Investing your money can certainly be scary. From managing market volatility to your own emotion, investing your earnings is a challenge. But before ever thinking about volatility, emotion, and other aspects of investing, individuals also want to make sure the investment itself is safe.
There are too many "get rich quick schemes" that turn out to be scams, too many investments that are too good to be true. So, how can you know if an investment is safe? What things can you look for to ensure your funds are protected?
In this article, we are going to provide a quick review on a relatively new platform called CrowdStreet and then dive into whether or not CrowdStreet is safe.
CrowdStreet is an online crowdfunded real estate investing platform. The company was launched in 2014 and provides investors access to commercial real estate.
CrowdStreet's offerings are limited to accredited investors and require a $25,000 minimum investment.
They offer investors access to individual deals, funds, and custom built portfolios. Each of the deals listed on their site are highly vetted. In fact, they explain to investors that they review roughly 400 deals every month. And of those 400, just 5% are deemed high-quality and listed on their website.
Since its inception, CrowdStreet has funded over 500 deals and 54 of them have been fully realized. The platform has achieved a historical IRR of 17.1% and has distributed over $245 million to investors.
The company has a 3.6 star rating on TrustPilot from 92 reviews.
Check out our full CrowdStreet review for more.
CrowdStreet is a safe and legitimate company; however, like any other investment offering, it is at risk of losing value. Whenever you invest your money, there is a risk that the value could go down. CrowdStreet makes this very clear in their disclosures and also states that they are not a registered broker or investment advisor registered with the SEC. Thus any investment offered on their site should be reviewed by the investor before committing funds.
CrowdStreet as a company is safe and has in fact raised over $2 billion from investors. Since its launch, CrowdStreet has achieved an impressive track record with over $245 million in distributions to investors and a historical 17.1% IRR. These numbers speak for themselves and demonstrate CrowdStreet's ability to pick and choose strong investments.
With that being said, it is important to note that while an investment listed on their site may show a targeted return, the actual return it achieves may be higher or lower than predicted. Like any investment, the individual investor should take the time to review the offerings and make a decision that makes the most sense for themselves.
There are a number of measures that CrowdStreet uses to choose their investments. First, the company does a deep dive on the sponsor. The way CrowdStreet works is that developers, or sponsors as CrowdStreet calls them, bring investment opportunities to the company. CrowdStreet then reviews these deals and determines whether or not they are high-quality and can be listed on the site.
Before a deal can be listed on the site, CrowdStreet also performs a detailed review on the sponsor themselves. This review checks a sponsor's references, lien history, track record, criminal record, business license and registrations, UCC filings, and even social media.
After a sponsor has been reviewed thoroughly, they are assigned a category: Emerging, Seasoned, Tenured, or Enterprise. Investors can then use these categorizations to help them as they choose investments.
After approving and categorizing a sponsor, CrowdStreet then performs an analysis on the deal itself. When reviewing a potential deal, CrowdStreet's team asks four key questions:
After evaluating both the sponsor and the deal and determining that they meet CrowdStreet's criteria, then it is listed on the site. At that point, the company still encourages investors to conduct their own research. These in-depth evaluations are conducted by a team of real estate experts, so when you invest with CrowdStreet, you get to leverage the knowledge and skills of highly experienced real estate investors.
Like any other investment platform, CrowdStreet does have to collect information from you such as name, email, address, SSN, etc. Investors want to be sure their information is held secure.
CrowdStreet takes security of your information very seriously. They state the following on their site:
The CrowdStreet security principles are influenced by Service Organization Control reporting requirements [specifically SOC 1 (SSAE 16 / 18) and SOC 2] in relation to Security, Availability, Processing Integrity, Confidentiality & Privacy, Infrastructure, People, Procedures and Data.
CrowdStreet maintains its customer facing systems exclusively hosted in Amazon Web Services leveraging corporate policies in configuring accounts (using IAM), network security (using security groups, subnets, NAT, limited public access, IP whitelisting, etc), mitigating DDoS attacks, monitoring and logging.
CrowdStreet has certainly proven itself since its start in 2014. The company has achieved strong financial results for its investors.
With a highly rigorous vetting process, CrowdStreet only approves roughly 5% of deals they review. Each of the opportunities on the site represent the top 5% of opportunities. Investors should still conduct their own research before investing.
For those that want to diversify their holding, CrowdStreet offers investors access to funds. While investors can choose to commit funds to individual deals, investing in a fund reduces the risk.
A benefit to investing with CrowdStreet is the education that you can receive. They hold webinars to help new members understand the process and investment choices.
If CrowdStreet sounds interesting to you, be sure to check out our full review.