Updated October 3, 2019

Real Estate Crowdfunding

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How much money do you need to become a real estate investor? Not a lot. Find out how beginners can invest in crowdfunding real estate with just $5

Here are the best real estate crowdfunding platforms for 2019:

What Is Real Estate Crowdfunding?

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Real estate crowdfunding is when you pool your funds with other investors to purchase real estate.

This allows you to invest in real estate with just a little bit of money. You then own a tiny portion of large multi-million real estate projects.

Developers use the crowdfunded money to build their projects. And investors (that's you) earn returns through rental income or when the property appreciates in value.

Real estate crowdfunding is a great way to make passive income. The platform professionals take care of vetting, acquiring, building, and managing the properties. And you just collect the returns.

Real estate crowdfunding vs REIT:
A REIT (Real Estate Investment Trust) is a corporation that invests in real estate. So when you invest in a REIT, you're technically investing in a corporation. There is usually little transparency and you just trust the company to make smart decisions. There are public, traded REITs where you can buy and sell shares anytime you want.

Real estate crowdfunding allows you to invest directly into real estate projects. The platforms are more transparent about exactly what projects your funds are invested in. However, there is less liquidity as the shares are not publicly traded.

How Do You Make Money

Typically, investors are paid in 2 ways:

  • Dividends: This is the income generated from the properties, either through rent or interest on mortgage.

    Dividends are a way to make passive income. Take note if the platform distributes dividends monthly or quarterly.

  • Appreciation in value of your shares: This is when the property goes up in value over time. You're paid at the end of the investment when the property is sold. This can be a few years.

There are two main types of crowdfunding projects:

  • Equity: This is when you own part of the property. Returns are made through profits, such as rental income. This is higher risk, but there is potential for higher returns.
  • Debt: This is when you act as a lender. Returns are made through lending money at a fixed interest rate. This is lower risk, but your returns are fixed.

Best Real Estate Crowdfunding Platforms

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Nowadays, there are tons of real estate crowdfunding platforms. Each one is different and has their unique features. How do you pick the right one?

We have come up with the top real estate crowdfunding platforms. Whether you have just $5 to invest or a lot, there's something that will fit your bill. Read on.

Rich Uncles: Best for Small Investors

Rich Uncles at-a-Glance:
  • $5 minimum investment
  • No accreditation/income requirement for Student Housing REIT
  • No account service fees
  • Project types: Equity & Preferred Equity
  • Property types: Commercial

Rich Uncles lets anyone invest in their Student Housing REIT with just $5. This is great if you only have a little bit to invest.

For Rich Uncles' National REIT, you do need a net worth of at least $70,000 and annual income of at least $70,000. You can buy into the National REIT with as little as $500.

Rich Uncles is very selective about their tenants. They purchase properties with a 50% or more cash down payment. This helps to lower the risk of default. Rich Uncles generally looks for long-term recognizable tenants such as Costco, Walgreens, and 24-Hour Fitness.

Rich Uncles mainly focuses on generating rental income. You receive monthly dividends from the rent. You can either collect the rent as a cash payout or reinvest the dividends.

Rich Uncles offers non-traded REITs. This means that you can't sell your shares on the open market. You should plan to stay in the investment for 4 - 7 years, on average. If you do need to "get out," Rich Uncles offers a monthly Share Repurchase Program.

Fundrise: No Income Requirement

Fundrise at-a-Glance:
  • $500 minimum investment
  • No accreditation/income requirement
  • 1% management fee
  • Project types: Debt, Equity & Preferred Equity
  • Property types: Commercial & Residential

Fundrise has absolutely no income or net worth requirement. All you need is just $500 to open an account. This makes Fundrise one of the best platforms for any investor.

Fundrise offers eREITs, or Real Estate Investment Trusts. eREITs are a well-thought-out, diversified portfolio of real estate investments. They may include new construction or existing buildings with existing tenants.

Fundrise offers both income and growth portfolios. So you have more options depending on your goals.

Income portfolios focus more on properties that generate cash flow (either through rent or mortgage interest). Growth portfolios focus more on properties that are expected to appreciate in value.

Dividends are paid on a quarterly basis.

Fundrise offers a 90-day money-back guarantee. If you aren't satisfied with the experience or aren't comfortable with this investments vehicle, Fundrise will buy back your original investment within the first 90 days.

EquityMultiple: Best for Accredited Investors

EquityMultiple at-a-Glance:
  • $5,000 minimum investment
  • Accreditation required
  • Up to 1% account service fee, plus 10% of profits
  • Project types: Debt, Equity & Preferred Equity
  • Property types: Commercial

Accredited investors definitely have a wider playground when choosing real estate crowdfunding platforms.

EquityMultiple sets itself apart by the vast amount of due diligence they perform before accepting an investment. EquityMultiple looks for:

  • National and regional lenders with significant experience
  • Commercial properties in thriving markets with cash flow
  • Short-term loans with high interest rates
  • Preferred equity investments with strong current return
  • Value-add projects with aggressive business plans

EquityMultiple is transparent with the expected returns. Investments typically last between 6 months and 7 years. The typical investment requires $10,000 minimum, though there are options for $5,000. You can peruse the investments options free of charge first.

In all equity deals, EquityMultiple doesn't get paid until all investors recoup their initial capital contribution. Then EquityMultiple takes 10% of the remaining profits.

What is an accredited investor?
An accredited investor must have a net worth of at least $1 million plus an annual income of at least $200,000.

If you are married and applying for an investment account together, your combined income must be at least $300,000 per year.

RealtyMogul: Best for Long-Term Investors

RealtyMogul at-a-Glance:
  • $1,000 minimum investment
  • Accredited and non-accredited investors
  • Fees vary based on investment
  • Project types: Debt, Equity & Preferred Equity
  • Property types: Commercial & Residential

RealtyMogul offers opportunities to both accredited and non-accredited investors.

For non-accredited investors, you can only invest in RealtyMogul's 2 REIT options (one designed for income and one designed for growth), starting with $1,000 minimum.

For accredited investors, you can invest in individual properties (called "private placements"). RealtyMogul offers equity investments in commercial real estate across the U.S. The typical investment is between 3 to 7 years.

RealtyMogul focuses on quality over quantity. It focuses on commercial real estate that can quickly provide cash flow to investors. It avoids ground-up projects or raw land and only works with real estate partners with a proven track record of success.

Groundfloor: Best for Short-Term Investors

Groundfloor at-a-Glance:
  • $10 minimum investment
  • No accreditation/income requirement
  • No account service fees
  • Project types: Debt
  • Property types: Residential & Single Family

Usually, real estate is an illiquid investment. You're in it for at least several years until a project is complete.

But Groundfloor offers real estate investing opportunities for just 6-12 months, so you're not locked in for years.

Groundfloor is like peer-to-peer lending for real estate projects. You invest in loans to borrowers who need funding for housing projects. You earn returns as the borrowers pay back the loan with interest.

You can pick which loans you want to invest in. The interest rates go from 5% to 25% (with the higher meaning more risky). You can build your own diversified portfolio to minimize risk of default. The average return is 10%.

Groundfloor is available to everyone in all 50 states. There is no income or accreditation requirement.

Other Real Estate Crowdfunding Platforms to Consider

  • Peer Street
    You can invest starting with $1,000. PeerStreet doesn't purchase the real estate itself. Instead, it operates as the middleman between the loan originator and the investors (you).

    You can invest the full loan amount or crowdfund the loan with other investors. You'll receive interest payments around the 1st and 15th of the month for the life of the loan.

  • RealCrowd
    For accredited investors only, RealCrowd lets you invest directly with real estate professionals. It has a strict vetting process. Every real estate company must have at least 10 years of principal-level experience and at least $50 million in transactional history as principals.

    You can select your own projects based on your goals. RealCrowd is a good option for investors who want to do the legwork themselves.

Reasons to Use a Real Estate Crowdfunding Platform

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  • Invest with as little as $5. Because you pool your funds with other investors, you don't need hundreds of thousands of dollars to invest in real estate. You can invest in real estate that would normally not be accessible.

  • Know your risk upfront. Many crowdfunding platforms provide details of the investment upfront, including level of risk and expected returns.

  • Portfolio diversification. Investing in real estate gives you a little more diversification on top of stocks and bonds. This can help provide a hedge against the ups and downs of the market.

  • Invest in many projects. Instead of investing in just one real estate project, your funds can be invested into many projects across the U.S. This also spreads the risk in case one area experiences a downturn.

  • Tax advantage. Real estate investments are usually made through taxable accounts, but an investor can now use a self-directed IRA account to invest in real estate.

Looking for more direct control over your real estate investment? Check out this article from 37th Parallel Properties for everything you should consider before taking the plunge into real estate investing.

What to Look for in a Real Estate Crowdfunding Opportunity

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  • Income or accreditation requirements. This is the biggest limiting factor in what sites and investment options you have.

  • Minimum investment amount. Can you meet the platform's minimum investment requirement?

  • Time horizon of investments. Generally, real estate investment is illiquid. If you don't want your funds to be tied up for years, look for platforms with shorter project timelines or share redemption programs.

  • Investment options. Are you looking for equity or debt investments? Are you looking to make more passive income now or more future appreciation? Each has its own risk, fees, and potential profits. Choose the platform that offers what you need for your goals.

  • A thorough evaluation process. Find out how well the company vets each developer and their approval criteria.

  • A transparent process. You should have access to all the details of the investments to make an informed decision.

Once you've found success with crowdfunding real estate, you may want to take your investments a step further. This piece on Norada Real Estate Investments' blog breaks down everything you should know as you begin buying your own investment properties.

Bottom Line

Real estate crowdfunding gives you ample opportunity to invest in real estate without coming up with large sums of money or any experience in real estate investing.

Make sure you do your own due diligence when choosing the right platform for you, as each option has its pros and cons that make them right for some investors, but not the best option for others. Knowing the fees, risks, and regulations upfront will help you make the decision best suited for you.

Disclaimer: Opinions expressed here are author's alone. Please support CreditDonkey on our mission to help you make savvy decisions. Our free online service is made possible through financial relationships with some of the products and services mentioned on this site. We may receive compensation if you shop through links in our content.

More from CreditDonkey:

Fundrise Review

RealCrowd Review

Rich Uncles Review

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Sharestates Review

There's no way $1,000 could get you invested in real estate, right? What if we told you that you were wrong? There is such a way to invest in real estate and earn its lucrative returns with just $1,000.

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