Imagine that you had $50,000 to invest. Would you feel comfortable putting all of that money toward a single real estate deal, or would you stick to assets that have smaller investment minimums?
Most accredited investors are not comfortable putting all of their money into a single deal. And yet, the high investment minimums of most syndication deals create an unattainable barrier to entry to many.
Fortunately, it doesn’t have to be this way. In this article, we’ll break down some important numbers about accredited investors in the U.S. today, and we’ll explain how you can start engaging more of them with your investment opportunities.
A Crowded Red Ocean or an Open Blue Ocean?
There are more than 13 million accredited investors in the U.S., but only around 200,000 of those individuals invest in real estate syndications. This is largely because of the high investment minimums for syndication deals, typically $50,000 or higher.
Think again about the investor with a net worth between $1 million and $10 million who has $50,000 to invest this year. That person may not want to invest the full $50,000 into one deal, but they may be comfortable spreading the $50,000 across three or five deals.
Real estate syndicators are all competing for the attention and capital of those same 200,000 investors. But what if there was a way to appeal to the millions of investors with net worths between $1 to $10 million?
This group might make smaller investments than the 1%, but they collectively have billions of dollars to invest that the syndication sector is largely leaving on the sidelines.
Expand Your Investor Pool with Fractionalized Investments
When you create a customizable fund on Avestor’s platform, you can bring your typical syndication deals to a much larger pool of investors. Here’s how it works:
- Add a deal (or multiple) to the customizable fund
- Set your minimum investment for each deal, and your minimum investment to join the fund
- When an investor joins the fund, they can fractionalize their investment into smaller, deal-by-deal slices.
- The investor can invest additional capital over time as new deals are added.
Say for example, that you create a real estate fund with a $50,000 minimum investment. Once investors have joined the fund, they can choose how they want to allocate their $50,000 across the deals you have available. One investor might choose to put the entire amount toward a single deal, while another might invest $10,000 each in five different deals.
In this way, investors can instantly diversify their portfolios, without having to sacrifice the control that investing deal-by-deal affords them. This is especially valuable in an economic downturn, when people are especially focused on diversifying to reduce their risk.
Essentially, Avestor gives investors the best of both worlds, combining the accessibility of a traditional fund with the flexibility of a syndication.
Our platform also provides a valuable solution for the fund manager who might be wary of taking on the extra work of dealing with smaller investors. Investors get a single K-1 for the entire fund, and you can still set a fund minimum at whatever level you feel comfortable with. Plus, our platform makes fund management simple with ongoing technical support, accreditation checks, automated tax calculations, and more.
If you’re ready to learn more about how Avestor can help you reach more investors and raise capital faster, we’re offering a free strategy review session for anyone who books a call. Find a time now at this link.