Real Estate Crowdfunding: How It Works And 7 Platforms to Consider

INVESTING - REAL ESTATE INVESTING
Real estate crowdfunding may allow everyday investors to start investing in real estate without owning their own rental property.
Updated June 22, 2023
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Real estate crowdfunding

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Real estate crowdfunding platforms are a popular option for investing in real estate without buying individual properties. But until recently, real estate crowdfunding​​ wasn’t something you could easily do. Companies couldn’t publicly solicit investors to invest in private real estate projects. Instead, they had to rely on their personal connections to gather investors.

This changed when Congress passed the Jumpstart Our Business Startups Act (JOBS Act) in 2012. After this law passed, companies could now advertise these investment opportunities publicly. Although the law didn’t likely intend to enable real estate crowdfunding sites to begin operating, the result allowed this to happen.

Several sites exist that provide different opportunities for potential investors. Here’s what you need to know.

In this article

What is real estate crowdfunding?

Real estate crowdfunding involves pooling the money of several investors to purchase properties.

Generally, crowdfunding companies that facilitate this type of investing complete due diligence on properties to make sure they meet the company’s investment goals. Then, they manage the properties in accordance with the goal of the investment. Usually, this involves renting out the property to tenants, improving the property, or holding on to the property for appreciation.

Although the company holds the real estate, it pays out profits to shareholders in the form of dividends. Eventually, the proceeds from the sale of the property will likely be distributed to shareholders, as well.

7 real estate crowdfunding sites

Just as you can invest with one of several traditional brokerage firms, several real estate crowdfunding sites exist. Each offers its unique twist on real estate crowdfunding.

Some cater to accredited investors who meet certain net worth or income requirements, whereas others offer options for nonaccredited investors. Similarly, they may focus on different portions of the real estate market or different geographic areas.

1. Crowdstreet

Crowdstreet provides a few ways accredited investors can invest in commercial real estate deals. Investors who prefer to invest in a fund can invest in one of several options in its marketplace. Alternatively, you can choose individual commercial properties you believe will perform best based on the information provided. Another option is investing in a customized portfolio of unique properties based on your investment goals and profile.

Investments start at $25,000, but may require up to $100,000 to begin investing.

Requirements:

  • Accredited investor status: Required
  • Minimum investment: $25,000 or more

Read our full Crowdstreet review
...Or visit Crowdstreet

2. DiversyFund

DiversyFund allows investors to start investing in a single portfolio of multifamily real estate buildings with just $500. The company structures its investment as a real estate investment trust (REIT), called the Growth REIT.

The Growth REIT is a non-traded public investment qualified by the U.S. Securities and Exchange Commission. This means it’s not publicly traded on the stock market, but it’s subject to strict reporting requirements, similar to a publicly traded company. It only invests in apartments and does not invest in any single-family homes.

DiversyFund handles picking the buildings to invest in within the REIT and professionally manages the properties. The company renovates the properties as necessary and eventually sells them once it believes it is time to move on to a new property.

Requirements:

  • Accredited investor status: Not required
  • Minimum investment: $500

Read our full DiversyFund review

3. Fundrise

Fundrise allows everyday investors to start investing in the real estate sector with as little as $10. The company focuses on providing investments that contain high-quality assets, including debt and equity investments in commercial, residential, and other types of real estate.

The types of investments you can make depend on how much money you have set aside. Simple investments in registered products, or products offered on markets, start at the $10 mark. If you want to access private funds, such as eREITs, you need at least $5,000 to get started. Fundrise does offer some accredited offerings, but you need an initial minimum investment of $100,000 to access these opportunities.

Requirements:

  • Accredited investor status: Not required
  • Minimum investment: $10

Read our full Fundrise review

4. EquityMultiple

EquityMultiple lets accredited investors invest in professionally managed commercial real estate. EquityMultiple evaluates potential investment opportunities, selecting only 5% of the opportunities they consider.

The platform offers three different investment options:

  • Short-term diversified notes
  • Individual properties
  • Funds

The minimum investment starts at $5,000 for their short-term diversified notes investment option. Direct investing in individual properties using debt, preferred, or common equity starts at $10,000. Finally, you can invest in funds that provide diversification using debt, equity, opportunity fund, and commercial real estate securities starting at $20,000.

Requirements:

  • Accredited investor status: Required
  • Minimum investment: $5,000

Read our full EquityMultiple review
...Or visit EquityMultiple

5. GROUNDFLOOR

GROUNDFLOOR has one of the lowest initial minimum investments of the real estate crowdfunding sites at just $10. This platform offers short-term, high-yield real estate debt investments originated by GROUNDFLOOR. As an investor, you get to choose which real estate projects you want to invest in, which allows you to diversify if you wish.

Essentially, these debt investments are secured by single-family homes, multifamily homes, townhouses, condos, planned unit developments, or even new construction. This provides some protection in case loans default because the properties can be foreclosed on. Thankfully, GROUNDFLOOR tries to work with borrowers before moving straight to foreclosure to try to resolve the situation.

Requirements:

  • Accredited investor status: Not required
  • Minimum investment: $10

Read our full Groundfloor review
...Or visit Groundfloor

6. RealtyMogul

RealtyMogul offers two classes of investments for investors to consider. The company offers two REITs: Mogul REIT I and Mogul REIT II. Each has a $5,000 minimum investment and different objectives to provide options to potential investors.

Private placement investments may include multifamily, office, industrial, self-storage, retail, and medical office buildings. These have higher minimums, such as $25,000 or more. Accredited investors can invest in both, whereas nonaccredited investors can invest only in RealtyMogul REITs.

Requirements:

  • Accredited investor status: Not required for REITs / Required for private placement investments
  • Minimum investment: $5,000

Read our full RealtyMogul review
...Or visit RealtyMogul

7. PeerStreet

PeerStreet allows accredited investors to invest in real estate debt backing specific properties. You can invest in several types of loans with different terms, loan strategies, and other factors. In total, this investment platform provides hundreds of data points for you to analyze.

To start investing in real estate debt on the platform, you’ll need a minimum investment of $1,000. The low $1,000 minimum could allow you to diversify your investments across several loans and help to minimize the impacts of underperforming assets.

Requirements:

  • Accredited investor status: Required
  • Minimum investment: $1,000

8. CollabHome

CollabHome is a crowdfunded student housing real estate platform. Through CollabHome, you can co-own an income-generating student housing property for as little as $500.

Investors own shares of student housing real estate, then they get potential dividends paid monthly. Each year, CollabHome collects millions of dollars in rent, all while making student housing better.

Requirements:

  • Accredited investor status: Not required
  • Minimum investment: $500

Visit CollabHome

Pros and cons of real estate crowdfunding

Pros

  • Lower investment than purchasing a property: Traditional real estate investing required you to pay cash or take out a mortgage on a property, which is typically a costly endeavor. Real estate crowdfunding could allow you to begin investing with as little as $10.
  • Avoid managing properties: Crowdfunding takes property management out of your hands. Although you may be able to select which properties you invest in, you don’t have to pick tenants or deal with late-night phone calls if the air conditioner stops working.
  • Diversify your investment portfolio: Crowdfunding could let you invest in several properties with lower minimums to diversify your portfolio, rather than investing all of your money in a single rental property. REITs and managed portfolios are also options to diversify across real estate asset classes or multiple properties.
  • Earn dividends: REITs are structured in a way that requires them to pay out a large portion of their net income in dividends, which could provide income to investors.

Cons

  • Can be an illiquid investment: Many real estate crowdfunding sites offer investments that are not publicly traded. If you need to liquidate your portfolio, these investments may not be able to be sold quickly. Even if you can sell them, you might have to pay fees to cash out early.
  • May have to be an accredited investor: Several real estate crowdfunding sites require you to be an accredited investor to invest in specific opportunities. If you do not meet the income or net worth requirements, you cannot invest with these platforms.
  • Risks related to the real estate market: Real estate has risks just as with any other asset class. The real estate market crash of the early 2000s showed real estate prices could drop significantly in a short period. The COVID-19 pandemic showed that even the most reliable renters might not be able to make their rent payments due to job loss.
  • Potentially high minimum investment: Some crowdfunding websites have investment minimums as low as $10. However, other investment options require $100,000 or more to start.

FAQs

Can you make money with real estate crowdfunding?

It is possible to make money by investing money in real estate crowdfunding investments. Your investments might pay dividends or increase in value in the future. As an investment, real estate crowdfunding also comes with a risk of loss. It’s impossible to perfectly predict returns, as with any other investment.

What is the best real estate crowdfunding site?

The best real estate crowdfunding site for you will depend on your particular situation. For instance, accredited investors might prefer sites that present investment options for their accredited investor status, whereas nonaccredited investors will likely gravitate toward other sites offering options for them. To find the best site for you, evaluate the type of investment, expenses, and risks each opportunity offers. Then, pick the site that fits your needs best.

Is real estate crowdfunding worth it?

Crowdfunded real estate might be an option for you if it helps you meet your investment goals. These sites could help you diversify your portfolio and potentially earn passive income and future returns. That said, they might come with risks beyond what your investment plan calls for. If that’s the case, real estate crowdfunding might not be the best option for you.

Bottom line

Becoming a real estate investor doesn’t have to involve purchasing a property on your own. Instead, you can take part in crowdfunded real estate investments. Investing in this way is often less expensive than buying individual properties, and it could be an excellent way to build a diversified portfolio.

However, crowdfunded real estate may not be the best investment option for everyone. If you’re interested in exploring alternatives, check out our guide on how to invest in real estate.

FinanceBuzz is not an investment advisor. This content is for informational purposes only, you should not construe any such information as legal, tax, investment, financial, or other advice.

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Author Details

Lance Cothern Lance Cothern, CPA is a personal finance writer and founder of MoneyManifesto.com. Lance's work covering several personal finance topics has been published in U.S. News & World Report, Business Insider, Credit Karma, Investopedia, and several other publications.

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