Real estate crowdfunding enables people to invest in property everyday. You can diversify your investments into the investment class that has consistently outperformed stocks, for as little as $500. Read all about crowdfunding, and our best platform choices.
I first made my way into the real estate business in 2010. South Carolina had been a fairly easy place to buy a house for a 24-year-old. Especially with the aid of tax credit for first time homebuyers. Interest rates were not the lowest, but banks gave out loans with very little down.
I count myself lucky; nowadays, it’s more difficult to purchase real estate.
There is no longer the Housing and Economic Recovery Act of 2008 which provided a tax credit for the first-time homebuyers. Yet immovable markets are intense in high-cost living regions. Investing in a primary residence is hard enough, let alone if you plan to develop a portfolio of rental properties.
Luckily, by pooling with other buyers, you can maximize your capacity to invest in real estate. Within this article, crowdfunding immovable property is explored: a way to invest as little as $500 within real estate.
WHAT IS REAL CROWDFUNDING ESTATE?
Real estate crowdfunding means putting together many investors to invest in real estate. They are able to make bigger transactions than they could on their own by pooling their money together, thus increasing their returns.
When it comes to profiting from crowdfunding real estate, there are various choices.
Many transactions include collecting dividends from rental income (for example, by investing in already revenue-generating apartment buildings), while others include “flipping” the property – adding value by repairing or renovating it, and then reselling the property for profit.
Crowdfunded real estate allows investors to purchase expensive property which they would not have been able to buy on their own.
CAN YOU MAKE MONEY IN REAL ESTATE CROWDFUNDING?
The short answer to this question is “yes.”
In addition, researchers examined the returns of the major investment forms in a 145-year analysis (“The Rate of Return on Everything, 1870-2015”) and found that the stock market was outperformed by real estate, albeit with less risk.
According to Fundrise, in recent years the annualized average return for their crowdfunded investments has been:
- 2014: 12.25%
- 2015: 12.24%
- 2016: 8.76%
- 2017: 11.44%
- 2018: 9.11%
- 2019: 9.47%
In addition, some of the platforms, such as DiversyFund, also allow you to invest directly in real estate investment trusts (REITs) versus in assets. All strategies have benefits and drawbacks but one major benefit to REITs is that you can purchase and sell them as quickly as mutual funds. This helps you to take advantage of diversification when the real estate markets perform well, and shelter if they fail.
How Much Money Can You Make Crowdfunding Real Estate?
For crowdfunding real estate the amount of money you will make revolves around many factors. One of the big factors is the amount of capital that you are spending. The bigger the investment, the greater the potential return.
You can see from the table above that over the last years crowdfunded real estate has done very well. The compounding interest and dividends you will make are infinite, depending on the amount of money you are able to invest initially or continuously.
It’s easier than ever to build a starter portfolio of real estate with the option of crowdfunding to avoid relying solely on conventional stocks.
IS REAL ESTATE CROWDFUNDING A GOOD INVESTMENT?
Real estate crowdfunding is a fairly new choice to invest. But the opportunity to add more diversification to your portfolio of assets is certainly something worth looking into.
If you’re primarily interested in stocks and bonds, investing in real estate can be an excellent hedge against risks on the stock market. The stock market is even more fluctuating than real estate (but there are prospects in stock market for greater short-term returns).
Most experts believe that immovable property should be part of the portfolio of each investor. It may add an extra defensive layer at both good and poor stock market times.
And today, in addition to REITs (Real Estate Investment Trusts), crowdfunding allows people to invest in real estate on a regular basis, where it was open previously to 1%.
Another big advantage – when crowdfunded real estate requires private assets, investors don’t have to watch their account prices rise and fall every month at the stock market’s whim. Many investors in private real estate funds appreciate that value-added profit.
Now, let’s think about the platforms for real estate crowdfunding.
There are so many to choose from, and each of these crowdsourcing platforms has its own strengths and niches, as well as its own downtimes — be assured you’ll hear both in this piece.
Criteria that we used to find the best platform for real estate crowdfunding:
- A platform simple to use
- Should have a good collection of active and closed listings
- You have to find an interesting niche
11 BEST REAL ESTATE CROWDFUNDING PLATFORMS
We’ve checked over 50 different sites and here’s 11 of the very best crowdfunding platforms for real estate:
Fundrise is a crowdfunding site for tech-centric real estate. They have access to investment in real estate through eREITs and eFunds, which are basically diversified pools of private real estate assets across the US.
Moreover, many of the listings on the site are eligible to Fundrise with just $500 (!) low minimums. This makes the platform ideal for those with just limited amounts of capital to invest in real estate.
Fundrise also has a questionnaire to help you choose the best investments and plans for your financial needs and the money available to you. If you’re new to the real estate investment world you should probably check out this website.
Fees on the Platform:
- Investment advisor fee: 0.15%
- Asset management fee: 0.85%
- Additional acquisition fees: 0% – 2%
DiversyFund is one of the newest on the market for crowdfunding investment companies, but they do deliver some of the best rates and returns. Statistics are nice, but I pay attention to customer satisfaction as well.
That’s one explanation why DiversyFund is high on the list. DiversyFund has one of the best customer service teams in the crowdfunding arena I have come across. If I’m going to spend my hard-earned money with them, being able to get my questions answered quickly is extremely important.
Impressively small account fees even come with their excellent customer support. When it comes to fees, this investment platform has broken the mold. Why? There are zero fees. Even the other popular multimillion-dollar crowdfunding investment companies charge fees for accounts.
Alternatively, you can start out by spending just $500 in real estate.
The other thing I love about DiversyFund is their strategy for the investments. You see, they only invest in one type of property: multi-family housing. Why does that matter? It is one of the least dangerous forms of commercial properties.
DiversyFund is taking it one step further. They are searching for properties which need some renovation. No worries – this isn’t hypocrisy. What I mean is that they may need a new roof, updated bathrooms or kitchens or a fresh coat of paint.
Properties must be cash-flow-positive and in a high growth region to fulfill their strict requirements. Their technology helps them to search and find properties that are suited and in the region. If the properties are approved after a site inspection, they do the renovations, Improved properties allow DiversyFund to raise rents for new tenants and those with expiring leases. Rent rises boost property prices. That means investors are making more money when selling the assets.
CrowdStreet aims to offer investors direct access to opportunities for institutional-quality commercial real estate (CRE). The website focuses mainly on commercial developments such as retail outlets, office buildings and multi-family apartment buildings.
Perhaps better, the platform offers you all the online resources you need to make your investment in real estate. Their well-designed website makes all current products, as well as estimated returns and other related documents, easy to access. When you are ready to invest, simply e-sign the documents needed and submit your investment.
Historically, CrowdStreet was an accredited investor-only site, but this changed in August 2017 when the company launched its first offer for unaccredited investors.
Today the website has a mix of deals with each one getting their own minimum investment. The lowest we’ve seen is an open minimum investment of $5,000 and the maximum is a minimum investment of $50,000 aimed at qualified investors.
Roofstock was created in 2014 and is the first and #1 online platform for those interested in investing in rental homes for single families.
Even though Roofstock is a fairly young business, they have supervised more than $1 billion in transactions completed.
Roofstock knows that the real-estate investment market can be very complicated, so they tried to create a fully online platform that would simplify the process.
Even first-time real-estate investors will feel at ease with Roofstock.
Roofstock is proving an attractive choice for real estate investors throughout the region.
5. Alpha Investing
Alpha Investing takes a unique approach to crowdfunding real estate: they have a concierge service that allows you direct access to a private advisor and exclusive access to great offers on real estate crowdfunding.
The concierge service is unique, because every investor has direct contact at the company with a principal. Such principals are available to talk openly on any topic, so if you have concerns or need clarity on an investment, you will never be left in dark.
Note that Alpha Investing is for approved investors only and needs a telephone interview before you can invest. Not all will be accepted, so be sure to follow all criteria before signing up for an interview.
PeerStreet focuses on residential debt, and you’ll spend mainly in single-family developments such as homes and shop fronts. They do get the odd condo building or some other crowdfunding project for multifamily real estate, however.
The crowdsourcing site is collaborating with big lenders to offer the platform in return for a financing mechanism. This gives them industry high marks for openness and outstanding management.
PeerStreet has a minimum investment of $1,000 and is available to all investors. Usually, according to their staff, you can find loans of 6-36 month durations and 6-9 percent returns. That makes the platform ideal for those who just got into crowdfunding.
RealCrowd links investors with large-scale real estate funds and syndicators behind ventures. Many of the listings on the site are commercial, for instance, they currently have a range of hotels on their website seeking investment.
Notice the firm has fairly small minimum investments. Typically speaking, you can see minimums from $25,000 to $50,000, and the platform is strongly targeted towards certified and institutional investments.
Further, RealCrowd, unlike others on this list, focuses on long-term investments. Many of their products have five-year hold periods, making this a perfect long-term investment for high-return, passive income.
Want to invest at the same time in different real estate offers? If you do, then AlphaFlow is just what you need. Make one investment on this real estate crowdfunding platform and AlphaFlow will invest your money on its website into several deals for you.
Consider AlphaFlow as the private real estate investor. The platform will invest your money across the web over a total of 75 real estate deals, so you’ll make full returns and dramatically reduce risk.
There is a good track record on the platform, too. As of this summer, AlphaFlow has an investment portfolio of nearly 700 investments across 31 US states. This has a net return of 8.40%, which is very impressive considering that you are investing in more assets at the same time.
RealtyMogul is among the first to reach the crowdfunding real estate business. The platform provides a bit of everything: from mobile homes to multi-family apartment buildings and retail spaces. And they have a minimum investment of only $1,000 on most offerings, to make it even easier.
The crowdfunding platform is open to all individual investors and you can take advantage of their amazing offers as long as you meet the ‘$200,000 a year or more’ income criteria.
10. 1031 Crowdfunding
1031 Crowdfunding is a younger rival in crowdfunding in real estate. Nearly all of their offerings are commercial, focusing on shopping, hotels and even self-storage facilities. A range of multi-family homes are also eligible for sale, however.
The crowdfunding vets all investments on the platform, and its staff has more than 60 years of combined industry experience. They have earned more than $1.3 billion so far, and have more than $2 billion in total real estate sales.
But what makes 1031 special from those of the other portals? Simple: 1031 carries a second option, 1031 Insurance. You can use this tool to ensure that all of your investment funds are invested instead of being charged for capital gains in a replacement property.
After all, why pay taxes if you can still have your hard earned money working for you?
11. Patch of Land
Patch of Land strives to be the crowdfunding site for all. They deliver low minima for licensed investors who are just getting started with investment in real estate. The bulk of investments have a loan period of just 12 to 24 months.
Through searching the list of deals on Patch of Land, you’ll see an emphasis on single-family homes in big cities and tourist-focused areas such as Chicago, New York City and even smaller Hawaiian cities.
All offers on the site are carefully checked before being listed by the company’s underwriters, so you can invest without fear. Patch of Land actively co-invests in all of its successful offerings to provide the extra boost of trust.
WHICH REAL ESTATE CROWDFUNDING SITE ALLOWS NON ACCREDITED INVESTORS?
Some crowdfunding sites ask you to be an accredited investor. That means you will have to:
- Have earned $200,000 in annual revenue ($300,000 for joint investors) over the last two years with the expectation that this year you will earn the same or more, OR
- Have a net worth more than $1,000,000, without your primary home, either individually or jointly.
The requirement exists because the SEC wants to be sure that those who invest in unregistered securities can afford to lose them. Additionally, the requirement for accredited investors assumes that the applicant can do due diligence on his own.
That bar may be too big for many investors. If you’re not an accredited investor but you want to invest through a crowdfunded platform in real estate, you can. Our list of top platforms prioritized the sites that would accept all investors, but to recapture:
- Fundrise: Any citizen in the US over the age of 18 can invest with only $500!
- DiversyFund: The SEC allows DiversyFund to give investment opportunities to all. Any US citizen, unaccredited or approved, over the age of 18, can invest with just $500!
- RealtyMogul: Accredited and unaccredited investors can invest in MogulREIT I and MogulREIT II
- CrowdStreet: CrowdStreet launched its first ever investment offering for all US-based investors in August 2017.
HISTORY OF REAL ESTATE CROWDFUNDING
The JOBS – or Jumpstart Our Business Startups – act in 2012 opened up a new environment for US-based companies. Individuals historically had restricted themselves to trading in public stocks and bonds.
The day-to-day investor was now able to invest directly in online real estate investment ventures after the act passed. We’ve seen hundreds of real estate crowdfunding sites spring up. Such crowdfunding real estate platforms all have different niches, different ambitions and more. For the first time ever, by diversifying into private-market real estate investments you can now spend like a billion dollar company.
IS REAL ESTATE CROWDFUNDING FOR YOU?
There is no question that crowdfunding in real estate is shaking up current investment portfolios. With re-urbanization on the rise, there’s no question that in the next few years, more and more of these websites will spring up to finance new apartment complexes, retail and more.
Fortunately, you can now invest in real estate by crowdfunding with as little as $500 on the online real estate market. Whether you want to be a landlord or not, considering crowdfunded real estate as a way to diversify your investment strategy is worthwhile.