Investing in real estate is a massive blanket term. How an investor actually participates in real estate can function in a thousand different ways.
One way that is certainly popular today is through crowdfunding. This makes buying real estate far more accessible as many investors do not have the capital to purchase a large commercial property on their own. Additionally, through a crowdfunding platform, investors can take advantage of real estate while the platform handles the maintenance and tenants.
In this article, we will review two of these platforms: CrowdStreet vs PeerStreet. While both are crowdfunding options, the investment that they offer individuals is very different.
CrowdStreet is a crowdfunded real estate investing platform that focuses on commercial real estate. This platform has a minimum investment of $25,000 and is limited to accredited investors. Once signed up, investors have a chance to browse various deals listed on the site. These deals are highly vetted and represent the top 5% of deals CrowdStreet receives.
PeerStreet is another real estate crowdfunding platform, but rather than purchasing properties and collecting rent checks, it offers investors an opportunity to invest in real estate debt. Investors can pool their money together on PeerStreet and fund short-term deals while collecting interest payments. Like CrowdStreet, the platform is limited to Accredited investors, though the minimum investment of $1,000 is significantly less.
Platform Minimum Link $10 Minimum, Private Commercial Real Estate Portfolios View Investments $10 Minimum, Short Term Real Estate Debt Investments View Investments $100 Minimum, Buy Rental Property Shares View Investments $1,000 Minimum, Private Commercial Real Estate Portfolios View Investments Marketplace, Buy/Sell Single Family Rental Properties View Investments
CrowdStreet is a crowdfunded real estate investment platform. The company focuses on commercial real estate and has a highly objective vetting process to ensure investors have access to high-quality deals only.
The company is essentially a marketplace that connects developers, or sponsors, with investors. These sponsors bring deals to Crowdstreet, who then carefully reviews the offerings and determines whether or not the deal is a good fit for the platform.
CrowdStreet conducts an objective review process that evaluates both the sponsor and potential deal. Of every 400 deals that are brought to CrowdStreet, just 20 actually make it to the marketplace. Read our full review to learn more about the selection process.
Since its launch in 2014, CrowdStreet has listed 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.
CrowdStreet allows investors to invest in one of three ways: Individual Deals, Diversified Funds & Vehicles, and Tailored Portfolios. Let’s dive in and discuss each of them.
Within the CrowdStreet marketplace, investors have the opportunity to browse individual projects. This is a great feature as many real estate investment platforms are limited to funds.
On the website, members can analyze a number of different 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.
These individual deals are all unique, meaning the fees, targeted return, and holding period will be different. Regardless of the deal, there is a $25,000 minimum investment.
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.
In addition to being able to select individual deals on your own, you can also choose to invest in a fund. 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.
These funds have a much higher minimum investment usually between $150,000 and $250,000.
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.
Be sure to check out our full Crowdstreet review to learn more about the deal selection process.
Since its inception, CrowdStreet has demonstrated a strong track record with an average return of 17.1% IRR and a 1.39 equity multiple. These are the results from 56 fully realized deals that had an average holding period of 2.3 years.
Each deal listed on the site features a different targeted IRR and equity multiple. It is important to note that a target is just that, a target. So a deal may have a targeted IRR of 20% but actually realize a return of 17% or 23%.
Crowdstreet fees really depend on the deals that you choose; however, they generally range from 0.50% to 2.5%. There is no fee to sign up, meaning investors can create an account and start browsing potential deals before ever committing funds.
When investing with CrowdStreet, investors should be prepared to leave their money with the company. The holding period varies by deal but typically ranges from 2-10 years.
Since the company does not offer any early redemption or early liquidation, you will have to leave your money in the investment until the maturity date.
PeerStreet is a real estate crowdfunding platform focused on debt investments. PeerStreet was founded in 2013 and is headquartered in Los Angeles, California. Since inception, the company has transacted over $4 billion worth of deals and returned over $225 million worth of interest to investors. They are currently available in 44 states around the US.
Some entrepreneurs who are striving to renovate a property seek out a bridge loan, or a short term loan, to fund the project. With PeerStreet, everyday investors are able to pool their money and supply the capital to complete this project. So, instead of collecting rent checks or gaining value from appreciation, investors receive interest payments from the capital they loan to other entrepreneurs. Debt investments are often thought of as safer, though there is still risk.
"PeerStreet introduced the first and largest two-sided marketplace for investing in real estate debt. On one side, we source loans from our nationwide network of private lenders and brokers, then aggregate, service, and manage those loans for individual and institutional investors on the other."
The platform is currently reserved for accredited investors only. Accredited investors are those with either $200,000 in annual income or $1 million in net worth.
Check out our full PeerStreet review to learn more.
PeerStreet is often thought of as a two-way marketplace for real estate debt investments. The process all begins when an entrepreneur needs a real estate loan to "flip" a property, or renovate the property, and then sell it for a profit or rent it out.
This entrepreneur will then acquire a loan from a lender in PeerStreet's network. A lender is then able to submit one of these loans to PeerStreet for review. If the loan matches the profile and demand of investors, then PeerStreet will list it on the platform.
Once a loan is listed on the platform, investors will have the chance to review individual deals and select the ones that make the most sense to them. Each listing provides a plethora of details and analyses about the property to help investors with their decisions. Individuals are able to choose deals as they please or they can automate their investment.
Once a deal is fully funded, investors can expect the loan to close within 1-3 business days.
After the loan is closed, PeerStreet steps in and manages it through completion.
It is important to note that there is no secondary market available to liquidate holdings early. Once you commit money to a deal, you will not be able to withdraw your funds until the life of the loan reaches maturity. There is an opportunity to receive your money sooner should the borrower pay the loan off early. There is also a chance that a loan could be extended beyond the original term.
The returns an investor can expect to receive with PeerStreet vary by deal, though they typically range from 6-9% annually. Before committing funds to a deal, an investor ought to fully understand the offering and targeted returns.
PeerStreet pays out interest payments twice a month, on the 1st and 15th.
Like the returns, the fees an investor will pay vary by deal. The fee generally ranges between 0.25% and 1.00%. This fee is the difference between what the borrower's interest rate is and what the return is. For example, if the borrower has an interest rate of 7%, and the targeted return is 6.5%, then the fee is 0.5%.
The holding period will also vary by deal, but it typically ranges from 6-24 months. Investors should carefully review a deal before committing funds as there is no secondary market, meaning there is no opportunity to liquidate early.
Investing in real estate can be done in many ways. These two platforms offer investors 2 unique options. While CrowdStreet focuses on value add commercial real estate, PeerStreet focuses on debt investments. A benefit of both is that investors can actually pick and choose their own investments.
The minimum to invest with CrowdStreet is $25,000, while PeerStreet's minimum is just $1,000. Both platforms are reserved for accredited investors.
Another similarity is that both platforms do not offer a secondary market or early liquidation. However, PeerStreet's holding period is typically much less.
To better understand which platform is right for you, be sure to check them both out!