Detailed CrowdStreet Review 2020: crowdfunding real estate investment with CrowdStreet
Our CrowdStreet Review - Updated 30th June 2020
CrowdStreet is a website you need to check out if you are trying to expand your assets into sophisticated commercial real estate. It's only open to larger investors so in order to join, you would have to be considered an accredited investor (more on that later). But if you are, this platform delivers above-average returns, and can be an outstanding addition to a portfolio otherwise dominated by stocks and bonds.
Launched in 2014, and headquartered in Portland, Oregon, CrowdStreet is a crowdfunding site for real estate that invests in commercial properties. Since its establishment, the investor base – numbering more than 100,000 – has invested more than $350 million in 250 offerings, backed by real estate with a valuation of more than $8 billion. The platform blends experience in commercial real estate investment with technology, allowing management to fully screen investment opportunities of institutional quality.
The business says that some investors received more than 22% of returns. It also claims to be the biggest and most dynamic platform for direct investment in commercial real estate opportunities. While the platform is intermediary, your investment is directly with the sponsors of the project.
Crowdfunding sites for real estate are peer-to-peer (P2P) marketplaces, putting together on the same forum both real estate developers (sponsors) and others who want to invest in their projects. Developers pay lower interest rates by removing the middleman – the banker – while investors get higher returns on their assets.
Although the company is not accredited with Better Business Bureau, nevertheless the agency gives CrowdStreet an A+ rating on an A+ to F scale.
How Do You Qualify for CrowdStreet Investment?
You'll need to be an accredited investor to invest with CrowdsSreet. This is true of most – but not all – outlets for real estate crowdfunding.
The conditions to become an accredited investor are:
You must have income in each of the previous two years that exceeded $200,000 (or $300,000 together with a spouse), and fairly assume the same for the current year, OR
You must have a net value exceeding $1 million, either alone or in conjunction with a spouse, and that amount can not include your primary residence.
This criterion limits the involvement to bigger investors. (Three real estate crowdfunding platforms that don't need you to be an accredited investor include Rich Uncles, Fundrise, and Realty Mogul. You can get started on those platforms, then move into CrowdStreet if and when you achieve accredited investor status.) But if you're a eligible investor, please read on.
How CrowdStreet Works
You will have access to qualified checked investment deals when you sign up for the CrowdStreet website. That will make it easier for you to invest in commercial real estate, even though you have no prior experience of doing so.
CrowdStreet puts each transaction through a comprehensive 26-point review process before it is made available to the platform's investors. For instance, it accepts less than 3 percent of the deals evaluated for investment. CrowdStreet is adamant about only taking part in high quality investments.
That way, the screening process works like this:
They then conduct an investigation through Thompson Reuters to verify the business address, search for bankruptcy and lien, search for criminal and lawsuit records, search for UCC filing, and search for professional licenses.
They review each individual deal to ensure it is compatible with the history of the partners, and that they have a track record of handling that form of deal successfully. They also ensure the offer itself is consistent with investor expectations on the CrowdStreet marketplace.
They're doing a variety of other checks, including whether or not market evidence supports the deal assumptions. It involves study of equivalent rent rolls, lease and sale comparisons, assessments and other details.
As an investor, this saves you the hassle of having to go through these complex analysis procedures.
Types of CrowdStreet Deals You Could Invest In
CrowdStreet is different from other crowdfunding sites for real estate that may invest in single family homes, such as fix-and-flips. Rather, the proposed deals are exclusively in commercial real estate.
Criteria for investment deals are:
- Form of property: Retail, Office, Industrial, Mixed Use, Multifamily Homes, Hospitality, Senior Housing, and Storage. Some investments are in individual property, while others are real estate investment trusts (REITs) investing in a collection of related assets.
- Property value range: CrowdStreet is looking to invest in properties with a value range ranging between $5 million and $30 million, but the maximum value of the property is not set. They usually look at such property prices to provide overall funding between $500,000 and $3.5 million.
- Minimum investment: Each deal has a minimum investment needed of between $10,000 and $50,000.
- Expected returns and terms of investment: Targeted returns on investments range from 7.6% to over 23%. Investment periods vary from two years to 10 years, with the most falling around five years.
- Target markets: In all 50 states CrowdStreet targets primary, secondary, and tertiary markets. Each market must show positive trends in the economy and in demography. This means you can diversify your holdings geographically, as well as between different types of property.
Most platform deals are set up in the format of:
- Common or JV equities
- Preferred equities
- Mezzanine, or second position debt
Sign Up with CrowdStreet
First, you create an account. You can register through either Google or LinkedIn, or by providing the platform information. This includes your first and last name, your email address and a password that you create. You will have to adhere to their terms of service.
You would need to register as an accredited investor, and you may be required to complete a certification and include the appropriate documents as evidence of your income and/or net worth.
After you have registered to the website, using the dashboard, you will be able to track the investment performance of your holdings. This will provide updates to the project, monitor the performance of the investment against goals and access project documents.
Browsing Ways to Invest
When you sign up for the platform, you'll be able to search the numerous available investment opportunities. Some are already in place while others are brand new projects.
You will also be able to tell how much money has been raised for each specific project, as well as the number of investors involved in financing, as you browse through individual transactions.
CrowdStreet even has a page that provides the performance of completed deals on the marketplace so you can see the investment results from start to finish. Note that many of these investments easily exceeded the S&P 500 returns, as well as their targeted returns.
When you have agreed on one or more offers in which you would like to invest, pick a dollar sum and apply your investment bid. Since CrowdStreet is a platform for direct investors, you'll invest directly with the sponsor of the project.
You would assume that the deals mentioned above produce yields that are above the average for commercial real estate investments, but it is an indicator of the returns that are possible with this form of investment.
Customer support is available by e-mail and by phone. You may also contact the company through the contact form for online customers. Customer service is available Monday through Friday from 8:30 AM until 5:00 PM, Pacific Time.
Why Invest with CrowdStreet?
Two of the key reasons for investing with CrowdStreet, like real estate crowdfunding, are similar to all real estate investing.
The first relates to diversification. Through investing in a forum for real estate crowdfunding such as CrowdStreet, you can diversify your investments from stocks and bonds into real estate. That will offer you a higher degree of diversification than a portfolio composed entirely of paper assets.
Moreover, commercial real estate operates on various investment periods than stocks and bonds. Where stocks and bonds may fall together, owing, for example, to rising interest rates, commercial real estate will continue to pay dividends of income, and even increase in value as investors leave financial assets in favor of land.
The second reason is the return on investment. There's some evidence that both stocks and bonds are underperformed by commercial real estate in the long term.
As the graph below shows, both the S&P 500 and the yield on bonds was outperformed by commercial real estate since at least 2000. That's a big time period, since it encompasses two major stock bear markets. As you can see, the valuation of a $50,000 commercial real estate investment in the year 2000 has more than quadrupled to over $215,000.
Pros and Cons of CrowdStreet
Number of Alternatives
At the beginning of this article we listed some great alternatives for non-accredited investors so we'll concentrate on alternatives for the accredited investor for this segment.
First up is PeerStreet, where you can select vetted real estate loans to invest in, where the minimum investment is $1000. Your investment is buying a note that represents a piece of a whole loan. And if you have to spend $5,000 you can put your money into five different loans to diversify your investments further.
Alternatively, you can take your $5,000 and put it into EquityMultiple, where you can buy ownership interests in a commercial real estate project. The minimum investment here is $5,000 and your purchase also means you'll share a project's gains or any losses.
CrowdStreet offers a strong diversification of finance, away from stocks and bonds. Because when financial assets are in decline it has the potential to perform well, it will boost your portfolio's long-term performance when it holds a favorable role in your investment mix.
As it offers a stable return rate far above conventional secure investments, such as deposit certificates and the U.S. Treasury securities, it can be an excellent investment option.
CrowdStreet's main drawback is that it's geared for major investors. You will not be eligible to participate on the website, unless you are an accredited investor. However, as noted above, there are other crowdfunding sites for real estate that you can invest in because you don't need to be an accredited investor, and some have needed investment minimum amounts of only $1,000.
But if you're an accredited investor, and you're looking to expand your investments beyond conventional financial assets, CrowdStreet real estate crowdfunding is worth investigating.
If you want more details, or if you would like to sign up to start investing, please visit the CrowdStreet website.
CrowdStreet main features and highlights
- Commercial Real Estate