Investing in real estate is a great opportunity to increase your income and build wealth at the same time. CrowdStreet offers the opportunity to invest directly in commercial real estate projects. Let’s take a look at our CrowdStreet review for investing in real estate opportunities.
CrowdStreet Review: Attractive Real Estate Investment Options for Accredited Investors
If you need to raise capital for a business startup, one of the best ways to fund the opportunity is to use a crowdfunding platform.
CrowdStreet is a form of crowdfunding platform that is specifically designed for commercial real estate (CRE) accredited investors.
In this CrowdStreet review, we will look at how it works, some of its core features, and the pros and cons of the CrowdStreet platform.
What is real estate crowdfunding?
In the past, if you were in need of capital, in a majority of cases, you would have to approach a bank to fund your project.
If you are lucky enough or the bank considers you creditworthy, they would lend you the money and then give you conditions on how to repay the debt. If you are not lucky, then you would probably have to consider other alternatives like borrowing from your rich uncle or your friends.
Today, several online platforms can offer you an opportunity to raise capital for your startup.
Crowdfunding is one of them, and it provides an ideal and easy way to raise capital for any business by pooling together investors to invest in your project.
All you need to have is a good proposal and a business plan and then use the platforms to attract investors. CrowdStreet is one of the most popular crowdfunding platforms that attract investors if you want to raise capital for real estate projects.
CrowdStreet offers attractive returns for investors and connects projects with a number of accredited investors.
Commercial real estate investing is a lot different than residential real estate investing. We have several guides about commercial real estate along the way to help you.
Check out our full dive into commercial real estate investing.
I love real estate investing as an asset class. It has the same parallels to dividend investing, which I’m very fond of. You receive income from your investment and profits generated in the asset/business. In addition, dividend stocks and real estate both provide upside for capital appreciation.
Income plus capital appreciation is the perfect combo for any investor.
If interested in dividend investing, check out my book Dividend Investing Your Way to Financial Freedom.
If you want a sample of the book, you can download it here.
I wrote my dividend growth investing book to help you make better investment decisions. That’s also why I’m excited to give you a review of the CrowdStreet platform.
This is an accredited investor crowdfunding platform that has piqued my interest due to their attractive investment opportunities.
I’m a huge fan of accumulating wealth through real estate and stock market investing. Take your income and yield from real estate and dump it into dividend stocks. Dividend stocks pay a portion of income that is reinvested. It’s a compound interest snowball investor’s dream.
Millionaires continue to dump their net worth into assets that make their money work for them. Here’s what accumulated wealth looks like for the wealthy.
So, this article is a CrowdStreet review, and it will help you learn more about this platform.
CrowdStreet Background Information
Founded in 2014, CrowdStreet is a commercial real estate crowdfunding platform based in the US. The platform has funded over 200 projects by pooling together assets of over 100,000 investors. It enables investors to fund real-estate investment projects by combining their contributions to finance the projects.
The platform primarily targets US-based projects and mainly the ones in Texas and California. The investors have an option to choose whether to invest in a blended portfolio that is, a portfolio of a few projects or in individual investments that is one particular investment project. Since the own projects could result in total loss of the investment capital, they are considered a high risk than the blended portfolio which is more diversified.
The platform provides online commercial real estate (CRE) investment marketplace, technology as well as professional services.
Commercial real estate crowdfunding enables the investors to diversify their investment outside of the traditional investment vehicles of the stock market, better distribute the risk of investment and fundamentally transform real estate investing through technology.
With real estate equity investing, you are lowest in the capital stack. You must understand your risk profile and get compensated for the risk via returns.
In addition, commercial real estate investing is significantly different than real estate investing.
CrowdStreet is a platform that connects sponsors and investors and is a real estate crowdfunding for accredited investors. You must be wondering, who is an accredited investor? Well to be considered as an accredited investor, you must meet certain conditions under the financial regulation laws.
An accredited investor can comprise of the high net individuals, financial institutions, insurance companies, banks or large corporations.
How to Be Considered an Accredited Investor
Here are a few criteria that an individual must meet to be considered an accredited investor:
- Must have an income that is more than $200,000 or a joint income (if you’re married) of over $300,000 each year for the last two years.
- In addition, you must have a net worth more than $1 million and the value of your residence is not included.
- You must have a trust with over $5 million in assets.
We cannot write a CrowdStreet review and fail to explore how it works. So, here is how you can invest in the CrowdStreet platform.
How to Invest Using the Crowdstreet Platform
If you would like to invest in using the CrowdStreet platform, then you first need to visit their homepage and create an account. You must be an accredited investor and have at least $10,000 which you can invest in one of the smallest deals.
CrowdStreet features debt and equity investment opportunities, including multifamily, office, retail, industrial and senior housing opportunities and more.
I love the infinite options to invest, including hotel investment opportunities.
CrowdStreet offers support during business hours to answer any questions related to the investment opportunities and fundraising efforts.
The platform also has training and learning center that you can make use to understand more about how it works before you invest. You can also learn how it works via documentation, online or webinars.
Examples of CrowdStreet Investment Offerings
I cannot stress the amazing level of diversification between investment structure, profile, returns and market. We will get into the many different options of investing that CrowdStreet offerings.
Here are some examples of CrowdStreet offerings along with the targeted internal rate of return (IRR).
|Offering||Offering State||Property Type||Investment Structure||Investment Profile||Targeted IRR (%)|
|RN Villas Care Center||OR||Senior Housing||Equity||Value Add||18.8|
|AWH Boston Hotel Portfolio||MA||Hospitality||Equity||Value Add||14.3|
|CrowdStreet Blended Portfolio – Winter 2019||U.S.||Multi-Use|
|Escondido Village||TX||Multifamily||Equity||Value Add||25.8|
|Opportunity Zone Industrial Park – 188th St.||WA||Industrial||Equity||Development||12.8|
|Chateau on the River||TX||Multifamily||Equity||Value Add||16.7|
|The Franklin||TX||Multifamily||Equity||Value Add||18.8|
|Mission Grove||FL||Multifamily||Equity||Value Add||19.9|
|Metro Atlanta Fairfield Inn & Suites Portfolio||GA||Hospitality||Equity||Core Plus||14.9|
|Shepherd Living at Wildcat||SC||Senior Housing||Equity||Opportunistic||25.5|
|Tapestry Moon Senior Housing||PA||Senior Housing||Equity||Value Add||28.8|
|Morgan Stanley Tower||FL||Office||Equity||Core Plus||17.7|
|Canopy at Baybrook||NC||Multifamily||Equity||Value Add||14.6|
|Victorian Village Townhomes||MO||Multifamily||Equity||Value Add||19.7|
|Trion Multifamily Opportunity Fund II||U.S.||Multi-Use||Equity Fund||Value Add||15|
|BV Multifamily Fund I||U.S.||Multi-Use||Equity Fund||Opportunistic||22|
|New Era Medical Investment Fund II||U.S.||Medical Office||Preferred Equity||Value Add||19|
|KBS Growth & Income Real Estate Fund||U.S.||Multi-Use||Equity Fund||Core Plus||14|
|Legacy Opportunity Fund||WA||Multi-Use||Debt Fund||Value Add||12|
|Trueline Capital Fund II||Residential||Debt Fund||Core Plus||11|
As you can see from the table above highlighting CrowdStreet’s investment offerings that there are fund opportunities, direct and more.
The investment profile is something that is a very interesting angle as well. For those that don’t understand what these all mean, here is an overview:
1. Value Add Real Estate Investing
Investing in real estate opportunities that have proven cash flow, but the manager or the asset has an identifiable opportunity to improve the cash flow further.
There’s work that needs to be done in order to de-risk the investment and make it more attractive for a new potential buyer down the road.
2. Core Plus Commercial Real Estate
Core real estate investing is typically the least risky commercial real estate investment. Think your Class A office space that has reputable tenants and is producing strong cash flow. There is nothing you need to do. You are simply investing in cash flow.
Core Plus, however, is investing in value add ‘plus’ core. Think of it as an in-between opportunity. It isn’t as risky as value add investing, but it isn’t simply core.
3. Development Real Estate Investing
This is very risky stuff. Development equity is high-risk, high return investing. Think of speculative investing in a way. A developer has a plot of land and a vision to create a project or asset from scratch. If the project hits, you get outstanding investment returns.
4. Opportunistic Investing
Good ole opportunistic investing. The catch-all bucket with investing. These real estate investments are riskier than value add because they need significant uplift in cash flow and need a big turnaround.
Usually, opportunistic investments are the ones that everyone else hates, but you are able to buy them SO CHEAP that your risk-adjusted return is attractive. If these projects turnaround succesfully, the outcomes are pretty attractive.
Just from the investment profiles outlined above, you can see why I LOVE CROWDSTREET.
You can pick and choose an allocation within all of these buckets and have a nice blend of risk and return profiles.
CrowdStreet provides investors access to commercial real estate investment offerings featuring minimum investments as low as $10,000.
Let’s evaluate all of the core features of the CrowdStreet investing platform.
CrowdStreet Core Features
A majority of CrowdStreet reviews have explored the key features of this online platform. The features may include investment management functionalities including accounting, fund, client and portfolio management among others.
CrowdStreet also features three investing options which include direct investing, fund investing and managed investing options.
With direct investing, an investor can invest directly with individual commercial real estate offerings across the US that are listed on the marketplace. The investment minimum varies with the individual investor.
This option gives the investor access to institutional-quality offerings, extensive vetting and screening and direct access to own offerings.
With direct investing, think about things like your cap rate. This can be a good barometer for valuation and returns.
You want a high cap rate but low risk. Here’s additional detail on how to calculate a cap rate.
Fund investing, on the other hand, involves an investment in a blended portfolio meant for marketplace diversification. It includes investing in 30-50 highly vetted commercial real estate offerings with a single contribution. The minimum investment for fund investing is $25,000.
This option gives the investor access to institutional-quality offerings, extensive vetting and screening and automated rules-based portfolio construction.
With managed investing, the experts help the investor in choosing the best commercial real estate (CRE) offerings from the CrowdStreet marketplace that will help meet one’s investment objectives.
The minimum investment for managed investing is $250,000. With this option, an investor receives personalized portfolio construction, targeted diversification, fully-managed investing and deep CRE expertise & investment advice.
The managed investing program features the following:
1. Quality Pre-Screened Offerings
Before an investment opportunity is included in the CrowdStreet marketplace, it is highly vetted and pre-screened through a three-phase, 26-point review process which requires both the sponsor and the property adhere to CrowdStreets selective marketplace requirements.
Only the qualified applicants pass the process and appear on the CrowdStreet which occurs just about 2% of all applicants that apply.
2. Accessibility to IRA
You can invest in CrowdStreet deal if you have a self-directed IRA. Who doesn’t love that?
It’s always nice to have a tax-advantaged retirement account include exposure to alternative asset classes or even real estate private equity.
3. Favorable Terms of Investment
Current investment opportunities usually range from 2 to 12 years. I love this because it enables you to diversify your investment term depending on your needs. If you are younger you can opt for longer investment horizons.
CrowdStreet Sponsor Fees and Pricing Structure
Unlike most CrowdStreet competitors, the platforms fees are low and affordable. CrowdStreet’s portfolios management fee is 1%, and the other expenses are encompassed in the expected CrowdStreet returns on the portfolio.
The sponsor pays the charges on direct investments. Some of the typical sponsor fees include acquisition or disposition which varies and can be up to 2% of the purchase or sale price.
Property management fees range from 3% to 4% of gross revenues paid monthly in arrears for the duration or period of the investment. Asset management can average from 1 to 2% of total revenues or equity per year.
Construction management fees typically average 5% of hard construction costs or less, and development fees can range between 3% and 5% of the total cost often with smaller percentages charged on more significant projects.
Conclusion on CrowdStreet Review
CrowdStreet offers excellent investment opportunities, and it is the best crowdfunded real estate investing platform.
I love their diversification of offerings and sophistication. Investing in private equity is a money hack that is done by millionaires.
Real estate is such a proven wealth creation strategy that I think everyone needs to take a hard look at how they can get varying levels of exposure.
Plus, I think the returns are some of the best of the breed. It’s a great way to get exposure to the private equity real estate markets as an individual accredited investor.
CrowdStreet remains a great way for accredited investors to put capital to work in the private equity real estate markets.
Recommendation: Try investing in a few projects on CrowdStreet if you are an accredited investor to get a diversified basket of direct and fund level investing. This can be a great way to gain exposure to an attractive market in the United States… That is commercial real estate.
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With a platform like CrowdStreet, you can invest in as an equity investor across multiple markets. This will help you reduce your risk with real estate.
I hope this CrowdStreet review has given you useful insights.
What do you think about our CrowdStreet review as an accredited investor platform? Please let me know in the comments below.
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I looked into crowdfunding real estate platforms but didn’t ultimately go with anyone, including Realty Shares, remember them? We use real estate almost like a bond allocation for our portfolio — a stream of cash flow — and we also use it as diversification from paper assets. With real estate crowdfunding, you do get cash flow but it’s still a paper asset. Yes, owning rental real estate outright is more intensive than investing in a fund, but that differential yields the diversification and control benefits.
True – Agreed. You can’t deny the fact that you can get some broader market exposure without much effort. It’s hard to do that if you are investing in real estate outright.