Crowdfunding is a relatively new concept popularized by sites such as Kickstarter and Indiegogo in recent years. Niche-specific crowdfunding platforms have also been on the rise, including real estate crowdfunding platforms that seek to pair real estate developers with a pool of small investors looking for real estate opportunities.
With the growth of these alternative investment platforms on the internet and changes in laws and industry regulations, it’s now easier than ever to get started in crowdfunding real estate investment projects. There are plenty of real estate crowdfunding platforms that provide you with the freedom to take part in both debt and equity ventures and investments that would not be possible in the “traditional” industry.
Crowdfunding Real Estate Overview
Real estate crowdfunding platforms provide financing to borrowers who want to purchase or develop investment properties for sizeable returns. The borrowers propose their deals on the platform. The platforms then do their due diligence and decide if the proposed deals are good to host on their site. Platform investors are only allowed to choose from the pre-approved deals deemed good investments by the host platform.
Some crowdfunding real estate platforms fill a niche that Real Estate Investment Trusts (REITs) cannot fill. The properties on these platforms are usually small, their values are low, and/or the potential return on investment (ROI) is too small to be of interest to REITs. These crowdfunding platforms allow greater accessibility for non-accredited individuals eager to invest in real estate, diversify their real estate investment portfolio, or invest in others to curate real estate deals. Considering that some platforms require minimum investments of $1,000, $5,000, or $10,000+ means that crowdfunding a real estate deal is within reach.
Benefits to Crowdfunding Real Estate
There are many benefits to investing in crowdfunding real estate platforms. The benefits include:
- Low investment requirements, which range from $10 to thousands of dollars
- Ability to invest in many different types of assets (e.g., small homes, apartment complexes, office parks)
- No requirement to do due diligence on the properties before investing in them
- No phone calls, stress, or hassle when investigating and considering the merits of real estate deals (the platforms do it for you!)
- Less time consuming than doing it yourself or as part of a real estate investment group
- Ability to do real estate arbitrage
- Can take advantage of short investment periods (12-36 months for debt and 5-7 years for equity investments)
- Low platform fees (e.g., low annual fees, no platform membership fees)
Disadvantages to Crowdfunding Real Estate
Despite all the great things about crowdfunding real estate platforms, there are still disadvantages to them. Some of the disadvantages are:
- Real estate is inherently risky, and investors must never forget that
- Sweat equity has no value on these platforms
- You can’t sell your notes or equity
- Crowdfunding real estate platforms vary greatly, so you must carefully research them
- Crowdfunding real estate platforms are startups, and many startups fail (e.g., RealtyShares shut down last year)
In this article, you’ll learn about the 16 best ways to crowdfund real estate, with each having an approach or feature that makes it stand out among others. Let’s get into it!
Best Crowdfunding Real Estate Platforms
Founded in 2012 and headquartered in Washington, DC, Fundrise prides itself as one of the only platforms with over $4 billion worth of real estate investment across the US. Its current portfolio indicates that they manage over $1 billion of equity on behalf of their behemoth 130,000 individual investors. With a $500 minimum investment, openness to non-accredited investors, tiered plans for investors, and a solid reputation, Fundrise could be one of the more beginner-friendly crowdfunding platforms out there.
Fundrise deals with its own portfolio of privately-traded, trademarked eREITs and eFUNDs. As the names imply, these are trusts and funds rather than individual deals and projects. Accordingly, they’re less liquid than such investments, but if you’re looking to diversify your risk and are interested in a more hands-off approach (as many retail investors are), then Fundrise could be a good choice for you. You can also request share redemption at any time, although this is not guaranteed. Investors also have the opportunity to invest in institutional real estate.
Fundrise’s minimum deposit depends on the type of account an investor opens, and the platform offers a choice of account levels including, Basic, Core, Advanced, and Premium accounts. The platform promises an annual return of between 8.7 to 12.4 percent per annum. They also have one of the best mobile apps in the industry.
Fundrise Account Levels
- Minimum investment $500
- Minimum investment $1,000
- Minimum investment of $5,000
- Minimum investment of $10,000
- Minimum investment of $100,000
Fundrise Features and Requirements
- Annual advisory fee (0.15%)
- Asset management fee (0.85%)
- May ask to redeem your shares at any time
- No guarantee that the shares will be redeemed
- May be charged a fee for early redemption of shares
- Quarterly returns
- Annual returns ranging from 8.7% to 12.4%
Investors on this platform can invest in commercial property in small markets that are not attractive to REITs. Streitwise lets non-accredited investors invest in REITs. Although investors are not required to have a net worth of $1 million or more, investors are limited to investing 10% or less of their net worth or annual income, whichever is higher.
Streitwise Features and Requirements
- Minimum investment of $1,000
- Account opening fee (no more than 3% of investment)
- A management fee that is 2% of the investment
- No transaction fees
- Invested funds can be liquidated after 1 year
- After 1 year, investors can redeem their investments quarterly
DiversyFund prides itself as an alternative investment platform that requires zero management fees from its investors. DiversyFund also operates differently than other platforms by buying, developing, and managing a portfolio of multifamily real estate properties for its investors rather than connecting investors with projects. Profit shares are then appropriately distributed amongst the investors.
To invest with DiversyFund, investors must deposit a minimum of $500 which cannot be withdrawn earlier than the defined investment term. The total return on investment promised per annum is between 11 percent and 18 percent. Investors also do not have to be accredited, thereby giving more investors room to get involved with projects.
DiversyFund Features and Requirements
- Minimum investment of $500
- Receive advice from an automated service
- Investment cannot be withdrawn or liquidated for five years
- The platform constantly reinvests investors’ dividends and earnings from their assets until the assets are sold
- Investment limited to DiversyFund REITs
CrowdStreet boasts of over 100,000 investors throughout the US on their platform. The platform, headquartered in Portland, Oregon, was founded in 2014. As a multi-faceted real estate crowdfunding platform, investors can invest in both funds and individual deals.
CrowdStreet is only open to accredited investors with a minimum investment threshold of $25,000. While the minimum investment is higher than on other platforms, investors can participate in their professionally managed and curated real estate investment portfolio.
The company claims to have helped hundreds of firms raise much-needed capital and reports of funding more than 473 deals. Funding for a majority of these listings is ongoing.
CrowdStreet Features and Requirements
- Minimum investment size of $25,000
- There is also 0.5 to 2.5 percent CrowdStreet Fund fees
- Investors can expect returns on their investments in the region of 11.5 to 26.4 percent per annum, depending on the investment type
- Investors must be accredited
PeerStreet is another platform that focuses on a specific investment approach – loan crowdfunding. Accredited investors can invest in private real estate loans, providing lenders capital to loan out to real estate borrowers. PeerStreet then collects monthly payments from the borrowers, distributing a share of those payments to the investors. They have a solid system that allows you to diversify your portfolio manually and in an automated way, with filters for investments in particular locations, borrowers and lenders, terms, asset classes, rates, and more.
Investments through PeerStreet have a low-interest rate risk because loans are for a maximum of 24 months. However, since you’re able to invest only in debt, it also poses a higher risk than other crowdfunding platforms. If you have an appetite for higher risk, PeerStreet could be the best way to crowdfund real estate for you, as with higher risk can come higher reward or faster profit.
The crowdfunding platform connects investors with real estate lenders. PeerStreet acts as an intermediary between you and lenders, distributing your investment amount to real estate lenders. These lenders lend this capital to real estate developers, who in turn must pay the lenders the amount borrowed plus interest, which is then split to give investors their return on investment.
The crowdfunding platform promises a 6 to 12 percent return on investment per annum. Investors must also be accredited and must deposit a minimum of $1,000 to invest on the platform.
RealtyMogul has a reputation for doing some of the best research and due diligence in the real estate crowdfunding industry. It started in 2013, and since then, over 197,000 investors have joined the platform to access its REITs and individual property (multifamily, industrial, self-storage, medical, office, and retail units), investment opportunities. RealtyMogul inspects every property in person and does due diligence using its specially developed models and methods.
This crowdfunding platform only works with real estate partners with proven track records in managing real estate assets. Moreover, RealtyMogul doesn’t invest in properties that don’t have cash flow, such as bare land or ground-up construction projects. It allows you to choose from three goals – passive income, growth, and diversification. With a minimum investment of just $5,000, RealtyMogul is also open to non-accredited investors, making this an attractive platform for beginners looking for companies that are careful with their investments.
Investors may see on average a return on investment per annum between 4.5 to 8 percent. The flipside of this is that there are long hold periods, and investments can’t be easily sold or traded. Regardless of that, nearly 200,000 Americans have invested with RealtyMogul, so it could just be the real estate crowdfunding platform for you.
EquityMultiple has its eyes set on institutional, commercial real estate investments, and that’s what it offers to you alongside equity, preferred equity, and senior debt investments. It has an easy-to-use platform with a diverse range of investment opportunities. Yet, it is only open to accredited investors ready to pay a minimum of $10,000 to begin. Profit distribution schedules are usually monthly or quarterly but vary from deal to deal. They promise a return on investment of 13.7% per annum. It has a 0.5% fee for equity investments, with fees varying for other deals.
EquityMultiple offers its investors three investment approaches such as fund investing, direct investing, and tax-deferred investing. The platform’s main selling point is the decades of real estate experience and in-house underwriting.
EquityMultiple Features and Requirements
- Fund Investing
- Multiple assets. Immediate diversification
- Strategies include debt, equity, Opportunity Funds, and CRE Securities
- Target Duration: 1.5 to 10+ years
- Minimum investment of $20,000
- Direct Investing
- Targeted investments, one property at a time
- Strategies include debt, preferred equity, and common equity
- Target Duration: 6 months to 5+ years
- Minimum investment of $10,000
- Tax-Deferred Investing
- Equity investments that offer codified tax benefits
- Strategies include Opportunity Zone and 1031 Exchange
- Target Duration: 5 to 10+ years
- Minimum investment of $40,000
This investment platform provides loans to people purchasing single-family residential homes. For investors with a small amount of money to invest and who want to limit the time their money is locked in an investment, this platform may be for you. GroundFloor’s investors’ ROI comes from the borrower paying interest on the loan given by the platform.
GroundFloor Features and Requirements
- The minimum investment is $10
- No membership fees
- Receive your investment capital with interest in 6-9 months (on average)
- Manage liquidity and risk to your preference
- The platform has an ROI of 10%+
For investors who can park their capital in an investment for years, this profitable investment vehicle may be ideal. With YieldStreet, investors can invest in debt investments that include real estate, marine, art financing, legal, commercial loan, and litigation deals. These kinds of investments are normally reserved for hedge funds and institutional investors. Non-accredited investors can only invest in the Prism Fund.
YieldStreet Features and Requirements
- The minimum investment for Prism Fund is $5,000
- Management fees are 1-2.5% (on average) of invested funds
- Annual fees are 1.5% of the investment
- Transparent investments
- All asset secured by collateral
- Investors receive quarterly dividends at a fixed rate of 7%
- Investments cannot be redeemed until the end of the term of the offering
- Redemption of investments may extend past the term of the offering
- Limited opportunities for investment
10. Modiv (formerly Rich Uncles)
The Modiv crowdfunding real estate platform allows investors to invest in commercial real estate. It gives investors who want to develop their portfolios the opportunity to receive monthly dividends from the platform’s properties’ monthly rental income.
Modiv Features and Requirements
- Minimum investment of $500
- Management fees are 3% per annum
- Invest in 42 commercial properties held by a private REIT
- Invested capital is tied up in assets for a lengthy period
- Monthly dividend payments
- Restricted to investors with net worth and annual income of no less than $70,000
RealCrowd platform came through the prestigious Y Combinator incubator program, with its founders having a collective $3 billion institutional real estate investing experience. It is a low-risk platform that only deals with real estate companies that do not need your money to close on their offerings.
Among its 25,000+ potential investors, RealCrowd aims to develop a network of accredited investors who build long-term relationships with commercial real estate companies. Since its first offering in 2013, the platform has completed over 240 offerings for both properties and funds, with over $300MM invested across the board. Members can choose to invest in funds or individual property deals like multifamily, retail, office, industrial, and other commercial assets. A minimum investment of $25,000 is required.
12. Patch of Land
The crowdfunding platform is a peer-to-peer marketplace that aims at matching accredited, institutional, and international investors with pre-funded short-term debt investments. Patch of Land goes after projects that would otherwise be overlooked funding by traditional lenders. By providing immediate funding for real estate projects, investments start to accrue interest right away, which gets paid back monthly or quarterly to investors, resulting in high yields for its clients. Funding is available for projects like fix-and-flips, bridge loans, and other construction projects.
Patch of Land Features and Requirements
- Minimum loan amount of $100,000 for an investment deal
- A Loan to Value (LTV) up to 80%
- An After-Rehab Value (ARV) up to 70%
- 1 – 36 month loan duration
- No prepayment penalties
- Minimum investment of $1,000
- Account fees between 0 – 3% of the loan amount
- Investors are required to be accredited
Other Great Ways to Crowdfund Real Estate
13. Use Social Media
Social media is the most powerful tool in the world right now. Whether you are looking for a pair of shoes or a million-dollar investment, there is nothing that you cannot find there. On Facebook, Instagram, Reddit, and similar platforms, you can approach people who may be interested in real estate investments. Moreover, you can single out real estate investors and message them directly with your proposition. You can also create a public post and publish it, and people who would be interested can get in touch with you directly.
The best part about crowdfunding is that if someone wants to invest a small amount of money, such as $500, they can. With your proposition, people would be able to invest in real estate crowdfunding, which will help them get wonderful returns. You can frame your proposal so that you can appeal to hundreds or thousands of investors with little money, which will help you gather a substantial amount of money for your project.
14. Approach Family and Friends
Do you have a wealthy aunt or uncle, or someone in your friends’ circle recently inherited a lot of money? Even if you don’t have such people around you, you can get in touch with your family and friends and put forward your real estate proposal in front of them. When you are looking to get your real estate project crowdfunded, the wording is extremely important. You have to write your proposal so that people can understand that they will be joining numerous investors to fund your project and receive returns accordingly.
If you are a good speaker or have great people skills, you will have no trouble gathering investments from your friends and family. One benefit of doing this is that since you have a prior connection with family and friends, they’ll trust you and be more accommodating and understanding.
15. Build a Website
This is a rather unorthodox method, but you can build your website to reach out to the masses for real estate crowdfunding. If you run a construction company or are a real estate developer, you can put all the details of your new project on your website, as well as a call to action stating that you are looking to crowdfund your project.
To ensure that you reach more and more people, you can run ads, promotional campaigns, or even write in different real estate investment forums. Building a website to crowdfund real estate will help you gain maximum exposure and reach hundreds of potential investors.
16. Check out Real Estate Forums
There are many real estate forums where you can find thousands of like-minded developers and investors who discuss everything about the world of real estate. If you want to gather investment for your project, you can join these forums and explain your idea to other people. Even if ten people like your proposal and decide to invest a small amount of money, it would be a good start for you.
Also, bear in mind that once you get some investors for your project, you can ask them to spread the word in their circle, which will help increase your reach to more people. No matter how many methods you explore, word of mouth is still one of the best means of marketing.
This wraps up our guide on the 16 best ways to crowdfund real estate. If you choose to use one of these crowdfunding methods, remember to set clear expectations and detail what you are willing to offer in return. Also, make sure to update your investors at every stage or milestone of your project. Effective communication is always key to any crowdfunding project.
Another thing to keep in mind is to stay active during your crowdfunding campaign. No matter which method you use, you will have to pursue investors actively and pitch your idea to thousands of people with the same zeal. Perseverance is key when it comes to real estate crowdfunding.