Investor Resources

Real estate crowdfunding has become more popular for investors to enter the real estate market. By pooling resources through online platforms, individuals can invest in properties without the traditional barriers of direct ownership.

While this investment model seems appealing, many investors overlook critical risks that could impact their returns and financial security. Unlike direct property investment, crowdfunding comes with limitations that can expose investors to hidden pitfalls.

At Kenwood Management, we provide a stable, transparent alternative for investors looking for long-term success in commercial real estate. Understanding the risks of crowdfunding is the first step toward making informed investment decisions.

What Is Real Estate Crowdfunding?

Real estate crowdfunding allows multiple investors to contribute capital toward the acquisition or development of a property. Instead of owning the asset outright, investors hold fractional shares and receive passive income based on the property’s performance.

Platforms that facilitate these investments manage the properties, distribute returns, and handle operations. While this hands-off approach attracts many investors, it has significant drawbacks that aren’t always apparent at first glance.

Why Investors Are Attracted to Real Estate Crowdfunding

Investors are drawn to crowdfunding for several reasons:

• Low entry costs compared to direct property ownership.
• Passive income with no day-to-day property management responsibilities.
• Diversification by investing in different property types without requiring large capital investments.

However, while the benefits seem attractive, they often mask underlying risks that can erode profitability and financial security.

The Hidden Real Estate Crowdfunding Risks

These platforms can come with significant limitations that can impact financial security and exit strategies. This section will explore the hidden risks.

Lack of Liquidity and Limited Exit Options

One of the biggest drawbacks of real estate crowdfunding is the lack of liquidity. Investors can't easily sell or exit their position before the platform’s designated holding period ends. Unlike direct real estate investments, crowdfunding lacks a secondary market where shares can be resold. This makes it difficult for investors to access their capital when needed.

Platform Reliability and Business Risk

The success of a real estate crowdfunding investment is heavily dependent on the platform managing it. Investors could suffer significant losses if the platform

• Mismanages funds
• Fails to generate returns
• Goes bankrupt

There have been cases where crowdfunding platforms shut down, leaving investors with little to no recourse for recovering their money.

Limited Transparency and Control

With crowdfunding, investors must rely on the platform’s decision-making and financial reporting. They have no direct control over:

• Tenant selection
• Property management
• Maintenance decisions
• Strategic operational choices

This lack of transparency can lead to poor asset management, impacting overall returns.

High Fees and Reduced Profit Margins

Crowdfunding platforms often charge multiple layers of fees, including:

• Management fees for handling the investment, which can range from 1% to 3% of total assets annually.
• Platform fees for using the crowdfunding service, are often between 0.5% and 2% of invested capital.
• Transaction fees reduce net returns, sometimes costing investors an additional 1% to 5% per transaction.

These fees significantly eat into investor profits, often making crowdfunding investments less lucrative than direct commercial real estate ownership. Over time, these costs compound, further eroding returns and limiting an investor's ability to build long-term wealth.

Market Volatility and Economic Risks

Real estate crowdfunding investments are vulnerable to market downturns, but investors lack the flexibility to adjust their strategies. Economic recessions, interest rate changes, and fluctuations in the commercial real estate market can negatively impact investment returns.

For example, during economic downturns, rental income may decline, and property values may drop. Additionally, if a crowdfunding platform is tied to a specific sector—such as retail or office spaces—shifts in market demand can leave investors exposed to prolonged vacancies and revenue losses.

Another challenge is rising interest rates, which can increase borrowing costs for projects funded through crowdfunding platforms. This can erode profit margins and make it difficult for projects to achieve their initial projected returns. In extreme cases, investors may receive lower dividends or, in the worst scenarios, lose their entire investment due to project failure.

Since investors have no control over decision-making, they are left exposed to these market forces with little ability to mitigate risks.

Why Experienced Investors Choose Kenwood Management Instead

Kenwood Management has decades of experience in acquiring, managing, and optimizing commercial properties. Our hands-on approach ensures that investors receive consistent, long-term value. We provide clear insights and data-driven decision-making, unlike crowdfunding platforms.

We take pride in our ability to:

• Navigate market changes
• Maintain high occupancy rates
• Implement strategic property improvements that enhance long-term value 

Our team actively manages each property, ensuring that every investment is carefully maintained and positioned for success.

Direct Ownership with Full Transparency

With Kenwood, investors maintain direct ownership of commercial properties. This provides:

• Full financial transparency with clear reporting and straightforward accounting practices.
• Active management to maximize property performance, including tenant retention strategies and proactive maintenance.
• Control over investment decisions rather than relying on a third-party platform, allowing investors to tailor their portfolios to their long-term goals.

Because we operate with a direct ownership model, investors can have confidence in the stability of their assets. Unlike crowdfunding, Kenwood keeps everything in-house, ensuring decisions are made with the investor’s long-term success in mind.

Stable, Long-Term Wealth Growth

Kenwood focuses on stable, long-term investments that generate consistent rental income and property appreciation. Our approach prioritizes:

• Sustainable growth over quick, high-risk gains.
• Reliable income streams from well-managed commercial properties with strong tenant relationships.
• Direct asset ownership ensures investment stability and eliminates reliance on third-party intermediaries.

In addition to securing a steady income, our strategic property acquisitions and management techniques help investors capitalize on market opportunities. By focusing on high-quality assets in strong economic regions, we ensure that our properties remain resilient even during economic fluctuations.

By eliminating reliance on third-party crowdfunding platforms, we help investors build resilient and profitable real estate portfolios, fostering wealth accumulation that will endure.

Invest Smarter With Kenwood Management

Real estate crowdfunding can seem like an easy way to invest in property, but the hidden risks—lack of liquidity, platform reliability issues, high fees, and market volatility—can create significant challenges.

For investors seeking a more secure and profitable alternative, Kenwood Management provides a proven, transparent, and long-term approach to commercial real estate investing. Our hands-on management and direct ownership model give investors the control and stability they need to build lasting wealth.

Before making any real estate investment, it’s essential to evaluate all your options. Download The Real Estate Investor’s Guide to Smarter Alternatives to Crowdfunding to assess real estate opportunities and make smarter investment decisions.