Local Market Changes
All real estate is local. Significant changes in the local market, such as increase unemployment or crime, could cause a property to underperform.
Disasters happen – as well as unexpected capital needs. If such expenses cannot be covered by insurance or the property’s reserve fund, the property may need an additional loan or even be forced to sell.
Lack of Complete Control
Crowdfunding comes with a crowd. You may have to compromise when it comes to management decisions. In some cases, the votes of large shareholders may be the only votes that matter.
Lack of Short-Term Liquidity
Real estate investments, by their nature, are fairly illiquid investments. You may not be able to receive back your principal until the property is refinanced or sold.
CrowdTranche properties will typically be financed by a mortgage. If the property is not able to produce enough cash flow to make its monthly mortgage payments, the lender may choose to foreclose on the property.
Loss of Capital
Many factors could cause a property to underperform. If so, your investment may be worth less than before or, such as in the case of a foreclosure, be lost completely.