Top Real Estate Crowdfunding Platforms in North America

Real estate crowdfunding offers a chance for retail investors to be involved in the property market without the hefty upfront costs of buying a whole building, and then without the requirement to maintain any part of a building. Real estate investments can be made through acquiring fractional ownership equity, or by lending money, and it can be done for either residential or commercial real estate. There are also platforms that cater mainly for accredited or non-accredited investors, which is a system that operates in the USA and Canada (where the rules vary by province) to allegedly protect non-high net wealth individuals from over-exposure to investment risks. Here are some ways investors can participate, beginning at the high end of the market.

Real Estate Investment Options

There are broadly two main methods of using crowdfunding to invest in real estate.

Equity crowdfunding allows investors to buy shares in a real estate project. Sometimes a completed property or development is sold and the shareholders enjoy a slice of the profits.  In other cases the final development may be retained, rented, and the crowdfunding investors essentially become mini-landlords without the workload. They profit from potential rent collected and the property’s increasing value (capital appreciation, though not guaranteed). It may be possible to trade such shareholdings on secondary markets.

In debt crowdfunding, an investor essentially acts like a lender to a real estate project. Lenders get paid back with pre-set interest rates over a fixed term. The returns are often less than from equity investments, though lending also tends to be less risky than taking equity.

High End Real Estate Crowdfunding

Cardone Capital, as an example, differs a little from traditional real estate crowdfunding platforms in that it functions more like a real estate investment firm than a crowdfunding platform. It offers investment funds focused on acquiring income-producing properties, and people or organizations invest in Cardone Capital funds, not directly in individual properties.

The minimum investment amounts tend to be higher than typical crowdfunding platforms. While information on accreditation requirements isn’t readily available on their website, and it describes itself as appropriate for everyday investors, the required investment levels appear to cater primarily to accredited investors.

Commercial Real Estate Crowdfunding

Crowdfunding for commercial real estate works a little differently than residential crowdfunding. Here’s what you need to be aware of.

• Similar to the residential market, you can invest in equity (owning a share of the property) or debt (loaning money to a project). However, some platforms may offer hybrid options specific to commercial projects.
• Commercial real estate crowdfunding tends to focus on larger income-generating properties like office buildings, warehouses, or retail centres. It can be more volatile than residential as vacancies, tenant defaults, and property values are all more susceptible to economic swings. Commercial real estate is thus considered to be higher risk.
• The minimum investment levels for commercial real estate crowdfunding tend to be higher than residential due to the larger property values. Expect them to be in the thousands rather than hundreds of dollars.
• Selling a commercial real estate investment before the project’s term ends can be difficult. Be prepared for a long-term commitment, unless prepared to consider secondary markets. However, some projects may exclude secondary market trading from the outset.

Commercial Real Estate Crowdfunding Platforms

While there is some overlap with residential real estate platforms, here are four that are focused on commercial opportunities:

PeerStreet specializes in real estate debt, with investment durations typically ranging from one to 36 months. The platform aims to make vetted new loan offerings available daily, providing accessible real estate debt investment assets for accredited investors. They are paid interest on a monthly basis until final repayment of the full loan. PeerStreet typically charges its investors 1% of net proceeds, though this can vary by investment. The minimum investment level is $1,000.

Groundbreaker is a platform that specializes in commercial real estate and caters to both accredited and non-accredited investors, with offerings depending on each investor’s status. The platform’s founder believes technology can dramatically change the way firms invest in real estate, that investors are becoming more tech-savvy, and that these forces create an opportunity for real estate investment firms to embrace new tools that unlock pent-up growth. Groundbreaker is positioned for small and medium syndicates of investors.

Some platforms cater to niche audiences. Vesterr, based in the state of Georgia, launched in mid-2022 and is focused on property owners and investors who are black people. It deals with accredited and non-accredited investors across a wide variety of investments within the commercial real estate realm including hotels, multi-family developments, retail space and more. The minimum investment varies per deal but it is never below $5,000.

NexusCrowd, in Canada, offers its network of accredited investors opportunities to invest in projects run by pre-selected real estate development partners. Each investment opportunity will have already reached at least 50% of its funding target before it is offered to NexusCrowd investors.

RealtyMogul is a well-regarded US platform, dealing only with accredited investors. It is based in Los Angeles, California, and is a clearing house for commercial real estate investments offered by multiple real estate companies. Real estate on offer includes a wide range of multifamily residential, industrial, commercial and mixed use properties. There is a minimum investment level of $5,000, though for some specific projects it can be as high as $100,000.

Residential Real Estate Crowdfunding

This is the entry level point of real estate crowdfunding, though some regular investors are able to generate generous returns without venturing further into the sector. There are a variety of platforms available, some specializing in certain investment types or catering to accredited investors only (people who meet a specific income or net worth threshold). Do your research to find a platform that suits you, and here are a couple that focus on retail investors.

Fundrise is a popular entry-level US platform with a low minimum investment and offerings for non-accredited investors. Investors also enjoy low fees and quarterly redemption windows. It launched in 2012, and today Fundrise manages more than $2.87 billion of equity on behalf of more than 385,000+ individual investors.

addy Invest is a platform designed for Canadian non-accredited casual investors. It markets itself as an investment platform for everyday people who might otherwise not be able to afford to get into real estate investing. The minimum investment amount is astoundingly low at $1. However, addy caps investments per property at $1,000 for unaccredited investors. It is a great foot-in-the-door option for new retail investors to get to grips with the world of real estate investing.

Key Takeaways

Real estate crowdfunding can be a good way to build an investment portfolio, but be sure to understand the risks involved before diving in. Returns are not guaranteed.

• Research is key. Before investing, investigate the platform thoroughly, including fees, project details, and past performance.
• Diversification is smart, so spread your investments across different projects and property types to manage risk.
• Liquidity can be low. Unlike stocks, you might not be able to easily sell your investment before the project reaches its completion term.

If you’re a retail investor just starting with real estate crowdfunding, traditional platforms and residential opportunities might be a better fit due to their lower investment barriers and wider selection of offerings. However, investors can always consider moving towards platforms such as RealtyMogul and Cardone Capital later as their investment portfolio and accreditation status grows.

Remember, the platforms included in this blog are a sample of what’s available and any investor, or real estate developer wanting to raise funds, should conduct their own research on any platform, including fees, investment track record, and potential risks, before making any investment or fundraising decisions.

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• Source: https://crowdsourcingweek.com/blog/real-estate-crowdfunding-north-america/