Real estate crowdfunding provides the average investor with direct access to real estate investments. This potentially lucrative investment allows you to own a piece of the real estate market without the responsibility of managing properties.
This guide explains the potential risks and rewards of this relatively new opportunity. Real estate crowdfunding can be part of a mix of investments used to diversify your portfolio. Many sites allow an account to be held in a self-directed IRA for retirement savings.
We evaluated 45 investment providers to curate our list of the nine best real estate crowdfunding sites. We considered the fees, reviews, quality and quantity of investment offerings, and investor education opportunities. Our best real estate crowdfunding sites are CrowdStreet, DiversyFund, EquityMultiple, Fundrise, PeerStreet, RealtyMogul, Yieldstreet, Modiv and Roofstock.
Top Tips:- Real estate crowdfunding is a long-term investment of at least 5 years.
- Equity investments provide a better return than debt investments but are riskier.
- Real estate crowdfunding sites give plenty of information on investments, but you do all research yourself.
Tips for a Wise Real Estate Crowdfunding Investor
Investing in real estate was once reserved for the wealthy. Title III of the JOBS Act opened the door for average investors to buy real estate via online crowdfunding in 2015. The act gives early-stage businesses an avenue for financing projects and investors a way to diversify their portfolios or retirement savings.
Individual investors use real estate crowdfunding to pool resources and buy into projects otherwise reserved for the extremely wealthy.
What is Real Estate Crowdfunding?
Real estate crowdfunding starts with a business needing capital for operations, expansion, improvements or property purchases. The business provides project details to a crowdfunding operation, which ensures the deal makes sense. Projects and loan deals that are approved are offered to investors. Investors can buy a portion of a project, pooling their money until it’s fully funded.
The professionals at the top real estate crowdfunding site analyze proposed projects carefully. Projects that are not viable or worth the risk get vetted out. The crowdfunding site posts approved deals, providing details to help with choosing one or more investments.
You’ll find data about potential investments on real estate
crowdfunding sites, then you choose the deals.
Traditional real estate investments require spending millions of dollars on a property and managing upkeep, taxes and lease arrangements. Real estate crowdfunding is an affordable way to take advantage of potentially healthy returns without the hassles of commercial property ownership.
| Compare Real Estate Crowdfunding Sites | ||
|---|---|---|
| Site | Minimum | Best For |
| CrowdStreet | $25,000 | Access to a large selection of investments. |
| DiversyFund | $500 | Reduced research and REIT investing. |
| EquityMultiple | $10,000 | Laddering investment target dates. |
| Fundrise | $10 | All levels of risk tolerance. |
| PeerStreet | $1,000 | Short-term investments. |
| RealtyMogul | $5,000 | Creating a custom real estate portfolio. |
| Yieldstreet | $500 to $1,000 | Access to multiple alternative asset types. |
| Modiv | $1,000 | Monthly distributions. |
| Roofstock | $5,000 | Investing in tracking stock to lower risk. |
2 Ways to Invest in Real Estate via Crowdfunding
Real estate investments in the crowdfunding space are private investments, so the deals aren’t traded on the open market. The two investment types in real estate crowdfunding are equity and debt:
- Equity investors buy a stake in a property and then receive a share of the rental income. Equity deals may also provide a payout from the profit if the property is sold. An equity investment offers higher returns but is a long-term unsecured investment.
- Debt deals involve the investors providing a loan to the property sponsor. The investors receive a share of the interest paid on the loan at regular intervals. Should the loan default, debt investors are the first in line to be paid back.
Real estate crowdfunding can be an equity deal, a debt deal or a blend of both.
How Much Money Can You Make with Real Estate Crowdfunding?
Real estate crowdfunding is like any other investment — the greater the risk, the greater the potential reward.
Many real estate crowdfunding sites we investigated posted average past annual returns of 8% to 12% and higher. We found an informal study that averaged past returns and came up with 14% on combined debt and equity deals. The highest equity deals averaged 20%, and the highest payout on debt deals hovered around 8.5% to 9%.
Be confident you won’t need money invested until the deal’s target date.
Keep in mind these percentages are averages. You can lose money on real estate deals even though highly vetted. Higher returns correlate with tying your money up longer, typically for five to 10 or more years. Once you finalize the investment, you cannot withdraw your funds until the target holding period ends.
Real Estate Crowdfunding Risks
Most real estate crowdfunding risk is directly related to the real estate market. Here are some of the risks:
- Property damage or business interruption.
- Construction delays or unexpected construction costs.
- Economic conditions, both general and local.
- Zoning changes and property tax hikes.
- Liability from mold, hazardous waste and other environmental issues discovered during renovations.
- Uninsured damage from severe weather or acts of terrorism.
Real estate crowdfunding can be financially rewarding but should be a small part of your portfolio.
The illiquid nature of crowdfunded real estate investing ties up your money for months or years. You can back out of a deal up to 48 hours before the end of the offer period. After that time, there’s no way to cancel the investment. Be sure you are comfortable with having your capital tied up until the deal ends.
Our Search for the Best Real Estate Crowdfunding Sites
We started our search with 45 real estate crowdfunding sites. We narrowed our recommendations down to the best options by considering fess, ease-of-use and these steps:
- We evaluated the quantity and quality of real estate investments offered.
To narrow our search, we focused on crowdfunding sites that offered deals with various minimum investments and target dates. Each site we chose explained a lengthy vetting process for accepting real estate project offerings to investors.
- We read consumer reviews.
To narrow our search, we considered consumer reviews for the top real estate crowdfunding site. Expert reviews factored in as well. We removed those with a 3-star rating or below from consideration.
- We checked SEC and FINRA registrations.
We verified the best real estate crowdfunding sites on our list are registered with the SEC and have no violations.
- We considered the level of information provided to investors.
Investors receive no direct guidance for choosing real estate deals on crowdfunding platforms. However, the sites must provide details about each project so investors can make wise decisions. If a real estate crowdfunding site failed to explain each opportunity well, we excluded it from our search.
Best Real Estate Crowdfunding Reviews
Our evaluation results are our list of the best real estate crowdfunding sites: CrowdStreet, DiversyFund, EquityMultiple, Fundrise, PeerStreet, RealtyMogul, Yieldstreet, Modiv and Roofstock. Each of these companies stood out above and beyond the competition.
CrowdStreet Review
Great Investment Selection |
CrowdStreet provides direct-access real estate investments by bringing investors and sponsors together. The company thoroughly vets all properties on its real estate crowdfunding platform. Investors choose from a broad range of commercial assets.
CrowdStreet investments cover retail, storage facilities, office, industrial, hospitality, mixed-use, multifamily housing and senior housing. You can also invest in REITs and individual properties with CrowdStreet.
Depending on the program you’re interested in, you’ll need $25,000 to $100,000 to get started. CrowdStreet clients have invested over $1.9 billion across more than 500 projects to date. Distributions to investors as of August 2021 amounted to $245 million.
CrowdStreet invites accredited investors to pool their funds with others using its services and platform. To be accredited, you must meet income guidelines and have a net worth over $1 million. The SEC created the accredited investor definition to ensure only experienced investors could partake in riskier investments.
CrowdStreet fees: No joining fees (view deals for free), some sponsors may charge fees, privately managed account fees vary starting with a 0.25% management fee
Minimum investment: $25,000 to $100,000
Mobile app: N/A (used exclusively through a browser)
Learn more about the brand by reading our comprehensive CrowdStreet Review.
DiversyFund Review
No Management Fees |
DiversyFund exists for the everyday investor to build wealth via a self-serve real estate crowdfunding platform. The company offers pooled investments in multifamily real estate, like apartment buildings or other residential complexes. DiversyFund owns and manages these properties rather than brokering third-party projects, so investors pay no management fees.
Clients buy fully vetted multifamily real estate shares via a real estate investment trust, better known as a REIT. Think of a REIT as similar to a mutual fund that holds income-producing real estate. Individual investors earn a share of the income produced by the commercial real estate holdings without purchasing any property.
DiversyFund’s private investments are REIT 1 (closed to new investors) and REIT 2. Both operate with a five-year investment term during which you cannot liquidate your account. DiversyFund charges no fees. Instead, investors receive 100% of returns from asset sales up to the first 7% before the site takes profits.
DiversyFund fees: N/A
Minimum investment: $500
Mobile app: Android and iOS
EquityMultiple Review
Great Investment Options |
EquityMultiple allows both individual and institutional investors to invest in high-yield commercial real estate via a crowdfunding model. Founded by experienced real estate professionals, EquityMultiple provides the technology required for convenience and lower costs.
The minimum investment is $10,000, and you can’t withdraw your initial funds until the target date expires. EquityMultiple streamlines investments into three focus areas. Choose fund investing over 18 months to 10 years, direct investing for six months to five years or short-term diversified notes due in three to nine months.
Opportunity Funds encompass the fund investing approach with private-sector investments in targeted communities across the country. The targeted areas are called Opportunity Zones and have been elected by the state and federal government for economic development. Opportunity Funds may offer significant tax advantages.
You must meet accredited investor criteria set by the SEC to invest with EquityMultiple. Requirements include a high net worth, among other guidelines.
EquityMultiple fees: Depends on offering, Annual fee examples: No fee, 1% and $250 flat fee
Minimum investment: $10,000
Mobile app: N/A (used exclusively through a browser)
Fundrise Review
Great Investment Selection |
Fundrise investors can own part of the company as a shareholder through a unique iPO (internet public offering) model. The company says this minimizes reliance on outside capital while aligning the long-term interests of the Fundrise with investors. Fundrise launched its first offering in 2012 and today manages over $1 billion of equity with more than 170,000 individual investors.
Fundrise offers five investment options ranging from low to relatively high risk. Initial investments start as low as $10 and go up to $100,000. Greater investments provide access to more features and control over portfolio strategy.
The Fundrise iPO is also available to allow investors to buy ownership in parent company Rise Companies Corp. Fundrise fees are low. Investors can waive advisory fees for 90 to 365 days when they invite others to join Fundrise.
Fundrise fees: 0.15% annual advisory fee, up to 0.85% annual asset management fee
Minimum investment: $10 and up
Mobile app: Android and iOS
PeerStreet Review
Great Short-term Investments |
PeerStreet offers debt investing where investors provide the capital for loans to real estate borrowers. PeerStreet collects loan payments and deposits a portion of the interest received into your account each month. You can reinvest or withdraw earnings at any time, and your capital is typically tied up for 12 to 36 months.
You can craft your PeerStreet portfolio by selecting investments with different yields, terms and loan-to-value ratios (LTVs). Investments are for residential and multifamily properties.
PeerStreet’s Automated Investing feature allows you to go on autopilot to participate in new offerings that fit your criteria. Set the maximum loan term (one to three years), maximum LTV (60% to 75%) and minimum yield (6% to 8%). When investments match your settings, you have 24 hours to review them before committing.
You must be an accredited investor to invest with PeerStreet. The SEC requires you to earn at least $200,000 per year and have a high net worth. PeerStreet’s loans can be unconventional and difficult to understand, so they’re not typically appropriate for small investors.
PeerStreet fees: 0.25% to 1%
Minimum investment: $1,000
Mobile app: N/A (used exclusively through a browser)
RealtyMogul Review
Excellent Quality Control |
RealtyMogul says it’s extra-picky about the deals presented to investors. The vetting process results in a less extensive property catalog compared to most other crowdfunding platforms. Only 1.1% of the 30,000 proposed transactions have been approved since 2012. After a sophisticated property and sponsor analysis, RealtyMogul team members visit properties to confirm the building condition and characteristics before listing projects.
RealtyMogul serves over 219,000 members registered on the platform. Members can create customized real estate portfolios by diversifying holdings across individual properties, REITs or a blend of both. RealtyMogul has assets for all risk tolerances. Investments are available for growth, income, capital gains, 1031 exchanges and other strategies.
Accredited investors are eligible to invest in equity deals. Both accredited and nonaccredited investors may invest in RealtyMogul’s two REITs. There’s no cost to sign up to use RealtyMogul and browse properties online. Fees vary by investment and are listed with each property.
PeerStreet fees: 1% to 1.25% additional fees may apply
Minimum investment: $5,000
Mobile app: N/A (used exclusively through a browser)
Frequently Asked Questions about Online Wills and Trusts
What is a sponsor in real estate crowdfunding deals?
The real estate sponsor is the property owner or management team. The sponsor oversees everything to do with property operations, such as maintenance, leasing and renovations. Sponsors also negotiate real estate deals and find investors to provide capital.
How is a 1031 exchange a real estate crowdfunding investment strategy?
You can use a 1031 exchange to swap one investment property for another to defer capital gains taxes. The IRS defines the conditions under which the property exchange can happen in the Tax Cuts and Jobs Act, Section 1031.
Real estate investors can use a 1031 exchange as often and as many times as they choose. We recommend speaking to a financial advisor to understand the various rules and determine if the strategy is appropriate.
Is income from real estate crowdfunding sites guaranteed?
Many real estate crowdfunding sites offer monthly or quarterly distributions. Our research generally indicated reliable income, but it’s not guaranteed.
What information should a real estate crowdfunding site provide with offers?
In addition to project costs and anticipated future development, you need to understand the local market. The crowdfunding site should provide reliable data used to determine if an opportunity is right for you. Information should include:
- Local demographics to support expected leases and rental amounts
- Current rent and property value comparables
- Possible capital calls
- The economic outlook for the area
- Crime statistics
- How much, if any, stake the crowdfunding site has in the project
What are real estate crowdfunding capital calls?
A capital call happens when a sponsor asks investors for another round of contributions during the holding period. A capital call typically happens to increase cash flow to cover unforeseen project expenses. Know whether or not a capital call could happen before investing.
Conclusion
Bottom line:
Real estate crowdfunding is a good way to diversify your investment portfolio.
Real estate crowdfunding offers an affordable way to diversify your investment portfolio without directly buying and managing property. Investments can include buying fractional shares in various properties, investing in a single commercial project and designing a custom private REIT. Returns can climb over 10%, but be sure you understand and can handle the risks of real estate crowdfunding.
The Best Real Estate Crowdfunding Sites
| Company | Expert Review | |
|---|---|---|
| 1 | CrowdStreet | Great Investment Selection |
| 2 | DiversyFund | No Management Fees |
| 3 | EquityMultiple | Great Investment Options |
| 4 | Fundrise | Low Investment Minimums |
| 5 | PeerStreet | Great Short-term Investments |
| 6 | RealtyMogul | Excellent Quality Control |
| 7 | Yieldstreet | Great Alternative Investment Selection |
| 8 | Modiv | Great Share Repurchase Program |
| 9 | RoofStock | Great Passive Investment |