real estate crowdfunding investments

Real estate investments come with several huge drawbacks. 

Diversification poses a problem when a median home in the US costs nearly $400,000. Even when you leverage other people’s money and make a minimum down payment on an investment property, you still tie up tens of thousands in a single investment.  

Then there’s the labor and expertise required to both find good deals on properties and manage them once bought. Compared to truly passive investments, real estate starts looking like a lot of work. 

Real estate crowdfunding investments solve both those problems. Crowdfunded real estate platforms let you diversify easily, spreading less money among more pooled property investments. They also let you invest in real estate passively, with no ongoing labor required. 

 

What Are Real Estate Crowdfunding Investments?

Crowdfunded real estate platforms come in two broad categories. Before choosing platforms to invest with, make sure you understand the variations between and within real estate crowdfunding investments.

 

Crowdfunded REITs

A real estate investment trust or REIT is a fund that owns a pool of real estate-related investments. 

Those crowdfunding projects might include properties directly owned by the fund, known as an equity REIT. In contrast, a debt or mortgage REIT owns debts secured by real property. 

Equity REITs tend to offer more long-term growth potential. After all, they own properties, and real estate usually appreciates in value over time. 

Debt REITs tend to offer better cash flow, paid out to investors in the form of dividends. Both long-term growth and ongoing cash flow and dividends play a huge role in reaching financial independence and retiring early

Some REITs combine both direct ownership and loan investment strategies for a bit of both. 

You can buy and sell shares in publicly-traded REITs through your regular brokerage account. But private crowdfunded REITs work differently: you buy shares directly from the company. That makes share prices far less volatile, since they don’t trade in real time on stock exchanges. But it also makes them less liquid, and difficult to sell. If you want to sell within the first few years of buying shares, many real estate crowdfunding platforms buy them back at a discount from what you paid. 

One other important difference — the SEC regulates public and private REITs differently. Publicly-traded REITs must pay out at least 90% of their profits each year in the form of dividends. While that sounds peachy on paper, it prevents them from growing their portfolio by reinvesting profits in new properties. That severely limits their growth potential. 

Crowdfunded REITs fall under no such restrictions. That gives them more flexibility to reinvest profits and grow their funds’ portfolios, and therefore grow share values.

 

Secured Loans

Not all crowdfunded real estate platforms pool investments into REIT funds. Some instead operate as investment property lenders, offering loans to real estate investors. 

They raise the money for these loans from the public: you. You can review the available loans to fund, and pick and choose which ones you like. You decide how much you want to invest toward any given loan; sometimes as little as $10. 

These loans tend to be short-term, fix-and-flip loans. Loans to buy fixer-uppers, renovate them, and then either sell as flips or refinance as rentals (the BRRRR strategy). 

That makes them short-term investments — a rarity in the world of real estate investing. 

Secured loans offer strong passive income, but no long-term appreciation potential. You own debt, not equity investments in any real estate assets. 

 

Accredited vs. Retail Investors

Because of the way real estate crowdfunding is regulated by the SEC, many crowdfunding platforms don’t allow retail investors ​​mom-and-pop investors like you and me. 

Instead, they can only accept money from accredited investors. These are wealthy investors who must meet one of two criteria to qualify:

  1. A net worth over $1 million (not including equity in their primary residence) or
  2. Annual income over $200,000 for each of the last two years, and the expectation that you will earn at least that much again this year ($300,000 for married couples filing jointly). 

At the risk of getting preachy, the SEC basically says, “We don’t think anyone but the rich is sophisticated enough to invest in high-risk, high-return investments, so we’re not going to let them invest how they see fit.” Good thing we have paternal Uncle Sam telling us what we can and can’t do with our own money. 

So, in any discussion of the best real estate crowdfunding investments, you have to divide them into two camps: those available to accredited investors only and those available to all the rest of us.

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Best Real Estate Crowdfunding Investments for Non-Accredited Investors

Since most of us don’t qualify as accredited investors, let’s start with the best crowdfunded real estate platforms for retail investors.

Note that nearly all of these offer long-term investments only. Most real estate crowdfunding sites expect you to leave your money invested for at least five years. 

Rather than fixating on management fees for these crowdfunded real estate platforms, I focused on rate of return. The sad fact is that real estate investment platforms can hide fees easily, so their disclosed fees mean little. For example, if they do maintenance in-house, they can bill as much as they want as an hourly rate, to pad their profit margin. 

 

1. Fundrise

I invest in Fundrise myself, and have been largely happy with it so far. 

They operate using the pooled fund model, like a REIT. Technically, they operate many REITs, and spread your money among them depending on your investment settings. 

Fundrise invests in a combination of residential projects (mostly apartment buildings) and secured loans. They do own commercial properties in their investment portfolio as well, along with some single-family rental properties. Your money spreads among many of their real estate projects, which helps you diversify.

The more you invest, the more control you have over how your money is allocated. At the $10 and $1,000 levels, you have no control at all. With a minimum of $5,000, you have a little control, opting between their Supplemental Income, Balanced Investing, and Long-Term Growth allocations. If you invest $10,000 or more, you get access to their Plus plans, which allow you to “allocate a portion of your portfolio to more sophisticated real estate strategies that evolve over time based on new market opportunities.” 

They also offer a Premium option with a minimum investment of $100,000, available only to accredited investors. This allows access to even more “private” offerings.

Fundrise allows you to set up automated monthly investments and automated dividend reinvestment. They’re also partnered with a custodian to allow investing through a self-directed IRA. 

I earned a 7% return on my investments in 2020, and a 13.1% return through the first three quarters of 2021. That said, my balance constantly changed over that time, as I added funds through an automatic monthly plan. Other Fundrise investors earned more or less, depending on their investment plan and balance changes. 

Bottom Line: A great starting point for diversified real estate investing. 

Minimum Investment: $10

Type: Pooled funds holding residential & commercial real estate and secured debts.

 

2. Streitwise

I also have money in Streitwise, which invests primarily in commercial real estate. 

Specifically, Streitwise invests largely in office space in second and third tier cities, such as Indianapolis, San Antonio, Minneapolis, and Chandler, AZ. The founders have over $5 million of their own money tied up in the investments, for skin in the game. 

From 2017-2021, they’ve paid out average dividends of 9.4%. However, recent dividend yields have hovered around 8.3-8.4%, where I expect them to stay. 

Still, those are some pretty spectacular dividend yields. 

Unfortunately, Streitwise recently raised their minimum investment from $1,000 to $5,000. That put it out of reach for some, and will spook away other crowdfunding-curious investors. 

Like Fundrise and most other real estate crowdfunding investments, Streitwise expects you to leave your money in the pot for at least five years. If you sell early, they may buy back your shares at a discount. 

I appreciate Streitwise’s transparency around their returns. It bothered me when Fundrise removed both their past returns and future return forecasts from their website, even though returns didn’t decline. 

Consider Streitwise an excellent option to gain broad exposure to US commercial real estate. 

Bottom Line: A high-yield, easy starting point for passive commercial investing in many real estate markets. 

Minimum Investment: $5,000

Type: Pooled REIT fund holding commercial real estate.

 

3. GroundFloor

GroundFloor takes a completely different approach to real estate crowdfunding investments.

Unlike pooled REITs such as Fundrise and Streitwise, GroundFloor is a hard money lender. They issue short-term fix-and-flip loans to real estate investors, and you can pick and choose which loans you want to invest in. Most loans are for 12 months, plus or minus a few months. 

Best of all, you can invest as little as $10 toward any given loan. 

When the borrower sells the property or refinances, you get paid back with interest. You can turn around and reinvest the money in new loans or pocket your money and walk away. 

Of course, all loans come with risk of default. But because GroundFloor lends investment property loans, they aren’t subject to the regulation on homeowner mortgages. GroundFloor also lends a much lower loan-to-value ratio (LTV) than homeowner loans, usually in the 50-80% range. So if the borrower defaults, GroundFloor simply forecloses and sells the property to recover their — your — money. 

I invest in GroundFloor myself and have been mostly happy with it so far. A few loans have had borrowers default, and I continue to watch how GroundFloor handles the process. But the overwhelming majority of their loans repay on time. 

The trick? To invest a little money in a lot of loans. 

As for returns, GroundFloor grades each loan on risk, and charges borrowers accordingly. They pay between 6.5-14% interest on loans, depending on risk grade. 

GroundFloor also raises money by borrowing money directly in the form of private notes. They currently pay 7% interest for 12-month notes. 

Bottom Line: A high-yield, easy way to invest in real estate-secured debt without a long-term commitment. 

Minimum Investment: $10

Type: Individual short-term loans, private notes.

 

4. DiversyFund

DiversyFund takes a different approach, reinvesting all of their profits in new properties to build their real estate portfolio faster. 

They estimate they can return 10-20% per year on investors’ money through their aggressive growth strategy. Impressive returns by any standard, if they deliver on their forecasts.

The drawback is that investors receive no dividends in the meantime. Investors must rely on long-term appreciation and growth to deliver their returns in 5-7 years. 

Which raises a related issue: you can’t easily sell your shares early. DiversyFund is a long-term investment, hard stop. 

However DiversyFund does allow a low minimum investment ($500), making it accessible to many individual investors. Their strategy centers around multifamily apartment buildings spread among many cities nationwide. 

Bottom Line: A long-term investment focused on growth rather than dividends. 

Minimum Investment: $500

Type: Pooled REIT that buys and manages multifamily properties. 

 

5. RealtyMogul

RealtyMogul splits the difference, offering two different REITs. Their MOGULREIT I pays higher dividends with less emphasis on long-term growth. It currently pays a 6% annual dividend, paid monthly. 

In contrast, their MOGULREIT II pays a lower dividend yield of 4.5%, with a greater emphasis on long-term appreciation. Both REITs hold multifamily real estate and commercial properties. 

RealtyMogul also offers individual investment property partnerships, where you can buy fractional ownership in single properties. Investors can even take advantage of 1031 exchanges with these investments. However they only allow accredited investors to participate in these.

RealtyMogul has a relatively long history in the real estate crowdfunding investment space, and has provided stable returns over that time. They enjoy a strong reputation among investors. 

Unfortunately, the minimum investment remains high at $5,000. 

Bottom Line: A reliable crowdfunded real estate platform, with both income-oriented and growth-oriented options. 

Minimum Investment: $5,000

Type: Pooled REITs that buy and manage commercial and multifamily properties. 

 

6. Modiv

In 2019, NNN REIT bought crowdfunded real estate platform Rich Uncles, and in 2021 rebranded as Modiv.

They offer options for both accredited and non-accredited investors, allowing the latter to buy shares in their REIT, which owns both residential properties and office buildings across the US. Investors can buy in with a relatively accessible $1,000 minimum investment. 

I don’t love that Modiv’s website provides no information on past returns or future return projections. After all, it’s the number one question I want answered: How much will I earn on my money?

That said, real estate crowdfunding investments are heavily regulated by the SEC, which gets touchy about exactly what these platforms can and can’t say. That goes doubly for return information. 

Like all crowdfunded real estate platforms, Modiv has the potential to offer high returns. Early investors may earn higher returns than future ones as the company aims to build a track record of success that it can advertise. But only time will tell how they perform.

One feature I like with Modiv is that they offer to let you invest through a self-directed IRA, and they cover all custodial costs and fees on your behalf. That makes it an easy way to invest in real estate through a tax-sheltered retirement account. 

Bottom Line: An unproven yet high-upside option for investors to explore. 

Minimum Investment: $1,000

Type: Pooled REITs that buy and manage commercial and multifamily properties.

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What short-term fix-and-flip loan options are available nowadays?

How about long-term rental property loans?

We compare several buy-and-rehab lenders and several long-term landlord loans on LTV, interest rates, closing costs, income requirements and more.

Best Real Estate Crowdfunding Investments for Accredited Investors

Have more than a few nickels to rub together? 

Wealthier investors have more options for real estate crowdfunding investments. Here are a few of the better ones. 

 

1. Bricken Investment Group

I know Sam Wilson — the rather sharp mind behind Bricken Investment Group — personally, even if we aren’t exactly hanging out every weekend. We’ve chatted a few times over video, and he hosted me on his How to Scale Commercial Real Estate podcast, which we rank among the best real estate investing podcasts

I haven’t done a deal with them yet myself, as a non-accredited investor, although I hope to sneak in the door of their next deal as a sophisticated investor. Bricken Investment Group buys commercial and multifamily real estate and allows you to partner with them on individual properties.

Much of real estate partnerships come down to trust, and I find Sam to be both trustworthy and knowledgeable in the industry.  

Bottom Line: Experienced large-scale real estate investors cherrypick strong deals for investing partnerships. 

Minimum Investment: $25,000-50,000

Type: Individual commercial and multifamily properties for syndication. 

 

2. Real Wealth

I’ve also worked with the folks over at Real Wealth, and have found them to be straight shooters — and true experts in real estate investing. 

They offer real estate syndications for accredited investors through crowdfunding large real estate deals. They work across many types of real estate, from residential to commercial to land and beyond. 

I particularly respect their commitment to education, which is something we take seriously here at SparkRental. They publish an excellent real estate investing blog and podcast. 

Bottom Line: Experienced investors find strong deals for group investments. 

Minimum Investment: Varies by deal.

Type: Individual commercial, residential, and land properties for syndication. 

 

3. CrowdStreet

CrowdStreet is considered by many to be the best real estate crowdfunding platform in the market. 

They’ve consistently scored high returns for investors, ranging from 11.5-26.4%. Of the 473+ commercial real estate properties they’ve bought, they’ve sold 44 of them, with a strong track record on returns. 

Accredited investors can invest in either a pooled portfolio of properties or individual deals, allowing plenty of flexibility. However investment minimums start at $25,000 — hardly chump change. 

CrowdStreet also requires a long-term investment, with no easy options for selling shares early. Plan to leave your money invested in these real estate offerings for at least five years. 

Bottom Line: Strong returns for accredited investors willing to leave their money tied up for years. 

Minimum Investment: $25,000

Type: Both pooled funds and individual commercial and multifamily properties for syndication. 

 

4. EquityMultiple

EquityMultiple allows you to invest in either property-secured debt or equity in individual properties. They claim strong returns since launching in 2015, averaging 16.8%. 

The minimum initial investment is technically $5,000, although most projects require a minimum of $10,000-20,000. Still, that proves more reasonable than most real estate crowdfunding investments catering to accredited investors. 

The platform focuses on commercial real estate. They’ve recently started offering several tax-friendly ways to invest in real estate, including Opportunity Zones and 1031 exchanges. 

As with most real estate crowdfunding investments, expect to leave your money tied up for years. These are long-term, illiquid investments, but you get direct access to large scale real estate investment deals. 

Bottom Line: Strong long-term returns with multiple investing options and several tax-friendly structures available. 

Minimum Investment: $5,000

Type: Secured debt or equity in individual properties. 

 

5. PeerStreet

Similar to GroundFloor, PeerStreet lets you pick and choose individual loans to fund. 

You can also set up automated investments as new loans become available after setting your investing criteria. 

On the plus side, the loans come with short terms, so you don’t need to tie up your money indefinitely. It also comes with a relatively low minimum investment of $1,000. 

But I see little advantage here over GroundFloor — which lets retail investors participate, and provides more transparent interest rate and default rate information on its website. 

Bottom Line: An easy way to invest in real estate-secured debt without a long-term commitment. 

Minimum Investment: $1,000

Type: Individual short-term loans, private notes.

 

Another Option: SparkRental Co-Investing

Here at SparkRental, we recently launched a co-investing program where you can partner with us on our own real estate deals. 

We buy properties with local market experts, and then open them up for a few of our course students or audience members who we know and trust. These are always deals that we’re buying regardless of whether anyone joins us as a partner or not, and we always keep a combined minimum of 51% ownership. 

The deals are usually flips, BRRRR deals, or turnkey rental properties. Some offer short-term profits while others pay rental income for years. 

We are not a real estate crowdfunding platform. We don’t do real estate syndications. These are our own personal investments, our own deals. But we also love to teach, so we allow a few people to partner with us to see behind the scenes if we know, like, and trust them. 

And yes, we allow non-accredited investors. We aren’t here to serve just the ultra-rich or institutional investors — quite the opposite. 

If you’re interested in joining the waitlist to partner on our next deal, fill out the form on our Co-Investing page and we’ll be in touch to get to know you better. 

 

Final Thoughts

I love real estate crowdfunding investments almost as much as I love buying rental properties myself. They offer a great way to diversify your portfolio, and therefore reduce risk, without sacrificing on returns. 

In fact, I invest in real estate as an alternative to bonds. When you can earn similar annual returns on passive crowdfunding projects as you can from mutual funds or the stock market, while diversifying to a completely separate asset class, you reduce risk without sacrificing return on investment. 

But no investment comes risk-free, and you need to fully understand the risks inherent in each real estate investment opportunity before committing your money. Do your due diligence, invest wisely, and come back and let me know about your experiences with crowdfunded real estate platforms!

 

What are your favorite real estate crowdfunding investments? Why?

 

 

More Real Estate Investing Reads:

About the Author

G. Brian Davis is a landlord, real estate investor, and co-founder of SparkRental. His mission: to help 5,000 people reach financial independence by replacing their 9-5 jobs with rental income. If you want to be one of them, join Brian, Deni, and guest Scott Hoefler for a free masterclass on how Scott ditched his day job in under five years.

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