This column is an opinion by Mark Ting, a partner with Foundation Wealth who helps clients reach their financial goals. He can be heard every Thursday at 4:50 p.m. on CBC radio as On the Coast’s guide to personal finance. This column is part of CBC’s Opinion section. For more information about this section, please read our FAQ.
The high cost of real estate is often cited as the main barrier to entry into Vancouver’s housing market. As a result, some determined Canadians have turned to crowdfunding.
In North America, there are several real estate crowdfunding companies that divide investable properties into fractional shares. I recently bought a fractional share of a rental development in Mission, B.C. This project’s crowdfund goal was $500,000 consisting of 500,000 shares at a dollar each.
In total, about 1,000 people invested an average of nearly $500 to raise the half million. It is a longer-term holding with the developer building 105 units which include 11 affordable rental units over the next two years, then renting them out for three years before selling the units and dividing the profits among the investors.
The reason I got involved in the Mission rental property crowdfund was two-fold. First, I agree with the crowdfund procurement team’s assessment about Mission — it has great capital appreciation and rental income potential — and second, I’m using this investment as a learning experience for my children.
Investors need to make sure they know what fees they are paying for crowdfunded real estate, says Mark Ting. (Shutterstock/Roman Makedonsky)
A learning experience
For every ‘A’ my kids earn at school on their report cards, I give them $100. This year they decided to invest their earnings in real estate via crowdfunding. We chose the Mission project as it is local, which means we can visit the development, monitor its progress and experience, albeit in a small way, the sense of pride that often accompanies home ownership.
On behalf of my children, I invested $500 in the crowdfund which projects an annual return of 14 per cent. In dollar terms, ifachieved, our investment would double in about five years. Yielding $500 in five years isn’t going to dramatically change my life, however, for my kids it’s likely to be much more impactful. My hope is that they continue to invest the money they earn for good grades into more projects, essentially building a small pipeline of investments with different risk profiles that pay out at different times. My goal for them is to form good financial habits which, if accomplished, is worth several times more than the potential $500 profit created by this investment.
Some funds involve developers building a project and then renting out units. (Evan Mitsui/CBC)
When doing due diligence on crowdfunding, pay attention to the fees. Many offerings, in my opinion, overcharge or take an excessive cut of the profits. Before I invested, I compared the fee structures of various crowdfunding companies and ultimately went with a company that didn’t charge fees but instead were compensated via a subscription model.
To participate in the Mission development, I had to first pay $25 for an annual subscription. Something to consider if you are only planning on making a small investment. For example, it doesn’t make financial sense to pay a $25 annual subscription fee if you only plan to invest $100 into a project. Aim to invest at least a couple hundred dollars —ideally a couple thousand dollars, into various projects throughout the year.
Other factors to consider:
The crowdfunding company’s management team experience and track record.
The minimum investment amount which can be range from $1 to more than $250,000.
The expected returns of the investment versus the risk of the project.
The time horizon of the project which usually ranges from two to five years and more.
Overall, I feel that real estate crowdfunding can be a viable tool for those who want to invest in real estate but are restricted due to a lack of money or credit. Small investments in multiple projects add up over time. That makes it appealing for young people who want to get in the habit of investing — which now can be done in real estate for as little as the cost of a daily cup of coffee.
TORONTO – Canada’s main stock index was down more than 200 points in late-morning trading, weighed down by losses in the technology, base metal and energy sectors, while U.S. stock markets also fell.
The S&P/TSX composite index was down 239.24 points at 22,749.04.
In New York, the Dow Jones industrial average was down 312.36 points at 40,443.39. The S&P 500 index was down 80.94 points at 5,422.47, while the Nasdaq composite was down 380.17 points at 16,747.49.
The Canadian dollar traded for 73.80 cents US compared with 74.00 cents US on Thursday.
The October crude oil contract was down US$1.07 at US$68.08 per barrel and the October natural gas contract was up less than a penny at US$2.26 per mmBTU.
The December gold contract was down US$2.10 at US$2,541.00 an ounce and the December copper contract was down four cents at US$4.10 a pound.
This report by The Canadian Press was first published Sept. 6, 2024.
TORONTO – Canada’s main stock index was up more than 150 points in late-morning trading, helped by strength in technology, financial and energy stocks, while U.S. stock markets also pushed higher.
The S&P/TSX composite index was up 171.41 points at 23,298.39.
In New York, the Dow Jones industrial average was up 278.37 points at 41,369.79. The S&P 500 index was up 38.17 points at 5,630.35, while the Nasdaq composite was up 177.15 points at 17,733.18.
The Canadian dollar traded for 74.19 cents US compared with 74.23 cents US on Wednesday.
The October crude oil contract was up US$1.75 at US$76.27 per barrel and the October natural gas contract was up less than a penny at US$2.10 per mmBTU.
The December gold contract was up US$18.70 at US$2,556.50 an ounce and the December copper contract was down less than a penny at US$4.22 a pound.
This report by The Canadian Press was first published Aug. 29, 2024.
The crypto market has recently experienced a significant downturn, mirroring broader risk asset sell-offs. Over the past week, Bitcoin’s price dropped by 24%, reaching $53,000, while Ethereum plummeted nearly a third to $2,340. Major altcoins also suffered, with Cardano down 27.7%, Solana 36.2%, Dogecoin 34.6%, XRP 23.1%, Shiba Inu 30.1%, and BNB 25.7%.
The severe downturn in the crypto market appears to be part of a broader flight to safety, triggered by disappointing economic data. A worse-than-expected unemployment report on Friday marked the beginning of a technical recession, as defined by the Sahm Rule. This rule identifies a recession when the three-month average unemployment rate rises by at least half a percentage point from its lowest point in the past year.
Friday’s figures met this threshold, signaling an abrupt economic downshift. Consequently, investors sought safer assets, leading to declines in major stock indices: the S&P 500 dropped 2%, the Nasdaq 2.5%, and the Dow 1.5%. This trend continued into Monday with further sell-offs overseas.
The crypto market’s rapid decline raises questions about its role as either a speculative asset or a hedge against inflation and recession. Despite hopes that crypto could act as a risk hedge, the recent crash suggests it remains a speculative investment.
Since the downturn, the crypto market has seen its largest three-day sell-off in nearly a year, losing over $500 billion in market value. According to CoinGlass data, this bloodbath wiped out more than $1 billion in leveraged positions within the last 24 hours, including $365 million in Bitcoin and $348 million in Ether.
Khushboo Khullar of Lightning Ventures, speaking to Bloomberg, argued that the crypto sell-off is part of a broader liquidity panic as traders rush to cover margin calls. Khullar views this as a temporary sell-off, presenting a potential buying opportunity.
Josh Gilbert, an eToro market analyst, supports Khullar’s perspective, suggesting that the expected Federal Reserve rate cuts could benefit crypto assets. “Crypto assets have sold off, but many investors will see an opportunity. We see Federal Reserve rate cuts, which are now likely to come sharper than expected, as hugely positive for crypto assets,” Gilbert told Coindesk.
Despite the recent volatility, crypto continues to make strides toward mainstream acceptance. Notably, Morgan Stanley will allow its advisors to offer Bitcoin ETFs starting Wednesday. This follows more than half a year after the introduction of the first Bitcoin ETF. The investment bank will enable over 15,000 of its financial advisors to sell BlackRock’s IBIT and Fidelity’s FBTC. This move is seen as a significant step toward the “mainstreamization” of crypto, given the lengthy regulatory and company processes in major investment banks.
The recent crypto market downturn highlights its volatility and the broader economic concerns affecting all risk assets. While some analysts see the current situation as a temporary sell-off and a buying opportunity, others caution against the speculative nature of crypto. As the market evolves, its role as a mainstream alternative asset continues to grow, marked by increasing institutional acceptance and new investment opportunities.
