Real estate is a highly sought-after investment. This is due to strong appreciation and, generally, low volatility. However, there's a problem: once you buy a property, you have to deal with maintenance and tenants. Let's not even get into the actual buying process, which can take months. So, how do you invest in real estate without actually buying a property?
In the past few years, a multitude of investing platforms have come into existence. Crowdfunding investment platforms have especially gained popularity as investors can finally participate in real estate without the headache of tenants!
In this article, we look at two of these new platforms: CrowdStreet vs RealCrowd. Which of these platforms are best tailored to fit your needs? What are the pros and cons? Let's dive in!
CrowdStreet is a crowdfunded real estate investing platform that provides investment opportunities in 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.
RealCrowd is another platform that is also limited to accredited investors. Like CrowdStreet, it's a marketplace with a number of individual deals investors can browse.
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CrowdStreet is a crowdfunded real estate investment platform. The company focuses on commercial real estate and has a highly rigorous 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.
RealCrowd is an online marketplace connecting investors and sponsors. The company is not a broker-dealer and does not solicit investors. Instead, the company allows sponsors, or issuers, the opportunity to list a deal on their platform.
With a number of deals available for browsing, investors are able to pick and choose the investments that work for them.
RealCrowd was formed in 2012. Since then RealCrowd has completed over 240 offerings! Investors on the platform have invested over $300 million through their platform.
In order for a sponsor to qualify to bring a deal to RealCrowd, they must meet one of 2 requirements: have at least $50 million in transactions AND 10 years of experience or have at least $100 million in transactions and 7.5 years of experience.
Like CrowdStreet, RealCrowd offers investors the option to invest in individual deals or funds. In fact, the investment options really depend on whatever deals sponsors bring them.
With RealCrowd, investors can expect to see deals with all types of commercial and residential real estate. This includes storage units, office buildings, apartment complexes, multifamily properties, and more.
Each deal provides investors with all stats for the potential investment as well as information about the sponsor and their financial documents.
Each deal features different targeted returns. As of this writing, the various deals listed in their marketplace ranged from 10% to 24% targeted IRR.
Because RealCrowd is not the actual sponsor of a deal, they do not set the targeted returns investors see on a listing. Instead, the sponsor of the deal sets the terms such as potential returns, holding period, and first distribution along with the distribution schedule.
Each of the deals listed on the site provides investors with pertinent information. As shown below, investors can view the potential distributions, equity multiple, and more.
One of the great features about investing with RealCrowd is that there are no fees for the investors. The sponsors for each deal pay the fees, which include a base listing fee as well as an investor processing fee.
Like the returns with RealCrowd, the holding period also varies by deal. Most have a 5-10 year holding period.
When investing with RealCrowd, investors should be prepared to hold their position for the life of the project as there is no secondary market to liquidate early.
CrowdStreet and RealCrowd are actually very similar platforms. They both provide investors with a marketplace to browse and select individual deals. Both platforms have high deal flow, though CrowdStreet typically has more deals to choose from.
While both platforms have minimum qualifications for sponsors, CrowdStreet appears to do more due diligence than RealCrowd. Both platforms provide investors with tons of information about the sponsor and deal, and they both encourage investors to conduct their own due diligence.
One area of difference is their fees. CrowdStreet does charge investors a few different fees, which range from about 0.50 to 2.5%. On the other hand, RealCrowd only charges the sponsor fees to list on the platform.
Another major difference is in their investment options. While both offer individual deals and funds, CrowdStreet also offers tailored portfolios built by their team. This can provide investors with a great way to take a hands-off approach. It's important to note that this option does have a $250,000 minimum.
Both platforms are reserved for accredited investors and come with a high minimum investment of $25,000.
Since both platforms allow investors to browse their marketplaces before ever signing up and without paying anything, investors should take a look at both and decide which is best suited for their needs. If you are seeking to avoid fees, then RealCrowd may be best for you. And if you are looking for higher deal flow or a tailored portfolio, CrowdStreet may be the better option.
Check them both out today!