A relatively new investing option.

While real estate crowdfunding presents opportunities for unaccredited investors, crowdfunding platforms have not been around long enough to have "a proven record of performance, profits, and commitment to what they promise to investors," says Daniela Andreevska, marketing director of Mashvisor, a real estate analytics company. "This means that there is a certain degree of uncertainty associated with this type of investment." Still, good deals abound in crowdfunded real estate, as long as investors educate themselves about what they're buying and the platforms' responsibilities. Here are six pitfalls that experts say potential investors should avoid.

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Not researching the platform.

Many of the crowdfunding companies “were not founded by established and successful real estate professionals, but were largely created by individuals in the tech sector with little to no experience investing in real estate," says Adam Kaufman, co-founder and managing director of real estate crowdfunding platform ArborCrowd. “This poses a unique danger to investors, because real estate is a highly complex and nuanced asset class that requires a strong understanding of economic fundamentals, local markets and the capital markets, as well as highly specialized underwriting and asset and property management skills."

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A relatively new investing option.

While real estate crowdfunding presents opportunities for unaccredited investors, crowdfunding platforms have not been around long enough to have "a proven record of performance, profits, and commitment to what they promise to investors," says Daniela Andreevska, marketing director of Mashvisor, a real estate analytics company. "This means that there is a certain degree of uncertainty associated with this type of investment." Still, good deals abound in crowdfunded real estate, as long as investors educate themselves about what they're buying and the platforms' responsibilities. Here are six pitfalls that experts say potential investors should avoid.

Not researching the platform.

Many of the crowdfunding companies “were not founded by established and successful real estate professionals, but were largely created by individuals in the tech sector with little to no experience investing in real estate," says Adam Kaufman, co-founder and managing director of real estate crowdfunding platform ArborCrowd. “This poses a unique danger to investors, because real estate is a highly complex and nuanced asset class that requires a strong understanding of economic fundamentals, local markets and the capital markets, as well as highly specialized underwriting and asset and property management skills."

Neglecting to diversify.

As experts advise with any other security or type of investment, it's important to diversify your crowdfunded real estate holdings across different property types and geography. This will spread the risk of the investment, says Cary Brazeman, spokesman for CrowdStreet, a real estate crowdfunding platform.

Not understanding the platform.

Venture capital-backed real estate crowdfunding platforms and those operating in the Regulation A+ model face pressure to quickly deploy capital to show progress and begin generating income for investors, Kaufman says. "The only way they can achieve this is by offering a tremendous volume of deals on their platforms, which does not provide them the luxury of dedicating the time necessary to properly vet transactions," he says. "This pressure, combined with the fact we are at the top of the cycle, increases the likelihood that platforms will invest in overpriced assets that may not be worth as much when they near the ends of their five- to seven-year lifecycles."

Not dissecting the fees.

Fees charged by platforms can vary greatly and include acquisition fees, asset management fees, disposition fees and others, Kaufman says. "This language is often buried in investor documents or kept purposely vague," he says. Andreevska says fees could diminish your total return. "While real estate crowdfunding websites tend to have generally low annual fees, not taking them into consideration when analyzing the deal will hurt your long-term profit," she says. “Before you decide to go for a particular platform, make sure you have the projected dividend and return figures net of fees."

Not knowing about the investment.

Due diligence may also be lacking on crowdfunded real estate platforms. That means it's up to you to vet a deal. Check if the property is mortgaged and beware of interest rates, says Danny Mulcahy, director of investor relations for Northstar Commercial Partners in Denver. "Most of the real estate investment opportunities available to non-accredited investors are fix-and-flip opportunities," he says. "Even the best fix-and-flip developers go significantly over budget and over time. When that happens, the developers often have to take out more leverage to complete the project, which also adds to the cost." Also, avoid an offering sponsor that owns companies providing services to the investment that could inflate bills.

Expecting to cash out too early.

Real estate is generally a long-term investment, which means that even real estate crowdfunding is generally meant to be held at a minimum of five years, Andreevska says. "If you think you might want to sell your shares and exit earlier, you have to make sure that the platform you are choosing allows that," she says. "You should familiarize yourself with the exact terms and conditions of cashing out to make sure you will not lose money when doing that."

Pitfalls to avoid in real estate crowdfunding:

Not researching the crowdfunding platform and the people behind it.Neglecting to diversify property types and geography.Not understanding the platform structure.Not understanding the fees that will be charged.Not having intimate knowledge about the investment or location.Expecting to cash out too early.1 of 9

Kayleigh Kulp, Contributor

Kayleigh Kulp is a freelance journalist who also writes or has written for CNBC, The Daily ...  Read more

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