Real estate crowdfunding provides investors with a new way to diversify their portfolios by investing passively in real estate.

Some crowdfunding sites offer non-accredited investors access to investments that may have previously been available only to wealthy or knowledgeable individuals.

Real estate investing (like many other types of investing) is risky. Real estate investments don’t necessarily follow the ups and downs of the stock market, which is part of their attraction. In a portfolio with many different investment types, real estate could help protect investors from the stock market’s volatility.

Investors who would like to experience the potential advantages of real estate investing without having to finance, own, and manage properties may find the idea of real estate crowdfunding appealing. Even though real estate crowdfunding is relatively new, several real estate crowdfunding platforms have a track record of producing good returns for their investors. 

The platforms listed here are in alphabetical order. There are many differences between the platforms identified here. Each may be “best” for certain investors, so we’ve identified the type of investor that may find the platform most appealing.

What Is Real Estate Crowdfunding?

Real estate crowdfunding allows individual investors to pool their resources with other investors to amass a large amount of money quickly. Crowdfunding sites facilitate investments by gathering money from multiple investors to fund a single investment opportunity. Each investor receives a return that’s in proportion to the amount of their investment. If there’s a loss, the investors share that misfortune, as well. 

Investors benefit from real estate crowdfunding because it offers exposure to potentially lucrative investments that may be otherwise unaffordable. Many platforms provide automatic investing, which decreases the amount of time individuals must spend researching, vetting, and executing specific investments. Distributions or lump sum returns provide the potential for good returns from real estate crowdfunding investments. 

It’s crucial to understand that if you decide to get involved with real estate crowdfunding, your money could be tied up for three to five years. This type of investment can be high risk when compared to other investments. Depending on the platform and investment, fees could be high, as well. Some investment platforms work only with accredited investors. 

How Does Real Estate Crowdfunding Work?

Real estate investment platforms connect investment opportunities with funding. Most real estate crowdfunding deals have a sponsor, a crowdfunding platform, and investors. 

Here’s a brief explanation of how real estate crowdfunding platforms work:

• The sponsor acquires, manages, and eventually sells the investment. They are an individual or a company that takes responsibility for the entire project. 
• The crowdfunding platform makes connections between the sponsor and potentially interested investors. It handles regulatory issues, explains the terms of available deals to investors, and collects money from investors. 
• The investors offer money to fund the project in exchange for a share of the potential profits. 

The Best Real Estate Crowdfunding Sites of 2022

• Best for Accredited Investors & Transparency: CrowdStreet
• Best REITs: DiversyFund
• Best for Low Fees: EquityMultiple
• Best for Non-Accredited Investors: Fundrise
• Best for Investing in Loans: PeerStreet
• Best for Property Research: RealtyMogul
• Best for Short Terms: Groundfloor
• Best for Rental Income: Roofstock

CrowdStreet: Best for Accredited Investors & Transparency

CrowdStreet offers accredited investors direct access to commercial real estate investment deals. Potential investors can review, compare, and choose individual deals that meet their investment criteria. More than 100,000 accredited investors across the United States have used the CrowdStreet platform to facilitate their real estate investments. 

CrowdStreet has managed funds. Advisory services offer transparent access, and the platform makes it easy for investors to get involved in potentially lucrative deals outside of the stock market. 

CrowdStreet fees range from 0.50% to 2.5% for CrowdStreet funds. Other funds are also available on the platform, and their fees vary by offering. There’s a minimum $25,000 investment required. Average annual returns are 19% as of 2022. Investors who choose to participate in a CrowdStreet investment deal may experience much lower or higher returns than the average 17.3% returns. 

Choose from individual institutional-quality real estate deals or a professionally managed portfolio. 

CrowdStreet’s headquarters are in Portland, Oregon. The company was founded in 2014 and has been very transparent with their numbers and annual investor returns. As of February 2022, Crowdstreet has invested over $2.8 billion with over 580 deals funded and $464 million paid in distributions to investors. As of 2022, 95 investments have been fully realized (sold) with 2 being realized this year so far.

Pros

• A helpful chatbot helps users navigate the platform 
• Institutional-quality offerings
• Investment deals are easy to find after you sign up for an account

Cons

• Open to accredited investors only
• High investment minimums
• Early withdrawals prohibited

DiversyFund: Best for REITs

Investors become co-owners in a portfolio of real estate assets with their first investment on the DiversyFund platform. The DiversyFund team finds, vets, and creates access to properties with a high potential for positive investment returns. They sell the assets, split profits among investors, and reinvest cash flows to create even more wealth. 

Unlike similar platforms, DiversyFund actually purchases properties. They require a low minimum investment of just $500 for the DiversyFund Growth REIT, and you don’t have to be an institutional investor to get involved. However, investors never pay management or broker fees, and there is usually a 2% to 8% developer fee. Average annual returns across all investments on the DiversyFund platform range from 17% to 18%, based on 2017 and 2018 data.

Pros

• Investors never pay management fees
• Mobile app (unique among real estate crowdfunding platforms)
• Low $500 minimum investment

Cons

• Limited choices among investment types
• Early withdrawals are prohibited
• Investors receive payment at the end of the investment term

EquityMultiple: Best for Low Fees

EquityMultiple has a straightforward three-step process that allows investors to access institutional-quality opportunities quickly.

1. Create a free account to see the details of each property. Review EquityMultiple Marketplace deals to locate one that lines up with investing goals. 
2. Choose an investment amount and submit an investment offer. E-sign the appropriate documents for EquityMultiple approval and fund the offer. 
3. Monitor the direct equity in commercial real estate property via the EquityMultiple online portal. Get updates from the property sponsor, choose a distribution method, and manage tax documentation from the main dashboard. 

EquityMultiple charges a 1% fee on equity investments, and other fees depend on the terms of the individual investment. There may also be origination fees associated with fund offerings. The minimum investment amount is $5,000, and participants must be accredited investors. 

Previous investors with EquityMultiple experienced average annual returns of 16.8%. Since this is an average across all investment types, it’s possible to receive a much lower or higher return if you decide to invest with EquityMultiple. 

The platform provides access to commercial real estate deals, including senior debt, equity, and preferred equity. Investors can also participate in tax-advantaged deals like Opportunity Zones and 1031 exchange investments. 

Distributions are monthly or quarterly. 

Pros

• Diverse investment selection
• Intuitive platform
• Variety of distribution schedules

Cons

• Limited redemption options
• Open only to accredited investors

Fundrise: Best for Non-Accredited Investors & Beginners

Fundrise follows a value investing strategy of acquiring assets for less than their intrinsic value and replacement cost. Through partnerships with local operators and hands-on management, the Fundrise team works to increase the value of assets available on the platform. 

Investment options include equity, debt, commercial, and residential assets. 

Funrise was designed to withstand economic distress, making it ideal for investors that want to diversify to minimize the negative impact of stock market volatility on their portfolio. Extensive underwriting and a conservative approach make Fundrise one of the best platforms for beginning investors. 

Investors may pay a .15% advisory fee as well as a .85% asset management fee. There’s a minimum investment for each account level that ranges from $10 to $100,000.

Average annual returns for Fundrise investors have ranged from 7.31% to 22.99% from 2017 – 2021. Last year was their best year on record returning an average of 22.99% returns to their investors.

As of 2022, Fundrise has more than 210,000 active members and $7 billion in total asset transaction value. They have also returned $160 million to their investors to date. Like Crowdstreet, Fundrise is extremely transparent with their numbers and specifically their return to investors. They even keep a real-time track record to keep tabs on investor earnings.

There are five account levels available on the platform; Starter, Basic, Core, Advanced, and Premium. Each investment tier has a minimum investment amount along with varying investment strategies. 

Pros

• Accreditation not required
• Highly-rated mobile app 
• Share redemption requests available at any time, although redemption is not guaranteed

Cons

• Investors receive nonqualified dividends (taxed at ordinary income rates)
• Investments are illiquid

PeerStreet: Best for Investing in Loans

PeerStreet provides the largest two-sided marketplace where accredited investors can purchase real estate debt. The platform sources loans from a network of private brokers and lenders. They also aggregate, service, and manage loans for investors. PeerStreet provides investors with the chance to invest in real estate without owning property. 

PeerStreet is the first marketplace that allows non-accredited individuals to invest in real estate debt. When investors put money into PeerStreet and borrowers pay back outstanding loans with interest, dividends go back to the investors. 

Investors interested in PeerStreet can review individual investments to decide whether to become involved. The platform allows investors to automatically diversify their portfolios by choosing investments across various lenders, asset classes, LTV ratios, rates, terms, and geographies.

PeerStreet fees are typically 1%, with a minimum investment amount of $1,000. Investors receive average annual returns of 2% to 9%. Loans have a maximum term of 36 months.

Pros

• Different product offerings
• Flexible terms
• Powerful technology-fueled platform

Cons

• Accredited investors only
• Investment types limited to real estate debt
• May expose investors to higher risks than other real estate crowdfunding types

RealtyMogul: Best for Property Research

Investors get institutional-quality deals with the RealtyMogul platform. Both accredited and non-accredited investors can invest in commercial real estate deals. The platform has roughly 219,000 registered members and has financed more than $4 billion in property value. 

Non-accredited investors can choose between two public non-traded REITs and accredited investors can add private placement investments to their portfolio. The platform provides access to individual properties, including office, industrial, retail, medical offices, multifamily, and self-storage. Qualified investors may also have access to 1031 exchanges. Investors can choose from passive income, growth, and diversification objectives when they set up their accounts. 

Fees range from 1% to 1.5%, and the minimum investment is $1,000. Average annual returns historically range from 4.5% to 8%. Investors can get involved with the RealtyMogul platform with a $250 per month auto-investing REIT plan. 

RealtyMogul is well-known for its attention to detail when vetting potential properties. They examine every property in person and evaluate deals using proprietary models and methods. RealtyMogul does not invest in ground-up construction or raw land, which are non-cash-flowing investments. 

Pros

• Range of investment types
• Excellent due diligence
• Start investing with just $250 per month

Cons

• Fees vary according to investment type
• Investments are illiquid
• Long hold periods

Groundfloor: Best for Short Terms

Groundfloor facilitates the investment in real estate loans for those looking to fix and flip residential real estate. Groundfloor is available to both accredited and non-accredited investors alike.

You, as the investor, get to shop around for loans to invest in on the platform. Loans are available in different grades returning 5% to 25%. All loans are secured by the underlying real estate.

Average returns to investors since their inception in 2013 has been a little over 10%.

One of the more enticing features of this platform is that the loans generally have terms of just 6 – 12 months, so your funds aren’t locked up for years.

Pros

• You choose the loans to invest in
• Excellent due diligence, Groundfloor pre-funds most of the loans
• Available to everyone

Cons

• Fixing and flipping homes is a risky investment. This is why the loans have high interest rates with relatively short terms.
• Only available to invest in residential fixer-uppers.

Roofstock: Best for Rental Property Income

Roofstock is an Oakland-based Fin-tech startup that was established in 2015. It’s an online marketplace that allows users to buy and sell residential properties that have both tenants and rental income.

On the buying side, you can finance properties or pay in cash and Rookstock will pair you with an experienced property manager that handles the day-to-day operations.

The layout is easy to navigate and you can quickly see key statistics you’d be keen to know as a prospective investor. Things like: gross yield, cap rate, neighborhood rating, etc.

They’ve had over $4 billion in completed transactions since their inception with 734 properties in 27 states currently on their marketplace.

Roofstock One is their newest offering available only to accredited investors. With Roofstock One you can buy shares of rental homes in multiple markets to better diversify your holdings. Minimum investment in Roofstock One is $5,000 and requires you to buy at least 1/10 of a rental property.

Pros

• No minimum deposits required.
• Investors can choose to pay cash or finance the properties.
• Matched with an experienced property manager, so you remain a passive investor.

Cons

• These are fairly illiquid investments.
• Requires a large down payment if financing.
• Roofstock One requires you to be an accredited investor.
• No mobile app currently.

Real Estate Crowdfunding Platforms Provide Access to a Wide Variety of Investment Types

The Jumpstart Our Business Startups Act of 2013 (JOBS Act) was created to encourage funding of U.S. small businesses. The law eases many securities regulations, allowing companies like real estate crowdfunding platforms to use crowdfunding to issue securities. Before the JOBS Act, real estate investors had just two options; buy publicly-traded real estate investment trusts (REITs) or purchase property and pay to renovate, maintain, and manage it. 

Now, real estate crowdfunding platforms provide an easy and safe way for investors to pool their money to purchase large properties or invest in real estate debt. 

FAQs About Real Estate Crowdfunding

If you still have questions about investing in real estate through online crowdfunding platforms, here are a few more frequently asked questions by consumers like you:

How does it work?

Buying real estate as an investment is typically a sound idea as part of a greater portfolio that consists of stocks, ETFs (exchange traded funds), mutual funds, bonds, and cash. The major barrier to entry, however, has generally been high up front costs associated with the down payment. Along with that hurdle are ongoing monthly loan payments, utilities, maintenance and repair, potentially management fees, etc. Needless to say, it’s typically a costly and time consuming endeavor.

By crowdfunding real estate investments, individual investors can pool their money together using online financial technology companies (aka real estate crowdfunding websites) to fund real estate investments. Most platforms only require a few hundred to several hundred dollars to get started.

This pool of money is then transferred to a holding company – generally a REIT (real estate investment trust) or something similar. These holding companies then own the real estate and operational procedures.

Although there may be hundreds or thousands of investors in the holding company, it is still privately held and pays out dividends to investors on a regular schedule (see individual company’s TOS for details). Public REITs are available as an alternative, where shares can be bought and sold at any time during regular market hours.

Is it safe?

Like all investments, there are elements of risk associated with real estate crowdfunding.

For starters, these are relatively new investment vehicles that haven’t exactly stood the test of time yet. Since most were created after 2013, they haven’t had to weather any major market downturns or recessions up to this point.

Second, the investor (you) will need to have some general understanding of the type of property you’re looking to invest in and will need to conduct your own due diligence. Many of these platforms showcase dozens if not hundreds of properties to buy into. This adds to the risk profile.

Furthermore, when conducting due diligence you may not find every data point you’re looking for or you may not be able to digest everything without thorough experience in the field. Platforms will provide you with an executive summary (sometimes called an OM or offering memorandum) which provides a deeper look into the property, the sponsor and their background, financials, long-term plans and a summary of the investment.

How can an investor get started?

Investors new to the real estate investment scene can start by researching crowdfunding platform options. The best platforms have a track record of solid returns for past investors. They vet new deals thoroughly and have transparent fee structures. 

Before getting involved in real estate crowdfunding, be sure to read the rules about how and when it’s possible to make withdrawals from the account. Understand how redemptions work, as well. 

With real estate crowdfunding, there are no ongoing costs to own real property. It’s easy to track investment performance on the platform, as well. 

A number of the best real estate crowdfunding platforms only work with accredited investors, however. Before new investors can participate, they must submit net worth and income statements to prove they qualify. 

Can you crowdfund in commercial real estate?

Yes, many real estate crowdfunding platforms provide individual investors with the tools and access they need to invest in commercial real estate projects like apartment complexes, self-storage, retail, hotels, and medical complexes. Crowdfunding makes these large investments accessible to qualified individuals. 

Can you make money with real estate crowdfunding?

Yes, depending on the attributes of the individual investment or fund and the platform’s effectiveness, it’s possible to realize positive returns with real estate crowdfunding. Some experts estimate that real estate crowdfunding returns average 11% to 15% per year. 

Even so, real estate crowdfunding is risky. There are no guaranteed returns, and it’s possible to lose an entire investment. Most importantly, with real estate crowdfunding, the investment could be illiquid for years. Investors who discover that they need access to the money they’ve turned over to real estate crowdfunding platforms could face steep fees and wait months to get access to their funds. IT’s crucial to research the platform, fees, redemption rules, and sponsor before committing to a real estate crowdfunding platform investment. 

How does an investor become accredited?

An individual or entity must meet income and net worth guidelines stated in Rule 501 of Regulation D of the Securities Act of 1933. The Securities and Exchange Commission (SEC) defines accredited investors as: 

“A natural person with income exceeding $200,000 in each of the two most recent years or joint income with a spouse exceeding $300,000 for those years and a reasonable expectation of the same income level in the current year.”

And

“A natural person who has an individual net worth, or joint net worth with the person’s spouse, that exceeds $1 million at the time of the purchase, excluding the value of the primary residence of such person.”

There isn’t a single entity or agency that reviews an investor’s credentials to determine whether they can participate as an accredited investor. Companies that provide investment opportunities not registered with the SEC must determine a potential investors’ status as an institutional investor by conducting due diligence. Those seeking to participate in real estate crowdfunding investments reserved for accredited investors must provide the company with proof of their financial qualifications.

Are Real Estate Crowdfunding Platforms Worth It?

Maybe. It depends on your investment goals, your risk tolerance, how long you can afford to have your money tied up in an investment vehicle, and your comfort with new technology.

Accredited investors have more options when it comes to real estate crowdfunding investment opportunities. Still, non-accredited investors who would like to use this type of investment as a way to diversify a growing portfolio may find the potential for higher-than-average returns attractive. 

If you want to try real estate crowdfunding and have access to money you can afford to have tied up in an investment for a while, it may be a worthwhile experiment. Be sure to take time to get comfortable with the platform. Understand the terms and fees before signing paperwork or committing funds to the investment. If you are interested in real estate as an investment but aren’t sure about crowdfunding platforms, you may find that publicly-traded REITs are a better fit.