Real estate investing may still feel out of reach to many consumers, but a new trend growing from startups is fostering “micro-investing” to help a new wave of investors jump in – sometimes for as little as $5. It sounds a bit like penny stocks, but property, not stocks, is involved.
“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 at a lower price point,” Janine Yorio, founder and CEO of Compound, a real estate micro-investment startup offering an app that allows micro-investors to purchase shares of properties the company hopes to sell at a profit for investors.
Following a model similar to real estate investment trusts, micro-investing companies offer investors the chance to become part owners of a property. “REITs are just like owning stock, subject to stock market volatility and other unrelated factors to the actual performance of a property,” Darren Powderly, co-founder of CrowdStreet Inc., a micro-investment company that allows investors to buy shares of commercial real estate nationwide. “So in addition to REITs, savvy individual investors add private real estate to their portfolios for greater diversification and returns.”
The startup Compound says it intends to raise $10 billion a year to purchase properties and make them available as micro-investments. To date, the company has raised $2 million. Compound currently allows people to invest in a share of a luxury apartment in Miami Beach’s “Billionaire Bunker” island for $260. After three to five years, Compound will sell the properties and then distribute the profits to the investors.
“We’re looking to give people access to properties they would want to own for themselves and are proud to say they own a part of—but that also makes a great long-term investment,” Yorio told Yahoo Finance.