Real estate crowdfunding platforms can be a great way to gain exposure to an enormous asset class with a small initial investment and limited risk. It can also be a great introduction to the world of real estate investing without purchasing properties outright. There are many great real estate crowdfunding platforms you can invest with right now, and there are sure to be new companies springing up to offer new twists on property investment.
Investing in real estate sounds like a wise thing to do until you actually do it. Crossing the line into property ownership is a big leap to take. Actually making a down payment and taking sole ownership of an investment property can be one of the best investments you could ever make, and it could also be the worst. Tens of thousands of dollars for a down payment, monthly mortgage payments, property taxes, homeowners associations, utilities, yard care, new carpet… I could go on forever. The list is long for investment property expenses, and they are relentless.
Luckily, there are many new ways to gain exposure to real estate investment, which are much lower risk than buying a property outright. Not only will it require less cash upfront, but it will also give you an opportunity to learn the ins and out’s of real estate investment gradually, providing a solid foundation for scaling up your investment in the future.
The mission at Roofstock is simple. To make ownership of investment real estate radically accessible, simple, and cost-effective. And from the looks of it, they are succeeding in their quest to simplify real estate investment. Since the founding of Roofstock, the company has exceeded $2 billion in transactions.
Founded in 2015 by Gary Beasley, Gregor Watson, and Rich Ford, the trio has combined their deep understanding of real estate investment along with extensive capital-raising experience and Silicon Valley connections for top talent.
Roofstock has built cutting-edge technology to transform buying and selling real estate. Together, along with outstanding customer service, any investor is equipped with the tools to become a success in the real estate market.
And Roofstock doesn’t just talk about becoming a great real estate service for investors; they’ve already been doing it for years. The company was awarded Forbes FinTech 50 Most Innovative Companies, Entrepreneur 360 Best Entrepreneurial Companies in America, and Fortune’s Best Companies to Work for in the Bay Area.
With DiversyFund, you can scale up your real estate investments gradually, starting with just $500. Founded by Craig Cecilio and Alan Lewis in 2019, DiversyFund is SEC qualified and compliant with all the current regulations for institutional-quality offerings for all.
DiversyFund is structured as a Real Estate Investment Trust, or REIT, where passive investment is made by a group of investors and managed by the DiversyFund team. They employ a “Forced Appreciation” strategy, where properties are purchased and immediately renovated to increase the value. When the renovations are complete, usually within a year, rents can be increased, and cash flow increases. Potential investors have the ability to participate in these gains, much like real estate developers and institutional investors have enjoyed for many years.
Each month, DiversyFund pays a dividend from the rents they collect. These dividends are automatically re-invested, so you are compounding returns each month. Another important detail with DiversyFund is that they share profits after the first 7% is distributed to the investors’ pool. After the first 7%, the profits are split, with 65% going to investors and 35% going back to DiversyFund. If profits hit 12% per year, the profits are split 50 / 50 between investors and DiversyFund.
Real Estate Crowdfunding With DiversyFund
After 5 years, DiversyFund’s goal is to sell the property, recoup the initial investment, renovation expenses, and increase value over the 5 year period. Next, the funds would be used to purchase new properties, which can be immediately renovated and held for another 5 year period. The process repeatedly continues, buying, renovating, and selling multi-family properties with investors pooled-together funds.
Investors own a share in all the properties DiversyFund purchases to reduce risk and spread exposure over many different markets. For as little as $500, you can become an owner in multi-family real estate, learning how profits are distributed along the way. Investing through a crowdfunding platform could be a great way to expose yourself through real estate investment.
Our next real estate investing platform offering commercial properties that are federally registered is Streitwise. Both accredited and non-accredited investors have access to invest in a professionally managed portfolio.
The minimum investment is $1,000 to open a Streitwise account and begin investing in real estate. The Securities Exchange Commission regulates the funds, and the company offers some of the lowest fees in the fractional real estate investment industry. Streitwise has achieved a year-to-date dividend yield of 8.4%, making it more than double the average return of publically traded REITs according to the FTSE NAREIT.
Streitwise focuses on non-gateway markets, which tend to deliver higher dividends. Inside these non-gateway markets, Streitwise looks for commercial properties located near amenities and transportation hubs. They also identify properties with a solid occupancy history track record, which can outperform the broader market.
One of the benefits Streitwise offers is using only a modest amount of leverage to purchase properties. With only a 55% loan-to-cost ratio, the company believes they minimize risk and can be more flexible than the competition.
Based in Newport Beach, CA, Rich Uncles invests in single-tenant office, industrial and retail properties throughout the United States. They offer shares in two different real estate investment trusts (REITs) that hold the title to the properties and collect rents. Dividends will be paid to investors on the first 6.5% of profits before Rich Uncles takes any profits. After 6.5% is paid to investors, Rich Uncles will take 40% of the remaining profits.
Rich Uncles offers two investment options, the National REIT and the Student Housing REIT. The minimum investment amounts for the National REIT are $500 and are offered to investors in 20 states. The Student Housing REIT has a minimum investment of only $5 and is offered to investors in all 50 states.
How Many Real Estate Crowdfunding Platforms Are There?
Just how many real estate crowdfunding platforms exist, you might be wondering. The answer is a lot, and many more to come. Regulations have drastically changed over the last decade to allow new and improved platforms. Each offers investment in real estate with a low initial investment and much lower risk than buying a building outright.
New twists on current platforms will continue to pop up and compete for real estate investors net worth in the coming years. It’s important to remember as much as these real estate crowdfunding platforms want to pitch reduced risk and non-correlation to other asset classes, there is still no free lunch in investing. Especially in real estate, where history is full of boom and bust periods, individual investors need to remind themselves there is always the potential for loss.
New Options for Real Estate Investors
With so many investment opportunities available, average investors need to make informed decisions. Many investors already have plenty of exposure to the stock market, mutual funds, and public markets through their retirement account at work.
Commercial real estate, rental property, and private real estate investments are tougher to get exposure to for most investors. Fractional share ownership through alternative investments such as Roofstock, Streitwise, and Rich Uncles might make sense for your investment portfolio.
Passive income through a diversified real estate portfolio, including commercial property, apartment complexes, or other real estate deals, could be a great way to diversify your portfolio. As always, consult your financial advisor before making investment decisions.
The Changing Real Estate Landscape
If you are an accredited investor, you have many more options available to you. Real estate professionals know the potential for higher returns, but for the first time, the jobs act has enabled a new pool of investors to participate in the real estate industry. New online platforms and online tools could potentially change how the average investor constructs their portfolio in the future.