Online marketplaces open for real estate investments.
You don’t need to dream of owning a glorious skyscraper in New York: The vision of real estate ownership has been expanded to give small (and large) investors the opportunity to choose the location and type of real estate investment property for their portfolio. Before the Jumpstart Our Business Startups Act went into effect in 2013, real estate investors were limited to owning property outright or buying publicly traded real estate investment trusts, known as REITs. Since then, the crowdfunding sphere, where investors pool their money to buy multi-family units, commercial property or bundles of single-family homes, has exploded. Here are the seven best real estate crowdfunding platforms.
“ArborCrowd is the first crowdfunding platform launched by a real estate institution, offering a vastly different model than others in the space,” says Adam Kaufman, co-founder and managing director at ArborCrowd. Structured as a 506(c), which allows companies to raise an unlimited amount of capital, this platform has unique access to institutional-quality deals. The firm screened 500 deals last year, only to invest in seven. ArborCrowd presents one deal at a time, such as investing in multi-family units in Sioux Falls, South Dakota, and is currently offering ownership to accredited investors with a high-net worth of $1 million or more or an annual income of at least $200,000 for a single filer.
“We are a marketplace where sponsors can list their offerings and investors can invest typically between $25,000 and $1 million per investment to own their pro-rata portion of that deal or fund,” says Brandon Banks, vice president of real estate at RealCrowd. After a quick login, an accredited investor can view the available commercial real estate deals and choose the deals in which to invest. From an apartment complex in Arlington, Texas, to a hospitality property in Gainesville, Florida, investors with at least a minimum of $25,000 can develop a portfolio of real estate ownership. Unlike other platforms, the investor goes through the deal’s sponsor, not a middleman. After the first deal, the sponsor and investor can work together directly without RealCrowd.
Bradley Fulkerson, senior managing director at Transwestern in Atlanta says through Groundfloor, investors provide short-term, high-yield loans, secured by the underlying real estate. The benefit is it’s a real estate investing option to nonaccredited investors. “The real estate serves as collateral for the loans,” he says. Unlike many of its peers, which are available only to wealthy accredited investors, Groundfloor offers investors an opportunity to earn an average 10 percent annually on loans with shorter terms of six to 12 months. For a minimum investment of $10, the loans are secured by the underlying real estate, offering investors security and an opportunity to select which loans to invest in.
Accredited investors can participate in both equity and debt real estate funding through Portland-based CrowdStreet. With a $25,000 minimum investment, this platform is open to investors seeking to dip their toes into this alternative asset class. Highly selective, only 2 percent of real estate deals pass the CrowdStreet review process. CrowdStreet is growing rapidly due to the outsized returns, says Adrianna Apreu, a spokesperson for the company. Investors have access to invest in direct deals, blended portfolios, privately managed accounts and within a self-directed individual retirement account. In addition, the company offers the CrowdStreet Blended Portfolio, in which investors can diversify across 30 to 50 highly vetted commercial real estate deals with a single contribution.
“PeerStreet’s accredited investors earn a stable, consistent return with a yield that’s generally higher than bonds and sometimes even more than equities,” says Brett Crosby, co-founder and chief operating officer at California-based PeerStreet. Due to the stock market volatility in the waning days of the bull market, real estate debt is an attractive alternative, Crosby says. Considered the safest type of real estate investment, debt is senior to borrower’s equity. PeerStreet is accessible, requiring only $1,000 to invest. Like investing in equities, PeerStreet clients can pick and choose which properties to fund and build a customized real estate lending portfolio.
Small Change is crowdfunding investing for socially conscious small investors. From the platform, investors choose their projects and invest. Each project has its own minimum investment amount and timeline. Sample projects range from investing in a commercial building in Long Beach, California, to vacant homes in Baltimore. Although Small Change caters to the small investor, some projects are listed for accredited investors. One example: Investors in the Rosewood project in Los Angeles received a 10 percent annual return on their investment. As with all crowdfunding real estate investing, Small Change is for risk-tolerant investors who are willing to wait for the return on their investment capital.
Highly selective RealtyMogul offers commercial real estate investing for accredited and nonaccredited investors. A small investor can participate in the newly formed MogulREIT I, a public, nontraded REIT. This platform offers commercial real estate access with a $1,000 investment minimum. For accredited investors, RealtyMogul presents one or more commercial real estate investments, such as offices and mixed-use space across the U.S. for a minimum investment of $15,000 to $50,000; the typical time horizon ranges from three to seven years. Recent RealtyMogul investments include properties in New York’s Brooklyn neighborhood, a 310-unit apartment complex in Jacksonville, Florida and an office building in Maple Grove, Minnesota.
Top real estate crowdfunding platforms.
Real estate crowdfunding is another avenue to investment portfolio diversification. For aggressive investors who can tie up their funds for longer periods of time, real property crowdfunding is a path to commercial real estate debt and equity ownership. Here are seven ways to invest in this sphere:
— Small Change
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