Perhaps our most recent article (link to the ultimate guide on crowdfunding) has piqued your interest in real estate crowdfunding. Better yet, you’re already in the know about how beneficial it is to invest in real estate.
You probably know that since the early 2000s, real estate annual returns have nearly doubled the stock market’s annual returns. That’s right. Since 2000, the average $10,000 investment in real estate has averaged an annual return of 10.71%.
The stock market’s average annual return on that same investment?
Just look at the graph comparing the growth of real estate to the growth of the S&P 500:
Better yet, the real estate investment industry has received an even bigger lift since 2012. Why? Because 2012 saw the genesis of real estate crowdfunding.
Before 2012, real estate investing had long been considered an option reserved for the extremely wealthy. After all, not many people have the expendable resources to buy property developments.
A Brief Refresher
Feel free to skip this recap and head straight to the list of sites, below. If you’d like a little refresher on real estate crowdfunding, please continue to read on!
With real estate crowdfunding, investing has changed. People who are unable to buy a property outright, are now able to pool their money together to own a portion of a property.
You’re likely interested in real estate crowdfunding for a few reasons:
- You don’t want to deal with the stress of owning a property outright
- You’re not willing to put up a significant portion of your earnings to own property
- You want to diversify your investment portfolio
And you’re right to be interested:
The broad stock market typically only averages 8% in returns for your investments. Meanwhile, your real estate crowdfunding portfolio can average returns of at least 12%.
While a 4% margin may not seem much, remember this:
Investing in real estate crowdfunds is one of the least stressful investments you can make. You don’t have to worry about managing the property or monitoring the trends of the stock market. Instead, you just go on with your day and wait for the returns to roll in.
There are two different, primary types of real estate crowdfunding – equity investments and debt investments.
In case you forgot:
Equity investments are long term, high risk, and high reward investments. It typically takes at least 3 years before you start seeing your returns roll in. Also, if the development goes under, there’s a chance you’ll lose your investment.
There’s also the chance you gain a beautiful 20% return on your investment for multiple years. As said, it’s a high risk, high reward.
Debt investments are lower risk, lower reward. They’re the ones where you loan money to the property developer and they pay you back on interest. This investment is lower risk because even if the development goes under, you’ll still get paid back.
Because a foreclosure sale will be employed to at least partially refund the debt investors. Most debt investments offer a low reward because they’re capped by the loan’s interest amount. You’ll typically see annual returns just under 10%.
Alright, enough of that. Let’s get to the top 20 real estate crowdfunding sites.
The Real-Estate Crowdfunding Review, a website that ranks the top real estate crowdfunding sites, ranks PeerStreet as the top crowdfunding site for real estate. And with the numbers they put up, it’s easy to see why.
In 2018, PeerStreet originated over $500 million in loans for its investors. That’s a good deal of money. Also, they only charge administrative fees of .25% to 1%, which is very low.
In case you’re wondering, this site offers investors access to loan/debt investments. Most of their loan terms last from 6 months to 3 years. The average annual returns can reach up to 9%.
This site is a marketplace for accredited investors, meaning you will have to meet the qualifications to use the site. The qualifications usually deal with annual income and net worth.
In fact, an accredited investor must either meet an annual income requirement of $200,000. If an investor has a joint income of $300,000 with their spouse, they can also qualify. Another requirement you can meet to become an accredited investor is to have an individual or joint net worth of $1 million.
This site began as more of a niche site for real estate crowdfunding, but it’s quality all the way. At its start, Prodigy Network connected accredited investors with commercial real estate developers in Manhattan.
However, it now offers investors the opportunity to invest in developments in most major cities. Whether it’s retail, multi-family, office, or hospitality properties, this site allows you to invest in them.
The minimum investment amount for this site is $10,000, but your portfolio must meet a minimum of $20,000 in investments. Therefore, you’re only going to want to use this site if you’ve got the capital to spend big.
This site offers you so many benefits as an investor because they like to do the dirty work and research for you. They provide you with frequent project updates and financial statements for your investments to keep you up to date.
The best part?
They use a six-step vetting process for each investment opportunity they receive. In addition, Prodigy Network only partners with developers who have an extensive track record of success. This way, you know the investments appearing on the site offer you the best opportunities.
This crowdfunding site offers accredited investors opportunities in commercial real estate. Residential and multifamily properties are also offered to investors.
You will be able to invest as little as $1,000 on some projects. However, most projects you find will require a minimum investment of $5,000.
This site is great for investors who would like to handpick their investment opportunities. There aren’t any fund managers choosing your investments for you.
This site uses a strict vetting process to filter out any poor investment opportunities. They have a staff of analysts and underwriters who provide you with essential information for each investment. Because you’ll be hand-picking your opportunities, you’ll certainly appreciate this.
Finally, a crowdsourcing site for non-accredited investors. This is one of the most accessible real estate crowdsourcing sites because it allows investors from all 50 states.
It gets better:
The minimum investment amount for this site is a mere $500. The only drawback of the site is for people who want to handpick their own investments. Because Fundrise invests your money for you in a basket of different properties across the United States.
These property types typically include:
- Commercial developments
- Home developments
- Apartment developments and renovations
- Rent-stabilized apartments
Most of these investments result in an average annual return of around 7%.
Once your portfolio account reaches $1,000, you’ll be able to invest in more advanced plans. These advanced plans allow you to target specific markets and locations.
Advanced plans offer investors a big increase in their average annual return. Instead of seeing averages near 7%, they’ll see average returns yielding up to 12%.
The best part?
You don’t have to worry about the stock market. Remember, real estate crowdfunding doesn’t fluctuate with the daily stock market like REITs.
Non-accredited investors that are interested in REITs should check out Rich Uncles. This is one of the oldest real estate crowdfunding sites. While the site primarily invests in commercial real estate, you’re also offered two types of REITs to invest in:
- Student housing REIT
- Commercial property REIT
Since 2018, student housing REITs have offered an average annual return of 6%. Student housing REITs are great for beginner investors because they require a meager $5 starting investment. You read that right: $5.
If you’re fresh out of school or residency and looking to start a portfolio, definitely consider student housing REITs.
Commercial property REITs, on the other hand, are for people looking to invest more. This REIT option allows you to invest in different commercial and retail properties all over the United States.
The bad part:
Only people living in one of 24 states are allowed to invest in commercial property REITs on Rich Uncles. If you do live in one of the 24 states, you’ll only need a $500 initial investment to get started.
The best part?
Rich Uncles will make a 50% down payment on each property to protect you from borrower defaults and missed payments. This reduces your risk of receiving fewer returns on your investment.
This crowdsourcing site saw its beginnings in 2013. The site’s purpose is to make things easier for its investors by providing them with only the best investment options.
The platform offers investment options for both accredited and non-accredited investors, making it extremely versatile. Accredited investors can invest in individual commercial and residential properties.
Meanwhile, both accredited and non-accredited investors are able to invest in either of Realty Mogul’s REIT options. Mogul REIT I allows investors to make debt investments with a fixed monthly return.
Patience is key:
Investors who are willing to be patient should consider the Mogul REIT II option. This option requires investors to wait at least 3 years to receive their big returns. The potential upside for their returns is much greater than the Mogul REIT I option.
For at least a few years, they’ll receive smaller monthly returns.
Like many other real estate crowdfunding sites, iFunding was founded in 2012. This site offers a versatile selection of options for investors. Investors can choose to invest their money in single-family homes or high-rise apartment buildings.
The minimum investment amount is $5,000. While that may seem a lot, many sites only go as low as $50,000 or even $100,000.
The best part?
iFunding provides you with essential information about investments before you choose an investment option. The site will give you a background on the developer with information about the success of their past developments. The site also provides estimated returns for investments and how long the investment will potentially last.
This highly selective site offers accredited investors the ability to invest in debt and equity options. The site only approves 6% of borrowing requests from developers. This helps to ensure investors are only offered options that are certain to succeed.
What property types are included?
- Storage facilities
- Industrial developments
- Student housing properties
- Office developments
- Multifamily apartments
- Residential subdivisions
This crowdfunding site offers target returns ranging from 8% to a beautiful 20%. The site also claims a 0% loss on investments. This means they’ve had zero investment projects fail.
While many sites do their best to fix these numbers, it’s hard not to trust YieldStreet. Their projects offer maturity dates ranging from 1 to 3 years.
Their investment options offer a low stock market correlation. This means your investments will not fluctuate with the volatile stock market as much as other investment options (like REITs).
This site allows you to invest in regular commercial and residential real estate options. But what makes this site unique is it offers you investment options in other areas:
- Small business financing
- Marine shipping vessels
- Legal expense investments
AlphaFlow offers investors the ability to invest in short-term real estate loans. These loans are available to both accredited and institutional investors.
These short-term real estate loans offer quick returns ranging from 7.5% to 9%. This way, you’re able to make quick profits on low-risk investments. Some annual returns can even reach as high as 10%.
AlphaFlow automatically distributes your investment across up to 100 different property loans. This means you’re unable to pick which loans you want to invest in. Of course, this does make things easier for you if you don’t want to deal with choosing investments.
This crowdfunding site for real estate allows you to finance developers who are flipping properties. Your investments will be debt-type investment loans.
The best part?
Most of the investments offer you up to 12% returns.
Only accredited investors are allowed to invest at the moment. Also, a $5,000 dollar minimum is required.
This site offers office REIT investment options to anyone. Their target return rates hit around 10% and only $1,000 is required as a minimum investment amount.
It takes at least 5 years for you to receive full redemption value on your investment. Also, REITs have a high correlation with the stock market. If the stock market plummets, so does the value of your REIT.
This site allows you to invest in commercial real estate. However, the minimum investment amount is fairly steep at $10,000.
CrowdStreet is extremely selective for borrower applications. They only accept 2% of the developers who request to be put on their site. With this, you’re offered only the most potentially successful investment options.
This site only focuses on commercial real estate. If you’re looking more for residential real estate investments, you’ll have to look elsewhere. Luckily, just about any other site on this list offers residential investment options.
This crowdfunding site is open to any investor and only requires a minimum investment of $500. The low minimum investment makes it an extremely accessible site for novice real estate investors.
This site only invests in California properties. You’ll have to look elsewhere if you’re not interested in California real estate.
For your first five investments, this site allows a minimum investment of $1,000. This makes the site accessible to novice investors, as well.
Annual returns for investments on this site range from 8% to 12%.
After your first five investments, the minimum investment requirement rises to $5,000.
Accredited investors are able to use this site to invest in senior housing across the U.S. Returns are projected at an amazing range of 13% to 21%.
This real estate crowdfunding site offers investment options allowing you to receive 12% returns in 12 months. It offers investment options in both commercial and residential real estate.
This site uses tech specialists and syndicators to invest your money for you. The site works with a wide range of real estate developers to offer you a diverse investment portfolio.
This site connects accredited investors to commercial real estate companies. The low administrative fees on this site are a particular bonus for investors.
This site uses state crowdfunding rules. This means you don’t have to be an accredited investor if you live in a state where Groundfloor does business.
The investments typically last no longer than 12 months and offer 10% returns. Also, minimum investment amounts go as low as $100.
Don’t Just Use One
As the list comes to an end, it’s important to remember:
Don’t just use one of these sites. You can use a site like PeerStreet to invest in debt/loan investments. Meanwhile, you can also use CrowdStreet to invest in ventures related to commercial real estate.
What you think:
Do you have any experience with any of the listed sites above? If so, what can you say about your experience with the site(s)? Do you know of any other great real estate crowdfunding sites?
Let us know in the comments below!