Commercial properties have long been thought to be the cornerstone of real estate investing reserved for the wealthy. With CrowdStreet and EquityMultiple, now you can take part in this investment in a relatively passive manner.
While real estate investing should be an important part of your investment portfolio, remember there are various considerations that need to be made due to the tangible nature of the asset.
For example, when you invest in Apple stock, you will never have to worry about being called upon for more investment to repair a leaking roof. However, with real estate investing, that is a very real possibility.
Not to mention, it is much easier to sell a stock than it is to sell a building. There is less liquidity in the real estate market than in the stock market.
In this review, we will be looking at two platforms that make commercial real estate investing passive called EquityMultiple and CrowdStreet.
Keep in mind, in order to invest with either platform you need to be accredited. If you are not, check out our article on the best crowdfunded real estate platforms for non-accredited investors.
CrowdStreet is a crowdfunded real estate investing platform that allows accredited investors to get in on private deals with $25,000. With this steep entry fee, many investors will likely choose other options. But for those who are serious about commercial real estate, CrowdStreet is worth a look. The fee for investors ranges from 0.50% to 2.5% on an annual basis.
EquityMultiple is a crowdfunding real estate investment platform for accredited investors with a minimum investment of $5,000. The fee for this platform ranges from 0.50% to 1.50% depending on the type of investment you select.
|Investment Types||Individual properties, funds, tailored portfolios||Individual properties, funds|
|Minimum Investment||Variable (average of $25K)||Variable (average of $10K)|
|Real Estate Focus||Commerical||Commercial|
|Fees||0.5% - 2.5%||0.5% - 1.5% service fee + profit sharing|
|Best For||Experienced Commercial Investors||High Net Worth Investors|
|Diversified Funds, Individual Deals, Managed Portfolios, Opportunity Zones||View Investments|
|Marketplace To Purchase Shares Of Farmland||View Investments|
|Professionally Managed Commercial Real Estate Portfolios||View Investments|
|Income REIT, Growth REIT, Individual Properties, 1031 Exchanges||View Investments|
|Multiple Private Managed Real Estate Funds||View Investments|
Since its founding in 2014, CrowdStreet has published over 524 commercial real estate investment offerings.
Of those 524 offerings, 54 of those have been fully realized. Over $2.25 billion in capital has been raised and over $245 million has been distributed to investors.
Those are incredible numbers, but as you will see, it takes a lot of work to get there.
CrowdStreet allows investors to invest in one of three ways: Individual Deals, Diversified Funds & Vehicles, and Tailored Portfolios. Let’s dive in and discuss.
Within the CrowdStreet marketplace, users can browse different projects currently in production, or soon to be. After doing research and their own due diligence, investors can choose to participate. The minimum investments vary but in general, it’s around $25,000.
On the website, users can sift through a myriad of options from apartment complexes in college towns to new developments in up-and-coming cities. As an investor, you can do all the research necessary to make you feel comfortable before diving in.
Since this is obviously quite a lot of hands-on work, the team at CrowdStreet has made it easy with detailed deal documents, sponsor history, and progress tracking.
If you realize that you don’t have the time to pick your own properties, you can let CrowdStreet’s experts do it for you. With trained fund managers, you can access a quicker path to diversification, a tried and true strategy, and an average lower per deal upfront investment.
Within these funds, you can choose between single-sponsor funds or CrowdStreet funds. Single-sponsor means that one real estate firm is leading the charge and will usually focus on that firm’s specialty within a certain region or asset type.
On the other hand, CrowdStreet funds are managed and constructed by CrowdStreet employees and are set up with a variety of locations and property types.
If you are looking for a more personalized experience, then a custom-built portfolio might be best. These portfolios are designed by a CrowdStreet advisor specifically with your goals in mind.
These advisors will take your goals and bring them to life by investing in properties that line up with your objectives. This obviously comes with a fee, which varies depending on the size of the investment. It also comes with a hefty minimum balance of $250,000.
EquityMultiple’s platform allows users to be as hands-on or as hands-off as they want.
This is thanks to investments in technology made by the company to streamline the investing process. Just like investing with CrowdStreet, investors on EquityMultiple need to be accredited to use the platform.
Commercial real estate investing opens up many more doors than the traditional single-family investing strategy that is common for individual investors. Instead, EquityMultiple invests in professionally managed commercial real estate like malls, multi-family housing complexes, office buildings, and more.
Investors can likewise choose from projects all across the nation and in many different property types.
Currently, EquityMultiple has over $3 billion in assets and has returned over $91 million to investors.
With an impressive track record, EquityMultiple has also gone to great lengths to give its investors options for their money’s future. These options are Direct Investing, Fund Investing, or Tax-Deferred Investing.
This is for the more hands-on investor that enjoys doing all the due diligence required to make the right purchasing decision. Investors focus on one property at a time and are able to choose from a marketplace of projects on the company’s webpage.
These assets, however, are not for quick turnaround investors. Generally, investors prefer to hold these assets for as little as 6 months to 5+ years. Again, this investment comes with a high minimum investment of $10,000.
For those investors who are not as skilled in the art of deal finding, or simply don’t have the time, fund investing could be a great path to take.
This form of investing is best for those looking for diversification across the portfolio. The minimum investment for this type of portfolio is $20,000. Investors find that a timeline from 1.5 to 10+ years is optimal for this strategy.
Investors coming off a sale of another property can take advantage of Tax-Deferred investing where they are able to put off capital gains taxes.
This is done through a 1031 exchange to invest with EquityMultiple in the Tax-Deferred category. These investors have a much longer horizon of 5 to 10+ years. Investors need a minimum of $40,000 to jump in.
EquityMultiple investors can choose between preferred equity, common equity, or syndicated debt.
Similar to a stock investment into preferred shares, preferred equity give investors preference over other investors when cash flows are present.
Preferred equity holders are first in line for cash flow payments once the properties are free and clear of debt and until the preferred return has been met.
The servicing fee for this type of equity hovers around 1% but could be more or less than this.
Common equity is just as it sounds, common. Meaning anyone can use it and there is no preferential treatment, unlike preferred equity.
This, rightfully so, comes with a potential for higher gains given the higher risk associated with it. This spot in the long line of investors is less of a priority for cash flows.
The fee for this type of investment typically ranges from 0.5% - 1.5%. In addition, after you've received a full return of your investment and achieved the IRR hurdle, there is a profit-sharing program with EquityMultiple.
Syndicated money is from many investors to form the capital needed to complete a deal.
Due to the increased diligence of the properties funded with syndicated debt, investors feel more comfortable lending but also experience lower returns.
The fee for this type of investment is around 1%, but just like preferred equity, can fluctuate.
Just as important as where you invest your money, you also need to be wise about how much you pay to invest that money.
The annual fee of roughly 0.5% - 1.5% compensates EquityMultiple for asset management, reporting, record keeping, tax preparation, distribution administration, and other services.
EquityMultiple also charges $30 - $70 per year for each investment.
These platforms are really quite similar. Both allow accredited investors to buy into commercial real estate via a few different investment avenues.
The key differences are the minimum investment requirements and the fee structures.
EquityMultiple has a relatively transparent and straightforward fee structure, however EquityMultiple does keep a portion of the investment through profit sharing. CrowdStreet fees vary based on the investment vehicle, making them less transparent about fees.
In order to invest with EquityMultiple, the minimum is just $5,000. For CrowdStreet, the minimum is much higher at $25,000.