The Best Real Estate Crowdfunding Sites for 2020

Real estate is a very well understood but often poorly executed way of building wealth. It only takes one episode of an HGTV house-flipping show to know that it doesn’t take a genius… but even geniuses can mess it up with bad execution.

If you’re a buy and hold investor, you’re less likely to mess it up but then you run into the “death by a thousand paper cuts.” There are maintenance, repairs, finding tenants, kicking out deadbeats, 2 AM plumber phone calls, cleaning, … you get it

If you read a book about real estate investing, it all sounds so simple. And it is simple. But it’s not easy.

As they say, the devil is the details.

That’s why so many people invest in real estate investment trusts (REIT). A REIT offers exposure to real estate without any of the work. Vanguard’s REIT Fund charges you only a 0.12% expense ratio and you get exposure to a variety of commercial real estate companies. That’s only $12 on every $10,000 invested!

What if you don’t want to own a fund that only invests in storage facilities, office parks, and malls? Until recently, you were out of luck. You could try to find a real estate syndicate in your area but that’s not without its risks.

The best option may be a crowdfunding real estate investing site.

Best Real Estate Crowdfunding Sites Summary

Fundrise LogoFundrise is one of the best crowdfunding real estate investing platforms for non-accredited investors because they offer a package of their individual investments in a vehicle they call an eREIT. Being an accredited investor is usually one of the biggest roadblocks to investing in a real estate platform, Fundrise offers an alternative for those who don’t meet that high bar.

The eREITs follow an investment strategy, available in their offering documents. They’re like regular REITs except the minimum is a low $1,000. Unlike regular REITs that trade on the open market, these are not publicly traded. You can only redeem your shares quarterly. They’re more liquid than a syndicate, less liquid than a mutual fund.

We have a full review of Fundrise.

Learn more about Fundrise
(This is for both accredited and non-accredited investors)

Streitwise LogoStreitwise is a real estate investment trust that advertises 10% returns with a low minimum investment of just $1,000. It’s open to non-accredited investors.

The fee structure is 3% of the amount raised plus a 2% fee on assets under management. When you review the fees of other deals, you’ll often see that fees like that are tucked into the amount being raised (in the form of acquisition fees, financing fees, performance fees, etc.) as well as the disbursements. Having a straight 3% on the raise and 2% of the assets under management is a lot clearer of a structure than others.

Since it is a REIT, they distribute dividends quarterly and are required to distribute 90% of their taxable income annually to maintain that structure. You should expect to hold your investments in Streitwise for a period because there is a 1-year lockout and a redemption window each quarter. You also have the option of reinvesting dividends if you so choose.

The minimum investment is $1,000 and we have a full review of Streitwise here.

Learn more about Streitwise
(This is for both accredited and non-accredited investors)

Acretrader LogoDid you know you can invest in farmland?

AcreTrader is a new real estate platform that specializes in farmland. They research all the deals, select less than 5% of them, and acquire the farms through an LLC. You can earn income through rent as well as see appreciation in the land itself. Did you know that 40% of U.S. farmland is rented or leased?

The minimum investment amount is usually between $3,000 to $10,000. This varies between investments based on the price per acre and the total cost of the farm.

They charge just 0.75% of the farm’s value as an annual management fee plus any closing costs on each deal. The typical hold period is 3-5 years though some deals are 5-10 years, you can sell your shares on the marketplace. And you can do this in a self-directed IRA!

It’s a fascinating asset class that you won’t be able to get on any other platform. Read our full Acretrader review for more details.

Learn more about AcreTrader
(This is for accredited investors)

If you want to see more farmland deals, another startup is FarmTogether. I know less about them than AcreTrader but they’re similar platforms. Also for accredited investors and their deals typically have a $10,000 to $50,000 minimum. You get cash yields on a quarterly, semi-annual, or annual basis. It’s also free to join so you can sign up just to see their deals.

Roofstock is a real estate investment marketplace that lets you buy turnkey single-family rental properties with just 20% down. It’s free to sign up and you can browse their marketplace for properties based on a variety of factors such as list price, location, monthly rent, schools, etc. And if you’re familiar with 1031 Exchanges, they will also show you which properties are eligible for that as well.

Here’s a snapshot of some of the properties available as of June 11th, 2019:
Investment properties on Roofstock, June 2019

If you’re wondering why they’re on the list, it’s because you can also buy shares in real estate (not buy it outright) similar to how you buy shares of deals on other sites. You can invest in custom portfolios (essentially a non-public REIT) so you can invest with some diversification. For example, there was one portfolio that consisted of 6 single-family homes in St. Louis. There was another one that was 7 single-family residences in the Midwest.

If you do invest in a home, you own it and can lean on their property management services (they don’t run it, they connect you with ones in the area), insurance, etc.

Finally, it feels silly to say this, but they have a 30-day money-back guarantee. If you buy a property and are unhappy, they will refund it (technically, they list it for free on their marketplace and return your money once it sells).

Here’s a full review of Roofstock. It’s free to sign up.

Learn more about Roofstock
(This is for both accredited and non-accredited investors)

RealtyMogul launched in 2013 and offers accredited and non-accredited investors a way to invest in commercial real estate. Accredited investors can invest in specific deals while non-accredited investors can contribute to MogulREITs. They don’t deal with any residential deals and look to invest in targeted commercial real estate deals that the average investor won’t have access to.

Whereas the larger REITs focus on large corporations like Simon Property Group (mall owner/operator) and Public Storage (huge storage facility operator), RealtyMogul looks to invest in apartment communities, retail centers, and Class A office buildings.

The minimum investment size for individual projects is $5,000 but for their REIT, MogulREIT, you can get involved for as little as $1,000. You can check out our full review of RealtyMogul to learn more.

Learn more about RealtyMogul
(This is for both accredited and non-accredited investors)

EQUITYMULTIPLE LogoEquity Multiple is one of the newer entrants into the crowdfunding real estate investing marketplace. They offer debt and equity investments that exclusively focuses on institutional commercial real estate. They also have syndicate loans and they’re backed by an existing national real estate advisory firm (Mission Capital), which helps with the pipeline of deals.

The minimum is $5,000 and the fee structure is designed to align their interests with you, the investor, and based on the type of investment. There’s typically a 0.5% annual fee, to cover administrative costs, plus 10% of the profits after you’ve received all of your initial investment back. In preferred equity and debt deals, they also take a servicing fee in a “spread” between the interest rate charged to the borrower and what is paid out to you. Finally, in all deals, they will collect a portion of the total amount raised. This fee structure is typical, you have to review specific deal terms to know the specific numbers in each.

Learn more about EquityMultiple
(This is only for accredited investors only)

Patch of Land LogoPatch of Land is a peer-to-peer real estate lending marketplace for accredited investors, similar to PeerStreet. They look to work with real estate developers who are improving existing real estate projects.

The minimum investment is $5,000.

Learn more about Patch of Land
(This is only for accredited investors only)

The Rest of the Pack

As more sites pop up, I will continue to take a look at them and how they are different. This section of the post will cover those sites that I haven’t more deeply researched, email me if you want me to take a closer look at any single one.

Here are some of the other platforms with a brief word about each:

  • Prodigy Network – With a $50,000 minimum and a focus on institutional grade investments in Manhattan, they are hyper focused and have a more personalized service appeal. (This is only for accredited investors only)
  • LendingHome – San Francisco-based marketplace with 12-month loans on borrowers with single-digit properties. The properties are rehabilitation projects and fairly conservative (average LTV of 62%, according to an interview in the New York Times). $5,000 minimum. (This is only for accredited investors only)
  • Small Change – They invest in commercial and residential real estate projects based on their “change metrics” like mobility (walkability, bike-ability), sustainability (green building, adaptive reuse), and economic vitality (job creation, affordable housing). There are per-project minimums and they have options for both accredited and non-accredited investors.
  • Fund That Flip – Back vetted residential real estate loans (hard money loans) in $5,000 increments and they prefund their deals. You can see their open deals without creating an account. (This is only for accredited investors only)
  • ArborCrowd – Backed by the Arbor Family of Companies (Arbor Realty Trust, Arbor Commercial Mortgage, AMAC), you get access to large commercial investment opportunities. A recent $12.7mm deal for a multifamily property in Alabama projected an IRR of 16-18% with a 3-5 year old period. The deals tend to be on the larger side and the minimum investment amount is $25,000. (This is only for accredited investors only)
  • AlphaFlow – They build a portfolio of real estate loans from the debt offerings of other companies on this list, like PeerStreet, to optimize for risk and return. They will also rebalance and adjust the fund as needed, you can withdraw or reinvest monthly earnings. $10,000 minimum. (This is only for accredited investors only)
  • Senior Living Fund – Senior Living Fund is a platform that specializes in senior housing and they project rates of return in the 13%-21% range. They fund and develop new senior housing communities but they don’t offer too much in the way of details. I’m sharing it because it’s a good example of specialization but I don’t know much else about them.

What happened to RealtyShares?

RealtyShares used to be the top platform on our list because I had the first-hand experience with the platform and liked it. I had two investments with them (both are still performing on schedule) and they always had a ton of data associated with each deal. My overall experience was fantastic with them so I was sad to see them effectively shut down (no new investments, no new investors) on November 7th, 2018.

We put together a list of what we felt were the best alternatives to RealtyShares and think you’ll find a good replacement there.

Should You Invest in These Deals?

What if you’re unsure of these new platforms? Do they represent a good option?

We caught up with Professor Ralph Lim, Associate Professor of Finance and Economics at the Jack Welch College of Business at Sacred Heart University. We asked him a few questions and he was gracious enough to provide some insight:

Professor Ralph Lim, Associate Professor of Finance and Economics at Sacred Heart University

When it comes to investing, how much of one’s portfolio should include real estate?

I suggest about 10% to 15% of one’s portfolio be placed in real estate-related investments. This assumes an investor with average risk tolerance. Those with low-risk tolerance (e.g., very conservative investors) should probably not have anything in real estate.

Do you believe this new class of real estate investing is something people should pursue? Why or why not?

The new option to invest in notes secured by real estate appears to be a somewhat more conservative option of including real estate in one’s portfolio. Typically notes secured by real estate have priority over real estate equity owners. This is similar to the concept of priority of debt over equity.

So, in this case, the investor would appear to hold debt that is backed by the underlying real estate. The investor is not holding a real estate equity position. However, it is mandatory that investors read the prospectus or offering circular carefully before committing to this option.

How do these new options compare with existing investing options?

Instead of holding an equity position in real estate, this new option offers an investor an opportunity to invest in the debt portion. The risk is less than equity ownership, but so is the potential for gain. Investing in debt typically limits the investor to interest income and the return of principal.

Typically, debt investors do not participate in potential equity gains due to any underlying real estate appreciation. Of course, please read the prospectus or offering circular.

With crowdfunded real estate sites, there are a lot of different investment options. Some are debt, as Professor Lim has mentioned, and others are equity. Some are a mix of both, so it’s always important to review the prospectus or offering circular to know what you’re investing in.

What have your experiences been so far with crowdfunded real estate investing sites?

Other Posts You May Enjoy

 


Originally posted at https://wallethacks.com/best-crowdfunding-real-estate-investing-sites/

→ Save time. Save paperwork. Save dollars. Esurance ←