop, whether that’s through us or through some other means. That’s because there is a critical housing shortage in this country, and much of the housing stock is aging and for the most part far from energy efficient. Simply put, more investment into real estate will lead to more and better homes, as well as many other economic and social benefits, as detailed in our ‘Here Comes the Neighborhood’ report.
We are committed to educating would-be and current investors about the different types of opportunity; hopeful that we can empower them to make well-informed decisions, demystifying the traditionally complex world of real estate.
Building a More Inclusive Investment Market
Like any form of investment, investing in residential real estate through a platform like Upright can never be risk-free. The housing market, like the stock market, is subject to fluctuations, and developers face challenges including local regulations and the availability of labor and materials, which can delay project completion or diminish returns through additional unforeseen costs. But in the last two decades, only returns from investing in private real estate have performed better than equities on a risk-adjusted and absolute basis. One of the key reasons for this is that even in an economic downturn, the assets in question, homes, are tangible and hold their value. You can’t say that for cryptocurrencies.
Real estate crowdfunding platforms like Upright have ushered in a new era of real estate investment, where financial inclusion and empowerment are at the forefront. The democratization of real estate is not just a trend; it’s a transformative force that is reshaping the investment landscape and providing opportunities for many more individuals to participate in the wealth-building potential of residential properties. The vision of a truly inclusive real estate market is becoming a reality, empowering everyday investors to turn their property aspirations into tangible, lucrative investments.