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Real estate crowdfunding sites are designed to fund real estate projects and investments by pooling together investors' money. These sites allow everyday people to invest in projects that would otherwise be out of their reach. Investor money may be used to fund large-scale real estate projects, invest in REITs (real estate investment trusts), and purchase real estate debt.
Some real estate crowdfunding sites only cater to accredited investors, which are typically high net worth individuals or companies. Other sites allow non-accredited investors to also participate. Investors typically get paid back on their investments through dividends or when the property sells. However, returns are not guaranteed, so there is some risk involved. Keep reading to learn about the best real estate crowdfunding sites and decide which one is right for you.
Best Overall: DiversyFund
Why We Chose It: DiversyFund focuses on the everyday investor who doesn’t have millions of dollars to invest. It doesn’t charge management fees and the minimum investment is low.
$500 minimum investment
No management or broker fees
Public oversight with financials audited
Not many investment options to choose from
Profits aren’t distributed until the end of the investment term
DiversyFund was founded in 2014 and SEC-qualified in 2018. It was established with the goal of creating wealth-building opportunities for more Americans. The company focuses on transparency and teaching people about investment strategies and opportunities at their own pace, and its website has a learning center with investment-centered articles. DiversifyFund offers a Growth REIT, which invests in cash-flowing apartment buildings. It focuses on long-term capital appreciation.
The REIT is open to all investors and the minimum investment is only $500. The company manages and develops its own properties, which are different from some crowdfunding sites that serve more as a broker. The value-add cycle is typically five years and the average return on investment is 10 percent to 20 percent per property. The company doesn’t charge management or broker fees, but developer fees usually range from 2 percent to 8 percent.
Best for Non-Accredited Investors: Fundrise
Why We Chose It: Fundrise is open to all investors, has low fees, and invests in quality projects such as REITs and private funds.
Low fees compared to other real estate crowdfunding sites
Open to both non-accredited and accredited investors
Redeem shares at any time but it isn’t guaranteed and costs may be associated
Most investments are illiquid
Investment choices are limited, especially for the minimum investment level
Fundrise was founded in 2010 and launched its first offering in 2012. It's a well-known name in the real estate crowdfunding space and offers three investment levels. The first one is open to everyone and requires a minimum investment of $1,000. The next level requires a minimum of $10,000 and the top-level requires $100,000. Terms vary based on the investment level. The site offers an educational section for beginner and advanced investors. Features include auto-investing and IRA account support.
The company is open to investments from both non-accredited and accredited investors. Fundrise charges two types of fees: a 0.15 percent annual investment advisory fee and an annual asset management fee of 0.85 percent. Investments are long-term and are typically made for five or more years, which is common in the real estate crowdfunding industry.
Best for Accredited Investors: CrowdStreet
Why We Chose It: CrowdStreet offers a variety of investment choices, all of which are highly vetted. It also has an investor relations team to answer any questions.
Different investment options to choose from
Invest in multiple properties at once
High possible returns depending on the investment
High minimum required investment
Open only to accredited investors
CrowdStreet was founded in 2013 to give individual investors better access to real estate. It provides an alternative investment opportunity to the stock market. It combines investment experience and technology and has earned investors upward of $170 million in distributions from more than 490 projects. Open only to accredited investors, the company offers individual deals, tailored portfolios, and diversified funds to invest in.
Each investment deal goes through a rigorous review process, which is done by an expert team with over 60 years of combined private-equity real estate experience. Once you sign up for a free account, you will see all the investment options and you can connect with the investment team or a chatbot to go over any questions. The minimum investment is $25,000. CrowdStreet offers an online new investor orientation and educational resources. Fees range from 0.5 percent to 2.5 percent for the Crowdstreet fund and additional fees may be required for other investments. Annual returns average 11.5 percent to 26.4 percent.
Best Investment Selection: RealtyMogul
Why We Chose It: RealtyMogul has an impressive investment selection including REITs, 1031 exchanges, and individual properties. Each investment opportunity is thoroughly scrutinized before it’s offered.
Different investment options
Invest based on a specific strategy
Open to all investors
Fees vary depending on investments, so you need to read them carefully
Higher minimum investment is a barrier for some new investors
Founded in 2012 and based in Los Angeles, RealtyMogul is a marketplace for real estate investing. It connects borrowers and sponsors with individual and institutional investors. The company’s goal is to simplify the commercial real estate investment process. It has a strict due diligence process on every investment, which includes site visits, and only 1 out of every 1,000 projects is generally accepted. It has raised over $45 million and investors can choose their projects based on their investment goals—passive income, growth, and/or diversification.
The minimum investment for RealtyMogul is $5,000 and it’s open to both accredited and non-accredited investors. Fees typically range from 1 percent to 1.5 percent, but individual investments may add on their own fees. Average annual returns are 4.5 percent to 8 percent and distributions are sent out monthly or quarterly, depending on the project. You can invest in one of RealtyMogul’s REITs using your retirement account. Average investment timelines are between three and seven years, and a minimum investment of $15,000 is required for individual investment properties.
Investing always has its risks, and that's true when doing so in a real estate crowdfunding site. Know what the fees are upfront, do your research, and remember that no returns are guaranteed. With that in mind, real estate crowdfunding can be a unique way to make some passive income without being a real estate or investment expert.
The crowdfunding sites we recommend cater to both accredited and non-accredited investors and offer different types of investments, such as REITs, individual properties, 1031 exchanges, and portfolios. They also have varying minimum investment requirements. Overall, we recommend checking out DiversifyFund because it has a low minimum investment, is open to all investors, and has resources to teach you about investing.
Frequently Asked Questions
What Is a Real Estate Crowdfunding Site?
A real estate crowdfunding site brings together real estate developers and people who want to invest in their projects. It often uses social media to advertise the types of projects that are available for investing in. Investors get a chance to buy into projects they otherwise couldn’t afford and developers get pooled funding that they wouldn’t otherwise obtain.
There are different types of investments, including debt, equity, and REITs. If you participate in a debt deal, you’re essentially acting as the bank and lending money at a predetermined rate. You usually get paid back your principal plus interest on a monthly basis. An equity deal is where you own part of the property and, depending on the type of project and the goal, you may get paid back once the project is profitable, it sells, or is rented. If you invest in a REIT, you’re buying shares in the company and will get paid through distributions.
What Types of Properties Can You Invest in on a Real Estate Crowdfunding Site?
Different real estate crowdfunding sites offer different kinds of real estate projects. You may be able to invest in a single property or a group of properties. Some projects include large commercial buildings, apartment communities, multi-family buildings, office suites, and mixed-use properties with housing and retail space. Depending on the site, you may be able to choose the type of property you're interested in investing in. There, you will get to read an overview of the property and its location.
What Is the Difference Between an Accredited Investor and a Non-Accredited investor?
An accredited investor is a high net worth individual or business entity permitted by the SEC (Securities and Exchange Commission) to invest in crowdfunding sites specifically for accredited investors and/or trade securities without necessarily being registered. To qualify as an accredited investor in the U.S, you typically need to earn $200,000 or more per year over the previous two years or $300,000 or more (joint income with a spouse) and plan on making the same or higher going forward. Another way to qualify as an accredited investor is to have a net worth of $1 million or higher. Keep in mind there may be other criteria set forth as well.
A non-accredited investor is someone who doesn’t meet the income and/or net worth requirements of an accredited investor. They may only invest in real estate crowdfunding sites that allow non-accredited investors to participate. The purpose of this is to help protect an individual who may not be knowledgeable or may not have a lot of money to lose.
How We Chose the Best Real Estate Crowdfunding Sites
We researched more than a dozen real estate crowdfunding sites before deciding on our list. We chose a mix of sites that offer different types of projects and those that cater to both accredited and non-accredited investors. When comparing real estate crowdfunding sites, we considered available projects, minimum investments, fees, structures, and company history.
Past performance is not indicative of future results. Investing in real estate crowdfunding may entail risk, including loss of principal. Investors who have questions should consult a licensed financial advisor.