Real estate and crowdfunding is a perfect match. Real estate has always been a very popular investment class but unless you had big money, or tons of time on your hands, it was pretty hard to get into. Sure, you can invest in traditional REITs but these can be opaque and fees can quickly mount up. The advent of multiple real estate crowdfunding platforms has streamlined access for both accredited and non-accredited investors alike. You may now invest in debt and equity in real estate via the comfort of your own home.
One of the top questions from investors leveraging online real estate investing platforms is the issue of taxes. At some point in time your gains will be taxed. If you have losses, well these can potentially be deducted from your overall earnings.
To help investors more effectively evaluate real estate crowdfunding investment opportunities and their potential tax implications, AlphaFlow has published an eBook entitled, “Tax Implications Of Real Estate Crowdfunding”. AlphaFlow is a platform that seeks to provide an optimized portfolio of highly diversified real estate investments. Kind of like modern day ETFs. The book was published with the assistance of CPAs and examines what investors must consider when participating in the real estate crowdfunding sector. It is free to download here, you just need to hand over your name and email address first.
AlphaFlow tells Crowdfund Insider the book was driven by the increasing popularity of Real Estate crowdfunding and, correspondingly, the increasing frequency of questions regarding tax consequences.
Ada Pia d”Errico, Chief Operating Officer at AlphaFlow, explained one of the top questions regarding investing online in real estate assets;
“One of the most complicated aspects of investing in real estate crowdfunding is UBTI [Unrelated business taxable income] for investments held in Self-directed IRAs. SDIRAs have grown in popularity since they allow investors to diversify their holdings out of traditional stock and bond allocations,” explained d’Errico. “While the flexibility of SDIRAs has allowed more funds to be invested in alternatives, including real estate crowdfunding and marketplace lending, certain investments trigger immediate tax issues. If an investor doesn’t understand these tax considerations, they may inadvertently invest in something within an IRA that gives them an unexpected tax bill at the end of the year.”
d’Errico says that demand has been huge for investors seeking a way to invest in real estate online. The ease of access, combined with transparency and streamlined reporting, makes real estate a good option for anyone’s portfolio.
“All these elements help people feel more comfortable making a decision to invest in real estate – online,” said d’Errico. “It’s no wonder that real estate crowdfunding’s growth nearly doubled to $821 million in 2016 vs. $484 million in 2015. And traditional real estate companies are adopting technology to help them make the most of this shift and to capture some of this growing demand. I expect that real estate investing online will continue to grow.”
d’Errico believes there is no going back. The new model of investing online has made a profound and permanent impact.