6 Best Real Estate Crowdfunding Platforms in 2021 - TheBooMoney (2024)

Real Estate Crowdfunding Platforms is a new way to invest in property. Instead of buying a single property, you can buy a portion of a property. The benefits include better returns and liquidity compared to other types of investments.

1-Best Overall: CrowdStreet

• Fees– 0.50% to 2.5% for CrowdStreet funds; other fees vary by offering
• Minimum Investment– $25,000
• Average Annual Returns– 11.5% to 26.4%, depending on the investment
• Total Investor Distributions– $135 million
• Investment Options– Funds, individual deals, and a professionally managed, tailored portfolio
• Accredited Investors Only– Yes

More than 101,000 investors throughout the U.S. have invested on the Crowdstreet platform. Its innovative approach gives direct access to a vetted range of institutional-quality real estate investments. Accredited investors can pick a single property or invest in a fund.

Founded in 2014 and headquartered in Portland, Ore., the company has published more than 473 commercial real estate investment offerings. To date, 44 of those offerings have been fully realized.

Pros

• User-friendly platform with a helpful chatbot
• Institutional-quality offerings
• Easy to find investment details (once you sign up for a free account)

Cons

• Accredited investors only
• Steep investment minimums
• No early withdrawals

2-Best REIT Option: DiversyFund

• Fees– 2% to 8% developer fee
• Minimum Investment– $500
• Average Annual Returns– 10% to 20%, depending on the investment
• Total Investor Distributions– $135 million
• Investment Options– Real Estate Investment Trusts (REITs)
• Accredited Investors Only– No

DiversyFund’s model is unique in the real estate crowdfunding space. Instead of serving as a broker that connects investors with projects, DiversyFund buys, develops, and manages a portfolio of properties, collects the cash flow, and divvies up the profits amongst its investors.

Unlike some crowdfunding platforms, it doesn’t charge any management or broker fees. Currently, you can invest in the DiversyFund Growth REIT ($500 minimum).

Pros

• Zero management fees for investors
• One of the few platforms with a mobile app
• Low minimum investment

Cons

• Limited investment choices
• No early withdrawals
• Payment at the end of the investment term

3-Best for Institutional Commercial Real Estate: EquityMultiple

• Fees– 1% on equity investments; other fees vary by offering
• Minimum Investment– $10,000
• Average Annual Returns– 14.5%
• Total Investor Distributions– $62.8 million
• Investment Options– Institutional commercial real estate; equity, preferred equity, and senior debt; Opportunity Zones, and 1031 exchange investments
• Accredited Investors Only– Yes

EquityMultiple focuses almost entirely on institutional commercial real estate, and it also offers equity, preferred equity, and senior debt investments. The company recently added tax-advantaged real estate investments (Opportunity Zone and 1031 exchange) and fund products to its lineup. Distribution schedules vary by the deal and are usually monthly or quarterly.

Pros

• Good investment selection
• Variety of target hold periods
• Easy-to-use platform

Cons

• Accredited investors only
• Steep minimum investment
• Limited redemption options

4-Best for Beginners: Fundraiser

• Fees– .15% Advisory fee, .85% Asset Management fee
• Minimum Investment– $500 to $100,000 depending on account level
• Average Annual Returns– 7.42% to 12.42%, since 2014
• Total Investor Distributions– $100 million+
• Investment Options – Varies depending on the selected account level
• Accredited Investors Only– No

Since its launch in 2012, Fundraise has invested in more than $5 billion worth of real estate across the U.S. Today the company manages over $1.5 billion of equity on behalf of more than 150,000 individual investors.

Fundraise offers five account levels: Starter, Basic, Core, Advanced, and Premium. There’s a minimum investment amount at each level, as well as varying investment strategies and potential returns.

Pros

• No accreditation required
• Well-rated mobile app
• Request share redemption at any time (possible fees and redemption not guaranteed)

Cons

• Nonqualified dividends

5-Best for Investing in Loans: PeerStreet

• Fees– 0.25% to 2%
• Minimum Investment– $1,000
• Average Annual Returns– 2% to 9%
• Total Investor Distributions– $225 million+
• Investment Options– Real estate debt
• Accredited Investors Only– Yes

PeerStreet is an online marketplace where accredited investors can invest in high-quality private real estate loans. Here’s how it works: Your investment gives lenders capital to lend to real estate borrowers, then PeerStreet collects the monthly payments from the borrowers, and you (the investor) get a share of those monthly payments.

You can diversify your portfolio manually or automatically with investments from various locations, lenders, borrowers, asset classes, terms, loan-to-value (LTV) ratios, and rates.1

Pros

• Unique offering among real estate investment platforms
• Diversification across various parameters
• Low-interest rate risk because loans are a maximum of 36 months

Cons

• Accredited investors only
• Only offers investments in debt
• Higher risk than some other crowdfunding options

6-Best Property Research: RealtyMogul

• Fees– 1% to 1.5%
• Minimum Investment– $5,000
• Average Annual Returns– 5% to 19%
• Total Investor Distributions– $136 million
• Investment Options– REITs, individual properties (multifamily, office, industrial, self-storage, retail, and medical office), 1031 exchanges
• Accredited Investors Only– No

Since its inception in 2013, more than 212,000 investors have joined RealtyMogul to access its REITs and private market offerings. Known for its exemplary due diligence, the company vets every potential property in person and scrutinizes each deal using propriety methods and models.

The company looks for well-leased properties or those with existing leases, and it works only with real estate partners with proven track records and experience managing assets. It does not invest in non-cash-flowing investments, such as raw land or ground-up construction. Investors can choose from three objectives: passive income, growth, and diversification.

Pros

• Good investment selection
• Thorough due diligence
• Monthly auto-investing in REITs starting at $250 per month

Cons

• Different fees associated with each investment
• Investments not easily sold or traded
• Some long hold periods

FAQs

What Is Real Estate Crowdfunding?

Crowdfunding is a way to fund a project or venture by pooling small investments from a large group of investors. The idea is that when enough people make small investments, it’s possible to raise substantial amounts of money quickly. One of the most well-known crowdfunding sites is GoFundMe, a platform used to raise money for everything from creative projects to medical bills.2

Real estate crowdfunding raises capital for real estate investments. When developers or real estate professionals find investment opportunities, they may not want to fund the entire investment themselves (or they may not be able to). Thus, they turn to crowdfund to let individual investors help finance the project. The process enables investors to invest in real estate without having to own, finance, or manage properties.

Pros

• Real estate exposure without having to own, finance, or manage properties
• Low minimum investment, so you can access assets that would be unaffordable otherwise
• High-profit potential through distributions and a lump-sum return at the end of the investment
• Automatic investing on most platforms

Cons

• Illiquid, so your money may be tied up for at least three to five years
• Higher risk than other types of equity investments
• High fees, depending on the platform and investment you choose
• Some opportunities only for accredited investors

How Does Crowdfunding Work in Real Estate?

Real estate investment platforms connect investment opportunities with funding. Most real estate crowdfunding deals have a sponsor, a crowdfunding platform, and investors. Here’s a quick rundown of how it works:

1. The sponsor is the individual or company responsible for the project. The sponsor acquires, manages, and sells the investment.
2. The crowdfunding platform connects the sponsor to interested investors. It explains deals to potential investors, handles regulatory issues, and collects money from the investors on behalf of the sponsor.
3. The investor contributes to the project’s funding in exchange for a
   share of the profits.

How Can You Start in Real Estate Crowdfunding?

Crowdfunding platforms connect sponsors and real estate investors. To get started in real estate crowdfunding, research the various crowdfunding sites to find an opportunity that interests you—whether that’s an individual property or a fund that owns dozens of properties.

Pay close attention to the platform’s vetting process for deals as well as its sponsors. The top platforms employ high levels of due diligence to make sure that sponsors—and any deals offered by the sponsors—have been rigorously evaluated.

Can You Crowdfund in Commercial Real Estate?

Yes, real estate crowdfunding platforms give individual investors access to commercial real estate projects, such as hotels, apartment complexes, medical complexes, self-storage, and retail. Without crowdfunding, these
large-scale investments would otherwise be unaffordable to most individuals.

Can You Make Money from Crowdfunding?

Yes, there is the potential to earn competitive returns in real estate crowdfunding.
According to some estimates, average real estate crowdfunding returns are
between 11% and 15% per year.3

Still, real estate crowdfunding is considered a risky investment. Just like the stock market, there are no guaranteed returns, and you could lose your entire investment. In addition—depending on the investment and unlike the stock market—your money may be tied up for a period of years.

Real estate investment platforms connect investors with investment opportunities. While it’s possible to earn competitive returns, you can lose your entire investment. Carefully research the crowdfunding platform, sponsor, and opportunity before investing any money.

How We Chose the Best Real Estate Crowdfunding Sites?

To choose the top real estate crowdfunding sites, we considered a variety of factors, including:

• Investment minimums
• Platform fees
• Total number of investors
• Total investor dividends
• Historical annual returns
• Reinvestment opportunities
• Website transparency (how easy it is to find platform fees, minimums, and redemption options)
• Better Business Bureau ratings
• Educational offerings

We also investigated each company’s online reputation—including average monthly search volume, recent news, customer reviews, and complaints—to ensure the platform is well respected and legitimate.

source: The Boo Money

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