Real estate investors who want to diversify their portfolios should look into platforms like Crowdstreet. With this platform, investors can diversify their real estate holdings using smaller amounts of money than buying individual properties. Crowdstreet investors can select individual commercial real estate deals or invest in a fund that targets specific sectors of the real estate market.
This Crowdstreet review will explain what the company does, how you can invest, and how it is different from other real estate investing platforms.
- What is Crowdstreet?
- How does Crowdstreet work?
- Who can invest in Crowdstreet?
- How much can you earn with Crowdstreet?
- How much can you make with Crowdstreet?
- Is Crowdstreet safe?
- Common questions about Crowdstreet
- How to sign up for Crowdstreet and begin investing
- Other real estate investment platforms to consider
What is Crowdstreet?
Crowdstreet is a real estate investing platform that allows investors to access a marketplace of commercial real estate deals. This platform offers investors the ability to invest in specific deals, diversified funds or vehicles, or have a tailored portfolio curated by an investment manager.
Crowdstreet was launched in 2014 in Portland, Oregon, by Tore Steen and Darren Powderly. They’ve since built a team of real estate professionals with more than 120 years of collective performance as well as a decent track record. Since its launch, Crowdstreet has facilitated more than $1 billion in investments by 112,000 investors across more than 400 projects. To date, there have been more than $135 million in distributions to investors with an average of a 23.1% internal rate of return.
How does Crowdstreet work?
Crowdstreet is an internet-based platform that enables real estate investors to fund private real estate projects around the U.S. Investors have three options when it comes to investing in real estate deals through Crowdstreet’s marketplace:
- Individual deals
- Real estate funds and vehicles
- Tailored portfolios
The minimum required investment with Crowdstreet varies based on how you choose to invest. Individual deal minimums vary based on the project. At the time of publication, the minimum investment required for an individual deal was $25,000. Minimums for real estate funds and vehicles also vary by project and ranged from $25,000 to $100,000.
A tailored portfolio is a privately managed account by Crowdstreet advisors that requires a minimum of $250,000. This larger initial investment allows your registered investment advisor to create a custom-designed investment strategy that is diversified.
Who can invest in Crowdstreet?
Unlike other real estate crowdfunding platforms, only accredited investors may invest with Crowdstreet. Being an accredited individual investor means that you meet one of these two criteria:
- Earned income of $200,000 (or $300,000 with a spouse) in each of the prior two years and similar expectations for the current year.
- Has a net worth over $1 million, either as an individual or with a spouse (excluding the value of your primary residence).
Additionally, trusts and business entities may qualify based on the relevant criteria below.
- A trust with total assets in excess of $5 million that was not specifically formed to buy the securities offered.
- Any entity in which all of the equity owners are accredited investors.
Federal securities laws specify that only accredited investors may participate in certain securities offerings. One of the reasons for this limitation is to ensure that all participating investors are financially sophisticated, are able to fend for themselves, and are able to sustain the risk of loss.
These investments are not required to register with the Securities and Exchange Commission. Therefore, they do not have the same disclosure requirements as publicly-traded investments, like mutual funds.
How much can you earn with Crowdstreet?
As with most investments, there are no guarantees you’ll make money when you invest with Crowdstreet. That said, each project provides a target investor internal rate of return. This is not a guaranteed return. Instead, the internal rate of return estimates how much investors may earn on a project or investment. In this case, the IRR projections include both the monthly profits and any profits when the property is sold.
When you review opportunities in the Crowdstreet marketplace, you'll see the targeted investor IRR highlighted on the overview or when you click into the details.
In most real estate deals, the funds look to invest in commercial real estate properties for a limited window of time, then sell for a profit. This sale is known as a capital event, and investors will participate in those proceeds. While the buildings are held, investors participate in the net cash from operations when the sponsors decide to distribute profits.
Every real estate deal is different, and you'll need to review the offerings to find one that aligns best with your goals.
When researching commercial real estate investment opportunities on Crowdstreet, look for a tab that says “Distribution Strategy." Some sponsors have agreed to make the information publicly available to help you understand the expected distribution payments.
For example, one real estate fund offers the following payment strategy:
- A 9% annualized return to investors. This amount accrues each year and is paid out first before the sponsors receive anything.
- Investors receive 80% of the additional proceeds until they achieve a 15% annualized return.
- Any remaining proceeds are split 70% to investors and 30% to the promoters.
Not all real estate investments are currently making money, therefore, they may not pay distributions until later in the hold period, if at all. Because all distributions are at the discretion of the sponsor, it is best to assume you will not receive any distributions until the property is sold.
The "Financials" tab also provides an example of what a hypothetical $50,000 investment would yield on an annual basis. In this example, the investor is forecast to receive money each year from the project's cash flow. These amounts may be paid monthly, quarterly, or accrue until the project sponsor approves the payout. Additionally, there is the potential of extra return from the sale of the real estate asset.
How much can you make with Crowdstreet?
As an investor, you want to maximize your returns while minimizing risk. Here are a few tips to help you maximize your earnings with Crowdstreet:
- Choose individual deals. When you select individual real estate deals instead of funds or portfolios, you can choose those with the highest returns.
- Select shorter investment periods. The sooner a project is sold, the quicker you have access to cash and potential profits from a sale.
- Reinvest disbursements. Whenever you receive cash distributions from an investment, reinvest that money to continue earning returns.
- Avoid high-expense investments. When researching investments in the Crowdstreet marketplace, look at the investment expenses. Avoid individual deals and funds whose expenses are higher than similar opportunities.
- Time is money. Consider whether it makes sense to do your own due diligence and pick individual projects, invest in a fund, or use an advisor. You may be better off using a fund or advisor so you can focus on making more money using your expertise.
Is Crowdstreet safe?
There is always a risk when you invest your money. That said, here are a few best practices that can help you stay safe while investing:
- Diversify your portfolio. Diversifying your investments decreases the chance your portfolio suffers a loss. If you have only enough money to make the minimum investment, consider using a fund instead of picking an individual property. A blended portfolio will help you minimize risk.
- Use filters to match your risk tolerance. The Crowdstreet marketplace allows you to set filters to focus on projects that match what you are looking for. Use these filters to avoid projects that do not meet your needs.
- Choose projects with a monthly distribution period. When the project returns money to you, that portion of your investment is no longer at risk. Choose investments that offer monthly or quarterly distributions.
- Select investments with higher preferred returns. Preferred returns are money paid to investors first before the sponsors receive payment from the project's cash flows.
- Focus on projects with lower loan-to-cost ratios. When a project has a lower loan amount, there is more equity in the project for investors like you when the project is sold. Additionally, lower loan amounts reduce the interest that a project has to pay, which results in more cash flow available for investors.
- Choose sponsors with experience. Experienced investors typically have a lower risk than sponsors who are just beginning their careers. This is because they have completed numerous projects and been through the ups-and-downs of the economy multiple times.
Common questions about Crowdstreet
Is Crowdstreet legit?
Yes, Crowdstreet is a legitimate real estate investing platform. It has successfully funded more than $1 billion in real estate transactions since its launch in 2014. Crowdstreet has also funded over 400 deals, 33 of which have completed with a sale.
Is Crowdstreet a good investment?
Crowdstreet can be a good investment for the right investor. You must be a qualified accredited investor to invest in its real estate deals, which means you need to meet certain income and net worth requirements. Crowdstreet’s investment offerings typically require a three-to-five-year holding period, so you should not invest any money that you need immediate access to.
How much does Crowdstreet cost?
There are no fees to open an account with Crowdstreet. However, each investment has its own fee structure and related expenses. Depending on the type of project and investment you choose, examples of these fees include:
- Acquisition and disposition fees (to purchase and sell land or building)
- Construction management fees
- Asset management fees
- Property management fees
- Financing fees
Is Crowdstreet for accredited investors only?
Yes. In order to invest with Crowdstreet, you must be qualified as an accredited investor. Before you may invest in a project, Crowdstreet requires a verification process to ensure you are an accredited investor.
How do you invest with Crowdstreet?
To invest with Crowdstreet, you open an account, provide verification that you are an accredited investor, and then select the investment type that works for you. You can invest in individual projects, use a real estate fund or vehicle, or work with an investment advisor to create a tailored portfolio.
How to sign up for Crowdstreet and begin investing
If you're ready to open an account after reading this Crowdstreet review, here's how to sign up.
- Go to Crowdstreet.com and click on "sign up today."
- Sign up using your Google or LinkedIn profile or manually enter your name, email, and password.
- Answer the question of "are you an accredited investor" with a yes or no. If not, then you may still create an account but may not be able to invest in projects at this time.
- Complete your profile with your personal information and provide any required documentation necessary to validate your accredited status.
- Activate two-step verification in the security settings. This isn't required, but this step helps to secure your account from hackers by requiring you to enter a code that is texted to your phone.
Once your account is set up, how you start investing with Crowdstreet depends on the type of account you select — individual deals, real estate funds, or a tailored portfolio with an advisor.
Before you can invest, you must complete a vetting process to confirm that you're an accredited investor. The Crowdstreet system walks you through the process and alerts you to the documents you need to submit to prove that you meet the qualifications.
For individual deals and real estate funds and vehicles, new deals are launched frequently. When new launches occur, investors receive an announcement email that contains information about the investment, date and time of a live webinar to discuss the details, and when you can submit an offer.
Once a deal is launched, participation is first-come, first-served. If you want to invest in a specific deal, set a calendar reminder for when the investment window opens for a limited time. When the investment window opens, you'll submit your offer through the Crowdstreet portal.
Other real estate investment platforms to consider
Although Crowdstreet offers many attractive features, the $25,000 minimum investment and accredited investor requirement may have you looking elsewhere if you’re learning how to invest in real estate.
Competing real estate investing platforms are available that have lower requirements for potential investors. Two of the best investment apps for non-accredited investors to consider are Fundrise and DiversyFund.
Fundrise was founded in 2012 and has more than 130,000 active investors, who have completed over $4.9 billion in transactions. Investors can begin investing with as little as $1,000 and annual servicing and management fees are a total of 1% per year.
DiversyFund purchases, develops, and manages real estate investments through its Growth REIT. This closed-end real estate investment trust launched in April 2019 with a $2,500 minimum. In June 2019, it lowered its minimum investment to $500 so more investors could afford to participate. DiversyFund does not charge management or broker fees on its projects.