Since the founding of popular crowd-funding platform Kickstarter, there have been questions. Failed campaigns, ethical considerations, and reward systems have all plagued the platform, but, as more projects are funded, another question arises—what to do in the case of failed projects?
The answer is, well—there isn’t one.
In 2012, David Barnett successfully funded PopSockets, an iphone case designed to keep cords in check and support the phone for Facetime and movie watching. A year after his campaign was financed, there was still no project and investors were questioning him. Barnett refunded 40 of 500, though begrudgingly, as it seemed to suggest that an item had been purchased rather than an investment made. And Kickstarter isn’t a store at all.
Now, PopSockets has a website where the cases are available, but it is years later. The problem is in Kickstarter, whose policy requires refunds when projects fail but lacks enforcement. It can’t police itself and no one else is doing it, leaving some investors with absolutely nothing to show (physical or otherwise) for their devotion to a project.
The problem with this type of investment is in the total lack of control for the person supplying the money. When an investor relinquishes control by investing in someone else’s company or business or purchasing stock in someone else’s deal, he or she is open to risk.
The same is true for real estate investment. When you can invest directly, there’s little need for partnerships, LLCs, or Tenant-in-Common deals, which lose your money. By purchasing and controlling your own investments, you set yourself up for success and prevent these potential problems:
Problem #1
perhaps you’re investing with someone who intends to be dishonest with you. There are countless examples, on Kickstarter and otherwise, of crooks who set out to take your money.
Problem #2
it’s possible you’re dealing with someone who isn’t as well-versed on investments as you are and now you’re going to lose money because of their incompetence.
Problem #3
even if you’re handing your money over to an honest person who has the know-how to make investments work, they’re still charging a management fee for their role in your investment.
The bottom line is this—direct investors are in constant control of their money at all times. When you invest directly there is no conflict of interest between shareholder and those running the deal. Sure, there are more responsibilities, more work, more headaches. But there’s more money, too. (photo credit: YU-TA LEE via photopin cc)
* Read more from JasonHartman.com
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Some Real Estate Scams Never Get Old
The Jason Hartman Team
