At one time not long ago, investing in the real estate space of the USA. UU. It was not an easy task for everyday consumers. Indeed, unless you were willing to follow the conventional route of buying a house directly through a large down payment and a long-term mortgage agreement, you would not have been able to take a look.
However, things are somewhat different in the modern era of online investment, with the growth of real estate crowdfunding.
In a nutshell, the phenomenon allows average Joe's blogs to invest funds in real estate projects without needing to own the property 100%. Instead, you, together with thousands of other investors, will collectively collect your funds into what is known as crowdfunding. In some cases, this allows you to invest from just $ 5. In return, you will own the property, or group of properties, in a percentage proportional to your investment.
That said, real estate crowdfunding can be a very complex battlefield, so we suggest reading our complete guide before taking the plunge.
Within it, we will give you a complete breakdown of everything you need to know, how crowdfunding works, the different types of investments you can make, how much you should expect to make and what risks you should take into account. .
But first: we will list the best real estate crowdfunding sites currently active in the market.
The best real estate crowdfunding sites
Be sure to read the complete guide so that you now have a clear idea of what real estate crowdfunding is and how the process works.
Most importantly, you should now have a good understanding of the many metrics you should consider before joining a new crowdfunding site and, especially, how your money is likely to be invested.
That said, we have listed below the main actors currently operating in the growing real estate crowdfunding space.
If you like the sound of a particular site, just be sure to do your own due diligence before registering.
Fundraising: our best rated crowdfunding site of 2019/20
While you still have to make some considerations about what our other listed real estate crowdfunding sites offer, our number one selection per country mile is Fundrise. In a nutshell, Fundrise is a suitable platform for budgets of all sizes, as it allows you to start with an investment of alone $ 500
Since the platform was launched in 2012, Fundrise claims to have attracted more than 500,000 investors to its site, which resulted in $ 2 billion in real estate business. In terms of the platform's investment structure, the vast majority of what Fundrise offers is based on a conventional real estate investment trust (REIT).
For those who do not know, REITs are very common in the traditional financial field, and they see that large-scale companies raise institutional funds to invest in real estate projects.
These REITs are generally reasonably liquid, since they are quoted on a stock exchange, which means that investors have greater freedoms to collect. However, Fundrise, through its eREIT structure, offers a non-negotiable version of the asset class.
As such, you will not be able to collect your investments on demand so easily. On the other hand, the platform offers a redemption program if you wish to receive your money early. If this falls between 90 days and 5 years of making the investment, then you will have to pay a fee to do so.
However, Fundrise offers four investment portfolios in total, each of which targets a specific segment of the real estate space in the United States. For example, while some portfolios will focus on cash flow generating properties such as commercial buildings and multi-family residential units, others will focus on high-growth areas that are likely to generate gains in the form of appreciation.
Fundrise lists the historical gains it has achieved on its platform since 2014. Specifically, this amounts to average annual returns of:
In terms of the fundamentals, Fundrise will charge annual fees on two fronts: an advisory fee and a maintenance fee.
The first, with 0.15% per annum, covers daily costs, such as facilitating the website and processing deposits. The maintenance fee, which costs 0.85% per year, covers the costs associated with the search and administration of real estate projects.
In general, that means you will pay a very reasonable rate of only 1% per year on the total amount of your investment.
Finally, it is worth noting that you will not have the option to choose specific projects on a DIY basis. Instead, the platform will make investments in its name, depending on the type of investment portfolio in which it decides to enroll.
In this regard, the most popular portfolio in Fundrise is that of its Balanced Portfolio, which points to a good combination of cash flow and high growth generation projects, all of which are based in the United States.
You can read our full review of Fundrise here.
|Fundrise Real Estate Crowdfunding – Visit|
|kind of product||EREIT and real estate electronic funds|
|Potential return||The average yield in 2018 was 9.11%|
|Enrollment||Around 1% (asset management fee 0.85% and advisory fee 0.15%)|
|Minimum investment||$ 500|
|Property types||Commercial, Residential, Single Family|
Roofstock is an online real estate crowdfunding platform that focuses on single-family properties throughout the United States.
Unlike the other platforms we have discussed so far, Roofstock allows non-accredited investors to choose investments based on DIY. In other words, the Roofstock platform will list a lot of properties that you want to buy, and members can choose the specific property in which they want to invest.
This gives you much greater flexibility as to where your money goes if you prefer to adopt a more practical approach to investing in real estate.
In addition, you can view the full portfolio of investment opportunities simply by registering. However, the purchase process actually goes against the typical crowdfunding spirit, to the extent that you will be asked to buy the property yourself, directly.
While you can participate in the financing, you will be asked to maintain a sufficient amount of capital to be eligible.
In addition, you must also take into account the installation fee, which is charged on each real estate investment you make. This will equal the greater of 0.5% of the amount you invest, or $ 500.
You can read our full review of Roofstock here.
|Investment in roofing rental properties – Visit|
|kind of product||Equity, Direct Property|
|Potential return||Varies by property|
|Enrollment||0.50% installation fee|
|Minimum investment||From $ 500 with Roofstock One|
|Property types||Single family|
RealtyMogul is a real estate crowdfunding site based in the USA. UU. Which was also launched in 2012.
Although it is not in the same league as Fundrise with its numbers, the platform has still managed to attract more than 185,000 investors since its inception, which resulted in the injection of more than $ 400 million in real estate projects.
Similar to Fundrise, RealtyMogul invests in a range of real estate companies, including residential buildings, commercial buildings and multi-family complexes.
RealMogul is suitable for both accredited investors and everyday retail investors, although you will be asked to make a minimum investment of $ 5,000.
As such, the platform may not be suitable for those of you looking to start with a smaller investment. In addition, if it falls outside the threshold of the accredited investor, you will only have the option of investing in one of the two private REITs offered by the platform. This gives you less flexibility as to where your funds end.
On the other hand, accredited investors have the opportunity to inject capital into specific individual properties.
In terms of the blocking period, the platform does not offer an early redemption program, nor is there a secondary market to download its shares to other investors. As such, you must keep your investment until the deadline of the project expires.
On average, this will sit between 3 and 7 years. Finally, RealtyMogul charges an annual asset management fee of between 1% and 1.25%, which is based on the total amount that has been retained on the platform.
If an initial investment of $ 5,000 is simply too much for you, then it might be worth exploring what Rich Uncles has to offer. With a minimum investment of only $ 5, this particular real estate crowdfunding site is suitable for budgets of all shapes and sizes.
Rich Uncles will focus on commercial and residential properties within its portfolio, and even has a secondary market for those of you who wish to redeem your investment ahead of time.
If you are happy to keep your investment until maturity, Rich Uncles generally runs a term of 3 to 7 years on your projects.
In addition to super low minimums, we also like rich uncles because they don't charge any investment fees. Instead, the platform earns money once the term of a project has matured.
Once sold, the first 6.5% of the proceeds will be distributed to the platform members. After that, Rich Uncles will take 40% of the remaining earnings.
While this may seem like a lot at first glance, you should remember that this is only based on successful projects. If a real estate company does not generate profits, then Rich Uncles earns nothing.
As such, this is an additional motivator for the platform to ensure that it chooses its investments wisely.
While some of you may be the most suitable for smaller amounts of investment, it is also important to point out the address of a real estate crowdfunding site that specifically suits accredited investors.
In this regard, it might be worth checking out Origin Investments. In addition to being an accredited platform for investors only, you must invest a minimum of $ 100,000.
Launched in 2007 and facilitating more than $ 1 billion in real estate business, Origin Investments will generally focus on income-generating projects.
In addition, the platform will seek to make capital improvements and renovations in its purchased properties to increase the prospect of a healthy appreciation once the property is finally sold.
Most investments in Origin Investments will require a minimum term of 5 years, and the portfolios are packaged as private REITs. This means that it will be difficult for you to redeem your investments until the term expires. Finally, the platform charges an annual maintenance fee of 1.25%.
Similar to Origin Investments, AlphaFlow is a real estate crowdfunding site that is only suitable for accredited investors.
However, the platform allows you to start with a much smaller investment of $ 10,000, unlike the $ 100,000 required by Origin. However, AlphaFlow does all the hard work for you, which means that it will simply make an original investment and the platform will take care of the rest.
It is not necessary to choose specific projects, nor is there any requirement to describe your preferred investment strategy.
Instead, your funds will probably be grouped into dozens of different properties, which generally focus on residential and single-family homes.
The duration of the specific investment in AlphaFlow is also much shorter than that of Origin, with average terms of 12 to 48 months. In terms of commissions, investors will pay an annual charge of 1% on equity instruments and 2% on debt.
PeerStreet is a crowdfunding site that is potentially the most suitable for those of you with a greater appetite for risk.
Simply put, PeerStreet specializes 100% in debt instruments that see investors lend money to those who operate in the real estate development space.
These developers will then use the funds to build residential and single-family units throughout the United States. As developers are very exposed to the health of the United States economy, the risks associated with PeerStreet loans are somewhat high.
In return, you should expect annual returns of between 6% and 12%, which are paid in interest on the loans.
In addition, we like the fact that you have the flexibility to choose which loan structures you want to support, which allows you to perform additional due diligence on the respective developer.
In terms of the fundamentals, PeerStreet allows investments from only $ 1,000, and the terms of the loans generally average between 6 months and 24 months. You will have to pay an installation fee for each investment you make, which will be between 0.25% and 1% of the investment amount.
What is real estate crowdfunding?
In its most basic form, real estate crowdfunding is a process that allows you to set foot on the property ladder without buying a house directly. Instead, you can start with a small amount of money, with your property ownership proportional to the amount you invest. Subsequently, their funds are grouped together with other investors on the same crowdfunding platform.
This allows the platform to invest in real estate projects on its behalf. The real estate crowdfunding space has grown at exponential heights in recent years, especially since property is often seen as the safest asset class in the field of investment. However, each platform will have its own investment strategies, so it is crucial that you understand exactly what your money is injecting.
While we will cover the different types of investments provided by real estate crowdfunding sites in more detail in our guide, this could include anything from a traditional residential property, to a commercial office block and, in some cases, a new project of Development built from scratch.
However, to make sure you understand how a typical crowdfunding transaction could take place in the real estate scene, take a look at the following example.
- A real estate crowdfunding platform wants to buy a $ 400,000 property located in Florida on behalf of its members
- As such, it lists the project on its website with a complete breakdown of why it believes it represents a good investment.
- You like the appearance of the property and decide to invest $ 4,000
- Another 99 members also decide to invest $ 4,000 in the project
- This means that in total, 100 members invested $ 4,000 each, bringing their individual property to 1%
- Therefore, it now owns 1% of the property, something that it could not have achieved without a crowdfunding platform
Although the above example is extremely basic, it should at least illustrate how real estate crowdfunding works.
Read: What are REITs? Complete guide to real estate investment trusts
Choose a real estate crowdfunding site
So, now that you have a basic understanding of how real estate crowdfunding typically works, the following on your radar is likely to be a platform. Each crowdfunding site will not only have its own pros and cons, but will also target a specific segment of the real estate space. As such, you must make a number of considerations before joining a new site.
See the following key metrics that we have listed below. We have explained each metric in more detail below, so be sure to read them before continuing!
- Minimum Investment: Is the platform suitable for small investments or does it require you to be an accredited investor?
- Type of Investment: Will you invest in traditional residential properties or commercial buildings with long-term leases?
- Blocking Period: How long do you need to retain the investment before you can withdraw the funds?
- Appreciation vs Income: Will the underlying property generate profits in the form of appreciation, rental income, or both?
- Enrollment: How much does the crowdfunding platform charge for using its services? What fees should you consider?
- Debt vs. Capital: It is the crowdfunding site that purchases the asset as debt, capital or a combination of both. If it is a combination, what is the debt / capital breakdown?
Minimum investment and eligibility
First, you should evaluate the types of investors that the real estate crowdfunding site in question can assume. Before seeing the minimum investment amount, you should verify that the platform allows investors of the state in which you live. Most importantly, you must assess whether the platform requires you to be an accredited investor, since this is sometimes a requirement.
For those who do not know, a accredited investor refers to someone who has a net worth of at least $ 1 million, or has received an annual salary of $ 200,000 or more for a minimum of two consecutive years. If you do not meet the above requirements, and the platform can only accept accredited investors, then the site will not be suitable for your circumstances.
Once you have verified that you are eligible, you should explore the minimum amount of investment in the platform. While some real estate crowdfunding platforms require a minimum investment of $ 10,000, others allow you to start with just $ 5.
Types of investments in the real estate crowdfunding site
If the chosen real estate crowdfunding website complies with your financial profile, you should make some serious considerations regarding the type of investment you will make. Each type of investment will generally have its own risks and rewards, so you should choose an active vehicle that best meets your long-term investment objectives.
Here is a breakdown of some of the different types of investment that a real estate crowdfunding platform could make on your behalf. Keep in mind that platforms often offer multiple types of investment, so they won't necessarily be pigeonholed into one.
- Residential Properties – If the platform chooses to invest in independent residential properties, it will simply buy a single property on behalf of its members. Depending on the size of the platform, the crowdfunding site could buy multiple properties in a particular fundraising campaign, or just one.
- Multi-family residential properties – Similar to independent residential properties, the crowdfunding platform could also invest in multi-family residences. This is where the platform will buy a complete complex of houses or apartments, and then rent the properties individually.
- Commercial buildings – Outside the residential space, some real estate crowdfunding sites will invest in commercial projects. This could be anything from an office block, a shopping center, university accommodation units or a hospital. These are generally rented to commercial tenants in a long-term lease that will last several years.
- Development Project – Some crowdfunding platforms will seek to invest in projects from scratch. In other words, they will buy a plot of land and build a new project from scratch. This could be a new apartment complex or a commercial construction area. In any case, although development projects generally produce the greatest profits for investors, they also carry the greatest risks, since developers are much more susceptible to a sudden economic downturn.
- Real Estate Loans – Several leading real estate crowdfunding sites will also be dedicated to commercial loans. In most cases, this will be to finance real estate developers who need to raise capital for a new or existing development project. The crowdfunding platform will generate interest on the loan funds, which subsequently generates profits based on the income of its members.
It is also important to keep in mind that real estate crowdfunding platforms will differ in how they make their members choose a particular investment.
For example, some platforms will allow you to invest in an independent project, such as an individual residential property or a student housing complex. In this regard, you know exactly where your money has been injected.
On the other hand, some crowdfunding platforms will not give you the opportunity to choose specific projects.
On the contrary, you will simply choose the type of investment portfolio you need, such as a portfolio that focuses on appreciation or rental income, and the platform will make multiple investments on your behalf.
This is not a problem to say, since the platform is likely to have a highly strict due diligence process before choosing a new investment. In addition, this will generally consist of a team of highly experienced people within the real estate space, so it is not necessary for you to have knowledge of what a good or bad investment is.
One of the most important considerations you should make before investing your money in a real estate crowdfunding project is the amount of time you will be asked to block your money.
In fact, this is the case with any real estate investment, since the underlying asset is highly illiquid. This means that you probably do not have the option of simply withdrawing your investment as you would in the space of shares and participations.
On the contrary, your money, together with the money of your crowdfunder partner, will be tied in the property. As such, this means that the crowdfunding platform can rarely facilitate a withdrawal request until the underlying property has been sold.
That is why you should only consider a real estate investment if you want to make long-term profits. In most cases, this should be for a period of at least five years.
On the other hand, whether or not you can make your profits in the short term will depend on the crowdfunding platform in question, as well as the type of investment that the platform has made. For example, some crowdfunding sites allow you to make a redemption request after a set period of time, even if the underlying property has not been sold.
However, it is likely that you will not only have to pay an early reimbursement fee, but it will be on the condition that the site has the cash flow required to fulfill your withdrawal request. If they don't, then your money is likely to be locked.
You also have a much better chance of accessing your funds in a short period of time if you are investing in a developer loan, since these are usually fixed-term periods that rarely exceed 1-2 years. Ultimately, you should evaluate what the blocking period is before leaving with your money.
Appreciation vs Income
When choosing an investment in a crowdfunding platform, you are likely to be offered several different options, each of which focuses on a combination of appreciation and income. While it is true that the vast majority of properties will benefit from profits both in the form of appreciation and Continuous income, the exact division will vary according to the type of investment.
For example, the developer could buy a multi-family complex in order to make a profit in the form of monthly rental payments. On the other hand, the complex could be located in an area that is somewhat stuck in the growth department. As such, you can get 6% per year in rental income and only 1.5% in appreciation.
At the other end of the spectrum, the real estate crowdfunding site could invest in a new development project that seeks to build a high-rise apartment building. If the platform plans to sell the building as soon as it is completed, then you will get all your earnings in appreciation and nothing in revenue.
To make things easier, most platforms will offer a range of investment portfolios that target a specific growth model. For example, while some portfolios will focus on long-term appreciation, others may focus on making profits in the form of rental payments.
Fees: How much will you be charged?
Like its group of investors, real estate crowdfunding sites are in the business of making money. As such, you should make some considerations regarding the rates. This is to cover the costs associated with the search and management of investment opportunities on behalf of its members.
Fundamentally, a lot of work is required to identify possible investments, which in itself requires a team of highly experienced real estate stakeholders to perform the due diligence required on the property in question. Then, you must take into account the costs associated with the collection of tenant payments, the purchase and sale of new properties, legal specificities, customer service and more.
Your charges are likely to be implemented annually, which will make you pay a small percentage of the current investment portfolio you have on the platform. For example, if you currently have investments worth $ 10,000 at the crowdfunding site, and the annual charge amounts to 1%, then you will pay $ 100 per year.
In other cases, some real estate crowdfunding platforms claim that they do not charge any fees. However, this is usually the case if the platform specializes in higher-risk development loans, so keep this in mind.
Debt vs. capital: what are you investing in?
The final key metric that you should consider when choosing a new real estate crowdfunding site is whether your investment is represented as debt or capital. Either way, it is crucial that you firmly understand the difference between debt and equity in the context of real estate crowdfunding.
If your chosen project represents a capital investment, you will own a percentage of the underlying asset, proportional to the amount you invest.
- For example, if you own 1% of the property, then any gain made by the property will earn you 1%.
- This means that 1% of all rental payments will come your way, and when the property is finally sold, 1% of the income will also come your way.
- On the one hand, many crowdfunders prefer capital, as it guarantees that their investment is held directly in the asset itself.
- In addition, investment earnings are typically higher, and rates are generally lower.
However, capital investments also come with some potential disadvantages.
- For example, your funds are likely to be blocked for a much longer period, since you will not have the potential to make your money until the property is actually sold.
- Do not forget that you are sharing your money with thousands of other investors, so, unless there is a clear majority of their counterparts, the property will remain unsold until the platform decides.
- In addition, there is also the possibility that the purchase of real estate is facilitated along with third-party loans.
- If so, loan providers will generally be the first in the line if the project goes wrong.
As in the case of capital investments, debt instruments also have their advantages and disadvantages in the context of real estate crowdfunding.
First, when we refer to real estate debt instruments, this is when your money is generally used as a means to finance the real owner of the project.
For example, this could be a large multi-family residential unit that a developer wants to build and, therefore, requires funds from multiple sources.
In this sense, your funds will be secured by the property or in the form of a guarantee bond. Either way, if things went wrong during the development process, then you should be the first creditor online
In addition, and as we discussed briefly above, debt instruments will generally be based on a much shorter period, which means that you will not be asked to block your money for an extended period.
De hecho, su inversión solo puede requerir un período de bloqueo de entre 6 meses y 2 años. Finalmente, también es probable que reciba ingresos de forma regular en lugar de tener que esperar a que se venda la propiedad.
Como usted es efectivamente el prestamista en el proyecto, es probable que el prestatario le reembolse su dinero de forma mensual o trimestral hasta que la deuda se pague por completo. Esto le permite utilizar sus pagos de ingresos para reinvertir en otros proyectos y, por lo tanto, disfrutar de los peligros del interés compuesto.
Por otro lado, este tipo particular de inversión de crowdfunding inmobiliario también conlleva riesgos. De manera crucial, los retornos que puede obtener de su inversión están limitados. Si bien esto podría atraer a las personas que desean saber exactamente cuánto van a hacer con su inversión, esto limita su exposición al mercado inmobiliario más amplio.
Con esto, queremos decir que no disfrutará de los beneficios de la apreciación, especialmente si el proyecto está situado en un área de alto crecimiento. En cambio, simplemente obtendrá una cantidad fija de interés en su inversión y, por lo tanto, se perderá las ganancias que obtendrá el desarrollador una vez que se haya vendido el proyecto.
¿Cuál es la inversión mínima que puedo hacer en un sitio de crowdfunding inmobiliario?
Esto dependerá de la plataforma específica de crowdfunding en cuestión. Sin embargo, algunos sitios le permiten comenzar con una inversión de solo $ 5. En el otro extremo del espectro, algunos sitios requieren una inversión mínima de $ 100,000.
¿Cuál es la diferencia entre deuda y capital en un sitio de crowdfunding inmobiliario?
Si su inversión está respaldada por capital, sus fondos se inyectarán directamente en el activo subyacente. Por ejemplo, si está invirtiendo en una unidad unifamiliar, su porcentaje de propiedad será proporcional a lo que invierta. Por otro lado, invertir en un instrumento de deuda en un sitio inmobiliario significa que está prestando dinero al propietario de la propiedad subyacente.
¿Cómo puedo reducir los riesgos de invertir en un proyecto de crowdfunding inmobiliario?
Si bien ninguna inversión estará 100% libre de riesgos, tiene la mejor oportunidad de reducir su exposición a incumplimientos y recesiones del mercado si su cartera está lo más diversificada posible. Por ejemplo, en lugar de invertir $ 10,000 en un solo proyecto, sería mucho mejor hacer 100 inversiones a $ 100 cada una. De esta manera, si una inversión en particular sale mal, no sentirá los efectos cerca si hubiera respaldado un solo proyecto.
¿Cuánto tiempo necesito para bloquear mi inversión antes de poder retirarla de un sitio de crowdfunding inmobiliario?
Una vez más, esto no solo dependerá del sitio en cuestión, sino del tipo de inversión que realice. Por ejemplo, si está invirtiendo en un préstamo inmobiliario basado en deuda, entonces deberá esperar hasta que venza el plazo del préstamo antes de recibir su inversión total. Del mismo modo, si opta por una compra de unidad unifamiliar basada en el patrimonio, es probable que no reciba su dinero hasta que se venda la casa. On the other hand, some platforms give you the option of redeeming your funds early at a fee, and some will have a secondary marketplace that allows you to sell your shares to another buyer.
Disclaimer: The opinions expressed herein are only those of the author, not those of any bank or credit card issuer and have not been reviewed, approved or endorsed by any of these entities.
Disclaimer: The answers below are not provided or commissioned by the bank advertiser. The responses have not been reviewed, approved or supported by the bank advertiser. It is not the responsibility of the bank advertiser to ensure that all publications and / or questions are answered.[ad_2]