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There are countless benefits to owning property and being a real estate investor.
One of the problems faced by investors looking to get started with a real estate investment is the high barrier to entry.
Not to mention, the current interest rate environment has made it even more challenging to get into the rental property game.
Real estate crowdfunding platforms have created a unique solution to these problems. You can pool your money with other investors.
In this article, we will be looking at 6 of the top real estate crowdfunding platforms.
You can buy shares of real operating farms across the United States.
Invest in farmland passively while earning distributions from rent paid by farmers.
The minimum to begin investing is just $10 with the Starter Portfolio.
More importantly, you do not need to be an accredited investor.
Fundrise has portfolios for growth and income investors, among others.
Income investors are looking for consistent dividends or distributions from their investments.
RealtyMogul delivers that through their Realty Mogul Income REIT which pays monthly distributions. These can be reinvested back into the REIT or deposited directly to a bank account.
This REIT is available to all investors. The $5,000 minimum is higher than other alternatives.
This platform provides access to a variety of real estate investment opportunities across different markets.
As of 2023, the platform has achieved a net return rate of 17%, returning a cumulative total of $298 million to investors.
Unlike many other real estate platforms, EquityMultiple offers investments in equity, preferred equity, and senior debt.
Fundrise was founded in 2010, giving it a long operating history.
Fundrise is an online real estate company that allows regular investors to participate in private commercial and residential properties through a pooled investment platform.
Click here to view Fundrise investments!
Investors can buy shares of Fundrise's funds by selecting one of their strategies: Fixed Income, Core Plus, Value Add, or Opportunistic.
Each one of these strategies has different goals and potential risks, and this provides a wide array of options for their diverse clientele base.
The company determines the mix of eREITs and eFunds in each plan, along with the underlying properties. There are Advanced and Premium account levels that offer access to more real estate projects and additional features.
Fundrise opens up real estate investment opportunities to those who are not traditionally considered wealthy investors.
EquityMultiple is an online platform designed for accredited investors to engage in professionally managed commercial real estate ventures.
This platform provides access to a variety of real estate investment opportunities across different markets. Unlike many other real estate platforms, EquityMultiple offers investments in equity, preferred equity, and senior debt.
It's tailored for experienced investors with a minimum net worth of $1 million or an annual income of $200,000 ($300,000 for couples).
EquityMultiple blends crowdfunding and traditional real estate investing, allowing investors to grow their wealth through avenues like self-directed IRAs, trusts, entities, and joint accounts.
As of 2023, the platform has achieved a net return rate of 17%, returning a cumulative total of $298 million to investors.
Click here to view EquityMultiple investments!
This platform is ideal for hands-on investors with at least $5,000 to invest, particularly those willing to hold onto their investments for several years due to the relatively illiquid nature of real estate investments.
If you're seeking more liquid investment options, other real estate platforms focused on publicly-traded REITs and individual properties might be more suitable.
AcreTrader is a crowdfunding platform founded in 2018, based in Fayetteville, AR, offering a distinctive investment opportunity.
Instead of traditional real estate, AcreTrader allows you to purchase shares in farmland. This enables portfolio diversification beyond residential or commercial properties.
Led by CEO Carter Malloy, who comes from a farming background and financial services, the company comprises a team of over 120 experts in finance, technology, and agriculture.
Investors can benefit from this platform by investing in farmland shares.
There are two primary avenues for potential returns: the appreciation of the land's value over time and annual rental payments, functioning as dividends.
Click here to view AcreTrader investments!
Anticipated returns range from 3% to 5% with lower risk than most other investments out there.
AcreTrader meticulously evaluates parcels of land, with only a small fraction, less than 5%, meeting their criteria.
The chosen parcels are then placed within distinct legal entities, separate from AcreTrader, which investors buy shares in. Investors indirectly own the land through these legal entities.
Investments often require a minimum of $8,000 to $20,000, and property holding durations usually span from five to ten years. Some properties offer minimum investment options of an acre or more.
The company's BBB accreditation and A+ rating testify to its trustworthiness and professionalism in the field.
CrowdStreet is an online commercial real estate investing platform that launched back in 2014.
CrowdStreet is an online platform that simplifies the process of investing in commercial real estate projects across the United States.
It connects individual investors with reputable project developers, making it easier for investors to access commercial real estate opportunities that they might not have discovered on their own.
CrowdStreet carefully reviews and vets developers, including conducting background and reference checks, to ensure the quality and legitimacy of the projects listed on the platform. This initial screening helps save time for investors who may not have the expertise or resources to perform such evaluations themselves.
However, investors are still encouraged to conduct their own due diligence on both the developers and the projects to understand the potential risks involved.
Click here to view CrowdStreet investments!
The minimum investment amount varies depending on the specific offering and is determined by the project sponsor.
In general, most individual projects and real estate funds available on CrowdStreet require a minimum investment of $25,000.
RealtyMogul formally launched in 2013.
RealtyMogul is an online platform that enables both non-accredited and accredited investors to invest in commercial real estate.
They offer two main investment options: public, nontraded REITs and private placements.
Click here to view RealtyMogul investments!
Private placements, available to accredited investors, include opportunity zone eligible investments and typically involve single property or small portfolio deals with varying investment minimums and a two to 10-year time horizon.
RealtyMogul boasts a significant track record, having financed over 27,000 apartment units valued at more than $5.7 billion and amassed a membership base of over 250,000 registered members.
Arrived Homes offers investors an opportunity to participate in real estate without the headache.
Like the other platforms in this list, Arrived Homes strives to open the door of real estate to everyone, but their offering is unique in a few ways.
This segment is sponsored by Arrived Homes.
Arrived specializes in single family real estate all across the country. The company carefully vets real estate markets to determine which ones have the most income producing potential.
They then find the neighborhoods in those markets with the most potential and purchase properties that meet their criteria.
Each property is then placed in a Series LLC where investors can purchase shares of the property. Arrived qualifies as a REIT, or real estate investment trust, and is taxed accordingly.
Another aspect that makes Arrived so unique is that each tenant is a co-owner of the property, meaning that interests in the property are aligned.
Investing with Arrived is a simple process.
You will simply browse the properties available, reserve the number of shares you would like, and fund your account by linking a bank account.
With this investment comes a few key points to understand:
For those who are not familiar with real estate crowdfunding, let’s go ahead and cover some of the basics.
You might be wondering why all of these platforms are relatively new with limited operating history. This is because crowdfunded real estate is a new investment opportunity that came around in 2012.
The Jumpstart Our Business Startups or JOBS Act passed under the Obama administration. The point of this law was to loosen restrictions on small businesses, particularly by easing securities regulations.
Prior to this law passing, it was illegal for companies to use crowdfunding to issue securities. Now, it is perfectly legal to raise money in this fashion!
Crowdfunding is a relatively new way to finance a project or venture.
Born out of the internet era, investors from all over can pool money together back a project or idea.
A lot of the private real estate investments are reserved for accredited investors only. A number of these new crowdfunded real estate investments are too.
No, this isn’t some exclusive club that you didn't get the the invite to. This is a federal regulation.
An accredited investor is someone who is allowed to be involved with investments that may not be registered with financial authorities.
Governing authorities like the SEC and FINRA heavily regulate public investments that are available to average retail investors.
In order to be an accredited investor, you must meet either of these two requirements:
Based on somewhat recent changes to accredited investor requirements, financial professionals with Series 7, 65 or 82 licenses also qualify.
A lot of people are wondering why you would go through the trouble of investing through a crowdfunded real estate platform when you can just go out and buy a REIT.
If you aren’t familiar, a REIT is a real estate investment trust. It is a company that owns and operates income producing real estate.
This could be residential, commercial or industrial real estate ranging from office buildings to cell towers.
REITs trade on major stock exchanges just like the stocks we know and love. You can buy a share of a REIT just as easily as a share of Apple.
So the question becomes… why not just buy a REIT if you are looking to diversify? Here are a few reasons why.
There are some instances where a REIT makes more sense than a crowdfunded real estate investment.
When real estate investments are discussed, you will often hear about debt and equity investments.
It is important to understand the difference before deciding on a crowdfunded real estate investment.
You want to make sure this type of investment aligns with your goals and investment objective.
With a debt investment, you are loaning funds to someone who owns real estate or is purchasing real estate. It is just like going to the bank for a mortgage.
However, instead of a bank it is a group of private real estate investors backing the loan.
In the past, this was a small group of high net worth individuals who would have access to these deals. Now, thanks to crowdfunding and the JOBS Act, average investors can get in on the action.
Equity investors have an ownership interest in the property. As a result, they stand to gain if there is any upside and lose if there is any downside.
Equity investors share the upside if the property appreciates and share the cash flows if the building is producing income.
Consider a flip for example.
Equity investors pool their money together to buy a number of townhouses in a hot real estate market.
They secure a loan from the debt investors mentioned above. They upgrade the townhouses over the next year and hold onto them for an additional three years, renting them out.
If the properties are producing cash flow, the equity investors share the profits. During this entire duration, the equity investors are paying interest on the loan from the debt investors.
After the fourth year, they sell the townhouses for a significantly higher price.
All of the equity investors would share the upside from the asset appreciation.
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