Real estate crowdfunding, which simply allows accredited and non-accredited investors to buy private real estate assets through an online platform, is more than just a revolutionary concept in the investment world. It’s actually something that could significantly improve your portfolio today.
Looking for yield and steady income in a world of near zero yields everywhere? Crowdfunding real estate assets give juicy cash yields that provide ample income.
Want steadier returns and more stability in your portfolio at a time when stock markets have been anything but that? As largely uncorrelated assets with a long history of value appreciation, crowdfunding real estate investments provide essential diversification and are a shot of stability into any portfolio.
That’s just the tip of the iceberg. Real estate crowdfunding offers investors numerous ways to boost their portfolio returns, and reduce their portfolio risks.
Sound like a win-win? It is. As such, you next question should be: how do I get started?
Sign up for a real estate crowdfunding platform. But not just any platform. There’s a lot of players in the space. Only a select few are quality players which should be trusted with your money.
With that in mind, here’s a breakdown of the five best real estate crowdfunding platforms out there today:
Best Real Estate Crowdfunding Platforms: Cadre
The Short: A high quality, reputable real estate crowdfunding platform made for accredited investors willing to commit a lot of cash to a real estate investment for several years.
The Long: New York-based Cadre is perhaps the most well known real estate crowdfunding platform in the market, and with good reason. The company has arguably the best crowdfunding platform in the market, with access to some of the highest quality real estate assets in the crowdfunding world.
Cadre is also backed by some fame and expertise. Jared Kushner, son-in-law of U.S. President Donald Trump, founded the company, and the management team consists largely of former Wall Street bankers and private equity experts. There are also some deep pockets backing the company. Cadre has raised about $130 million in venture funding, with the lead investor in their most recent round being the very reputable venture firm Andreessen Horowitz.
But, there’s a catch. Unless you’re wealthy and have time on your hands, you can’t invest with Cadre.
That is, Cadre is for accredited investors only. The investment minimum is $50,000. Most investments are relatively non-liquid, and investors will typically have their money tied up for several years. The fees are also relatively high at 1.5% of net asset value, and there’s also performance fees (they take a cut of investors’ profits).
If that criteria is what you’re looking for, then Cadre is the best crowdfunding platform for you. Else, there are better options out there.
The Short: A great, low-hassle starter crowdfunding platform for retail investors who want to get their feet wet in real estate crowdfunding, and don’t have any expertise in real estate markets.
The Long: Fundrise is one of the biggest and oldest real estate crowdfunding platforms in the market, and it’s probably the best option out there for retail investors who want to get into real estate crowdfunding, but don’t know what makes a good real estate investment.
The Washington D.C. based company offers one of the few real estate crowdfunding platforms that allows retail investors on the platform. More than that, they are actually built for retail investors. The platform has one of the lowest minimum investments in the space at just $500, and industry-low fees that equate to just 1% of net asset value. There also aren’t any performance fees.
More uniquely, though, Fundrise doesn’t allow its investors to pick-and-choose their own real estate investments on the platform. Instead, all funds put into the platform are automatically allocated across multiple Fundrise REITs, so Fundrise investors are essentially trusting the platform to make smart real estate investment decisions for them.
For savvy real estate investors, that’s a lose. For novices who don’t know the difference between a good property and a bad one, that’s a win.
Depending on who you are — and how much money you make and are willing to commit to real estate crowdfunding — Fundrise could be the perfect crowdfunding platform for you.
The Short: Built for accredited investors who want exposure to high quality real estate investment opportunities, but don’t want to put in the effort of finding those high quality opportunities.
The Long: ArborCrowd is a very unique real estate crowdfunding platform which is built for a very specific type of investor.
An offshoot of publicly traded REIT Arbor Realty Trust (NYSE:ABR), ArborCrowd leverages its robust real estate experience to carefully select real estate projects for its platform. The upside? If a real estate project makes it through ArborCrowd’s vetting process, it’s probably a great investment. The downside? Not many projects do make it. Usually, there’s only one project at a time on ArborCrowd.
For investors who trust ArborCrowd’s vetting and don’t want to pick-and-choose their own investments, that’s great news. But, for investors who prefer to pick-and-choose, ArborCrowd isn’t a great real estate crowdfunding platform.
Also of note, the platform is for accredited investors only, has a $25,000 investment minimum, and has no liquidity.
In other words, there are some upsides and downsides of ArborCrowd for accredited investors. If liquidity isn’t a concern and you want highly curated investment opportunities, ArborCrowd is a perfect fit. But, if you want some liquidity and more flexibility, then a platform like Cadre is probably better.
The Short: In an attempt to create the real estate crowdfunding’s version of house-flipping, Groundfloor has built a revolutionary platform which allows both accredited and retail investors to participate directly in real estate investment loans on a fractional basis.
The Long: One of the bigger, more exciting, and liquid markets in residential real estate is house flipping. Think popular shows like Flip or Flop. A person or group of people secure some financing to buy a distressed home, repair that home, and sell the repaired version on the market at a higher price, paying back the principal plus interest and pocketing the difference.
Traditionally, if house flippers tapped the debt markets, they did so by securing a loan from a bank. Groundfloor has created a platform where flippers can now tap the “crowd debt” markets, and raise money from accredited and retail investors instead of a bank.
It’s a revolutionary concept. And it’s great for investors. For as little as $10, investors can help fund a house flipping project, and earn interest depending on the risk level of the project (which is determined by Groundfloor). In other words, it’s a great alternative yield play for investors both big and small.
Of course, there are some catches, the biggest of which is that some of the loans can default, resulting in a loss of capital for investors. Groundfloor says that this doesn’t happen often, and that significant liquidity on the platform makes up for any defaults that do happen (investors can bounce back, and invest in a new project). Still, it’s a risk worth noting.
All in all, though, if you’re interested in house flipping but don’t have the capital to actually flip homes, Groundfloor is, at the very least, worth a look.
The Short: The environmental, social, and governance (ESG) friendly way to partake in real estate crowdfunding, so that you can make money and help the world become a better place at the same time.
The Long: ESG investing in the stock market is one of the bigger, most relevant, most important, and most powerful trends happening in the stock market today, and it revolves entirely around investing with an eye towards making the world a better place.
It’s only natural, then, that ESG investing is also a thing in the real estate crowdfunding world.
Small Change is a real estate crowdfunding platform which allows both accredited and retail investors to invest as little as $500 into real estate projects which positively impact cities and neighborhoods. They do that by evaluating real estate projects according to their Small Change Index, which measures how positively a real estate projects impacts mobility, community, and economic vitality. If a projects ranks well according to those measures, then it gets listed on Small Change, and investors can thereafter invest in that project.
In other words, Small Change is the ESG-positive real estate crowdfunding platform for retail investors. If you’re a retail investor looking to commit upwards of $500 to ESG-positive real estate projects, then Small Change is perfect for you.
Luke Lango is a Markets Analyst for InvestorPlace. He has been professionally analyzing stocks for several years, previously working at various hedge funds and currently running his own investment fund in San Diego. A Caltech graduate, Luke has consistently been rated one of the world’s top stock pickers by TipRanks, and has developed a reputation for leveraging his technology background to identify growth stocks that deliver outstanding returns. Luke is also the founder of Fantastic, a social discovery company backed by an LA-based internet venture firm. As of this writing, Luke Lango did not hold a position in any of the aforementioned securities.