Note: Investing Simple is affiliated with Fundrise, and we may earn commissions if you click on a Fundrise link.
There are countless benefits to owning property and becoming a real estate investor.
However, one of the problems faced by investors looking to get started with a real estate investment is the high barrier to entry. In order to go out and buy your first rental property, you usually need about $100,000 saved up.
Not to mention, the current interest rate environment has made it even more challenging to get into the rental property game.
Real estate crowdfunding platforms have created a unique solution to these problems. You can pool your money with other investors, and that pool of money is then invested in real estate.
In this article, we will be looking at 5 of the top real estate crowdfunding platforms.
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More importantly, you do not need to be an accredited investor.
Fundrise has portfolios for growth and income investors, among others. This makes it a suitable option for a variety of investment strategies.
Income investors are looking for consistent dividends or distributions from their investments.
RealtyMogul delivers that through their Realty Mogul Income REIT which pays monthly distributions. These can be reinvested back into the REIT or deposited directly to a bank account.
This REIT is available to all investors. The $5,000 minimum is higher than other alternatives. However, you do not need to be an accredited investors.
This platform provides access to a variety of real estate investment opportunities across different markets.
To date, EquityMultiple has returned over $430 Million in total distributions to investors via the platform. Unlike many other real estate platforms, EquityMultiple offers investments in equity, preferred equity, and senior debt.
However, EquityMultiple is available to accredited investors only.
Fundrise was founded in 2010, giving it a longer operating history compared to newer platforms.
Fundrise is an online real estate company that allows regular investors to participate in private commercial and residential properties through a pooled investment platform.
Here's a rundown of the platform:
Click here to view Fundrise investments!
Investors can buy shares of Fundrise's funds by selecting one of their four strategies: Fixed Income, Core Plus, Value Add or Opportunistic.
Each one of these strategies has different goals and potential risks, and this provides a wide array of options for their diverse clientele base.
The company determines the mix of eREITs and eFunds in each plan, along with the underlying properties. There are Advanced and Premium account levels that offer access to more real estate projects and additional features.
Fundrise opens up real estate investment opportunities to those who are not traditionally considered wealthy investors, as you do not need to be an accredited investor. In addition, the minimum investment to get started is just $10.
So far, over 2.1 Million people have joined Fundrise as investors via the platform.
RealtyMogul formally launched in 2013, giving it a slightly shorter track record compared to other platforms.
RealtyMogul is an online platform that enables both non-accredited and accredited investors to invest in commercial real estate.
They offer two main investment options: Public Non-Traded REITs and Private Placements.
The REIT investment opportunities are open to both accredited and non-accredited investors:
Click here to view RealtyMogul investments!
Private placements, available to accredited investors only, typically involve single property or small portfolio deals with varying investment minimums and a two to 10-year time horizon. This also includes opportunity zone investments.
To date, RealtyMogul has seen a total of $1.1 Billion invested through the platform. This is spread out across over 290,000 members who have joined the platform.
EquityMultiple is an online real estate platform designed for accredited investors to engage in professionally managed commercial real estate ventures.
This platform provides access to a variety of real estate investment opportunities across different markets. Unlike many other real estate platforms, EquityMultiple offers investments in equity, preferred equity, and senior debt.
EquityMultiple blends crowdfunding and traditional real estate investing, allowing investors to grow their wealth through avenues like self-directed IRAs, trusts, entities, and joint accounts.
To date, EquityMultiple has returned over $430 Million in total distributions to investors via the platform.
Click here to view EquityMultiple investments!
Despite being available to accredited investors only, EquityMultiple has a low minimum investment of just $5,000.
CrowdStreet is an online commercial real estate investing platform that launched back in 2014. CrowdStreet simplifies the process of investing in commercial real estate projects across the United States.
It connects individual accredited investors with vetted project developers, making it easier for investors to access commercial real estate opportunities that they might not have access to on their own.
CrowdStreet carefully reviews developers, including conducting background and reference checks, to ensure the quality and legitimacy of the projects listed on the platform. This initial screening helps save time for investors who may not have the expertise or resources to perform such evaluations themselves.
However, investors are still encouraged to conduct their own due diligence on both the developers and the projects to understand the potential risks involved.
Click here to view CrowdStreet investments!
Here's how CrowdStreet works:
The minimum investment amount varies depending on the specific offering and is determined by the project sponsor. In general, most individual projects and real estate funds available on CrowdStreet require a minimum investment of $25,000.
This segment is sponsored by Arrived Homes.
Arrived Homes offers investors an opportunity to participate in real estate without the headache.
Like the other platforms in this list, Arrived Homes strives to open the door of real estate to everyone, but their offering is unique in a few ways.
Arrived specializes in single family real estate all across the country. The company carefully vets real estate markets to determine which ones have the most income producing potential. Then, they find the neighborhoods in those markets with the most potential and purchase properties that meet their criteria.
Each property is then placed in a Series LLC where investors can purchase shares of the property. Arrived qualifies as a REIT, or real estate investment trust, and is taxed accordingly.
Here's how it works:
Another aspect that makes Arrived so unique is that each tenant is a co-owner of the property, meaning that interests in the property are aligned.
For those who are not familiar with real estate crowdfunding, let’s go ahead and cover some of the basics.
You might be wondering why all of these platforms are relatively new with limited operating history. This is because crowdfunded real estate is a new investment opportunity that came around in 2012.
The Jumpstart Our Business Startups or JOBS Act passed under the Obama administration. The point of this law was to loosen restrictions on small businesses, particularly by easing securities regulations.
Prior to this law passing, it was illegal for companies to use crowdfunding to issue securities. Now, it is perfectly legal to raise money in this fashion!
Crowdfunding is a relatively new way to finance a project or venture.
Born out of the internet era, investors from all over can pool money together back a project or idea.
A lot of the private real estate investments are reserved for accredited investors only. A number of these new crowdfunded real estate investments are too.
No, this isn’t some exclusive club that you didn't get the the invite to. This is a federal regulation.
An accredited investor is someone who is allowed to be involved with investments that may not be registered with financial authorities.
Governing authorities like the SEC and FINRA heavily regulate public investments that are available to average retail investors.
In order to be an accredited investor, you must meet either of these two requirements:
Based on somewhat recent changes to accredited investor requirements, financial professionals with Series 7, 65 or 82 licenses also qualify.
A lot of people are wondering why you would go through the trouble of investing through a crowdfunded real estate platform when you can just go out and buy a REIT.
If you aren’t familiar, a REIT is a real estate investment trust. It is a company that owns and operates income producing real estate. This could be residential, commercial or industrial real estate ranging from office buildings to cell towers.
REITs trade on major stock exchanges just like the stocks we know and love. You can buy a share of a REIT just as easily as a share of Apple.
So the question becomes, why not just buy a REIT if you are looking to diversify? Here are a few reasons why.
There are some instances where a REIT makes more sense than a crowdfunded real estate investment.
When real estate investments are discussed, you will often hear about debt and equity investments.
It is important to understand the difference before deciding on a crowdfunded real estate investment. You want to make sure this type of investment aligns with your goals and investment objective.
With a debt investment, you are loaning funds to someone who owns real estate or is purchasing real estate. It is just like going to the bank for a mortgage. However, instead of a bank it is a group of private real estate investors backing the loan.
In the past, this was a small group of high net worth individuals who would have access to these deals. Now, thanks to crowdfunding and the JOBS Act, average investors can get in on the action.
Equity investors have an ownership interest in the property. As a result, they stand to gain if there is any upside and lose if there is any downside. Equity investors share the upside if the property appreciates and share the cash flows if the building is producing income.
Consider a flip for example.
Equity investors pool their money together to buy a number of townhouses in a hot real estate market. They secure a loan from the debt investors mentioned above. They upgrade the townhouses over the next year and hold onto them for an additional three years, renting them out.
If the properties are producing cash flow, the equity investors share the profits. During this entire duration, the equity investors are paying interest on the loan from the debt investors.
After the fourth year, they sell the townhouses for a significantly higher price. All of the equity investors would share the upside from the asset appreciation.
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