Real estate crowdfunding is a relatively new way to invest in commercial real estate. Some sites give everyday investors access to assets that have traditionally been reserved for the wealthy. Real estate investment platforms (aka crowdfunding sites) pair developers and other real estate professionals with individual investors who want exposure to real estate—without the hassles of owning, financing, and managing properties.
While real estate crowdfunding is inherently risky, real estate investments can help diversify your portfolio and provide competitive returns. We evaluated more than two dozen platforms to find our top picks for real estate crowdfunding sites in 2020. Here they are, in alphabetical order.
Best Real Estate Crowdfunding Sites
CrowdStreet
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- Fees – 0.50% to 2.5% for CrowdStreet funds; other fees vary by offering
- Minimum Investment – $25,000
- Average Annual Returns – 11.5% to 26.4%, depending on the investment
- Total Investor Distributions – $135 million
- Investment Options – Funds, individual deals, and a professionally managed, tailored portfolio
- Accredited Investors Only – Yes
More than 101,000 investors throughout the U.S. have invested on the Crowdstreet platform. Its innovative approach gives direct access to a vetted range of institutional-quality real estate investments. Accredited investors can pick a single property or invest in a fund.
Founded in 2014 and headquartered in Portland, Ore., the company has published more than 447 commercial real estate investment offerings. To date, 33 of those offerings have been fully realized.
User-friendly platform with a helpful chatbot
Institutional-quality offerings
Easy to find investment details (once you sign up for a free account)
Accredited investors only
Steep investment minimums
No early withdrawals
DiversyFund
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- Fees – 2% to 8% developer fee
- Minimum Investment – $500
- Average Annual Returns – 11% to 18%, depending on the investment
- Total Investor Distributions – $135 million
- Investment Options – Real Estate Investment Trusts (REITs)
- Accredited Investors Only – No
DiversyFund’s model is unique in the real estate crowdfunding space. Instead of serving as a broker that connects investors with projects, DiversyFund buys, develops, and manages a portfolio of properties, collects the cash flow, and divvies up the profits amongst its investors.
Unlike some crowdfunding platforms, it doesn’t charge any management or broker fees. Currently, you can invest in the DiversyFund Growth REIT ($500 minimum) or in the DiversyFund platform itself though Series A round funding ($25,000 minimum; accredited investors only) ahead of the company’s initial public offering (IPO).
Zero management fees for investors
One of the few platforms with a mobile app
Low minimum investment
Limited investment choices
No early withdrawals
Payment at the end of the investment term
EquityMultiple
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- Fees – 0.5% on equity investments; other fees vary by offering
- Minimum Investment – $10,000
- Average Annual Returns – 13.7%
- Total Investor Distributions – $24 million
- Investment Options – Institutional commercial real estate; equity, preferred equity, and senior debt; Opportunity Zones, and 1031 exchange investments
- Accredited Investors Only – Yes
EquityMultiple focuses almost entirely on institutional commercial real estate, and it also offers equity, preferred equity, and senior debt investments. The company recently added tax-advantaged real estate investments (Opportunity Zone and 1031 exchange) and fund products to its lineup. Distribution schedules vary by deal and are usually monthly or quarterly.
Good investment selection
Variety of target hold periods
Easy-to-use platform
Accredited investors only
Steep minimum investment
Limited redemption options
Fundrise
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- Fees – 1%
- Minimum Investment – $1,000
- Average Annual Returns – 8.7% to 12.4%, depending on the investment
- Total Investor Distributions – $79 million
- Investment Options – eREITs and eFUNDs
- Accredited Investors Only – No
Since its launch in 2012, Fundrise has invested in more than $4 billion worth of real estate across the U.S. Today the company manages upward of $1 billion of equity on behalf of more than 130,000 individual investors.
Fundrise offers three account levels: Core, Advanced, and Premium. There’s a different minimum investment amount at each level, as well as varying investment strategies and potential returns. If you want to redeem your shares within Fundrise’s 90-day introductory period, you can receive your full, initial purchase price.
No accreditation required
Well-rated mobile app
Request share redemption at any time (possible fees and redemption not guaranteed)
Limited investment choices
Highly illiquid, privately traded REITs
Nonqualified dividends
PeerStreet
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- Fees – 0.25% to 1%
- Minimum Investment – $1,000
- Average Annual Returns – 6% to 12%
- Total Investor Distributions – $175 million
- Investment Options – Real estate debt
- Accredited Investors Only – Yes
PeerStreet is an online marketplace where accredited investors can invest in high-quality private real estate loans. Here’s how it works: Your investment gives lenders capital to lend to real estate borrowers, then PeerStreet collects the monthly payments from the borrowers, and you (the investor) get a share of those monthly payments.
You can diversify your portfolio manually or automatically with investments from various locations, lenders, borrowers, asset classes, terms, loan-to-value (LTV) ratios, and rates.
Unique offering among real estate investment platforms
Diversification across various parameters
Low interest rate risk because loans are a maximum of 24 months
Accredited investors only
Only offers investments in debt
Higher risk than some other crowdfunding options
RealtyMogul
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- Fees – 1% to 1.5%
- Minimum Investment – $5,000
- Average Annual Returns – 4.5% to 8%
- Total Investor Distributions – $160 million
- Investment Options – REITs, individual properties (multifamily, office, industrial, self-storage, retail, and medical office), 1031 exchanges
- Accredited Investors Only – No
Since its inception in 2013, more than 197,000 investors have joined RealtyMogul to access its REITs and private market offerings. Known for its exemplary due diligence, the company vets every potential property in person and scrutinizes each deal using propriety methods and models.
The company looks for well-leased properties or those with existing leases, and it works only with real estate partners with proven track records and experience managing assets. It does not invest in non-cash-flowing investments, such as raw land or ground-up construction. Investors can choose from three objectives: passive income, growth, and diversification.
Good investment selection
Thorough due diligence
Monthly auto-investing in REITs starting at $250 per month
Different fees associated with each investment
Investments not easily sold or traded
Some long hold periods
What Is Real Estate Crowdfunding?
Crowdfunding is a way to fund a project or venture by pooling small investments from a large group of investors. The idea is that when enough people make small investments, it’s possible to raise substantial amounts of money quickly. One of the most well-known crowdfunding sites is GoFundMe, a platform used to raise money for everything from creative projects to medical bills.
Real estate crowdfunding raises capital for real estate investments. When developers or real estate professionals find investment opportunities, they may not want to fund the entire investment themselves (or they may not be able to). Thus, they turn to crowdfunding to let individual investors help finance the project. The process enables investors to invest in real estate without having to own, finance, or manage properties.
Real estate exposure without having to own, finance, or manage properties
Low minimum investment, so you can access assets that would be unaffordable otherwise
High profit potential through distributions and a lump-sum return at the end of the investment
Automatic investing on most platforms
Illiquid, so your money may be tied up for at least three to five years
Higher risk than other types of equity investments
High fees, depending on the platform and investment you choose
Some opportunities only for accredited investors
How Does Crowdfunding Work in Real Estate?
Real estate investment platforms connect investment opportunities with funding. Most real estate crowdfunding deals have a sponsor, a crowdfunding platform, and investors. Here’s a quick rundown of how it works:
- The sponsor is the individual or company responsible for the project. The sponsor acquires, manages, and sells the investment.
- The crowdfunding platform connects the sponsor to interested investors. It explains deals to potential investors, handles regulatory issues, and collects money from the investors on behalf of the sponsor.
- The investor contributes to the project’s funding in exchange for a
share of the profits.
How Can You Start in Real Estate Crowdfunding?
Crowdfunding platforms connect sponsors and real estate investors. To get started in real estate crowdfunding, research the various crowdfunding sites to find an opportunity that interests you—whether that’s an individual property or a fund that owns dozens of properties.
Pay close attention to the platform’s vetting process for deals as well as its sponsors. The top platforms employ high levels of due diligence to make sure that sponsors—and any deals offered by the sponsors—have been rigorously evaluated.
Can You Crowdfund in Commercial Real Estate?
Yes, real estate crowdfunding platforms give individual investors access to commercial real estate projects, such as hotels, apartment complexes, medical complexes, self-storage, and retail. Without crowdfunding, these
large-scale investments would otherwise be unaffordable to most individuals.
Can You Make Money from Crowdfunding?
Yes, there is the potential to earn competitive returns in real estate crowdfunding.
According to some estimates, average real estate crowdfunding returns are
between 11% and 15% per year.
Still, real estate crowdfunding is considered a risky investment. Just like the stock market, there are no guaranteed returns, and you could lose your entire investment. In addition—depending on the investment and unlike the stock market—your money may be tied up for a period of years.
The Bottom Line
Real estate investment platforms connect investors with investment opportunities. While it’s possible to earn competitive returns, you can lose your entire investment. Carefully research the crowdfunding platform, sponsor, and opportunity before investing any money.
Methodology
To choose the top real estate crowdfunding sites, we considered a variety of factors, including:
- Investment minimums
- Platform fees
- Total number of investors
- Total investor dividends
- Historical annual returns
- Reinvestment opportunities
- Website transparency (how easy it is to find platform fees, minimums, and redemption options)
- Better Business Bureau ratings
- Educational offerings
We also investigated each company’s online reputation—including average monthly search volume, recent news, customer reviews, and complaints—to ensure the platform is well respected and legitimate.