Report: Top 7 Crowdfunding Sites for Investors
Joe Stampone is a real estate blogger based in New York City, and he's released a report titled Top 7 Real Estate Crowdfunding Sites for Investors. You can get a copy and read his blog post here. I wanted to give you an overview here, because crowdfunding is beginning to change the way investors can become involved in large commercial real estate projects. I'm taking some excerpts from his report to give you an overview. Investors should definitely check out the opportunities in crowdfunding. Think of this more as an introductory review.
Crowdfunding takes advantage of technology to bring projects and investors together. Let's talk first about some differing platforms for your foray into crowdfunding. There's lots more information in the report, but this will get your feet wet.
Direct Equity Investment with a Sponsor
Characteristics: Limited liquidity with typically longer-term (5+ year) hold periods. Returns, risk, and deal structures vary wildly, but typically offer a preferred return with a cash flow split above a specified return hurdle.
Examples: RealCrowd, CrowdStreet and Acquire Real Estate
Direct Equity/Debt Investment in a Newly Formed Entity
Characteristics: Equity investments offer limited liquidity and longer term hold periods. Debt and preferred equity investments typically offer a fixed rate of return and finite hold period, typically between 1 and 3 years.
Examples: RealtyShares and RealtyMogul
Auto-Investing in Debt
This could be the ideal solution for the hands-off system oriented investor. The investor sets out their parameters and underwriter algorithms allocate them into investments that match. The investments are in debt instead of equity, and algorithms can be constructed to evaluate the components of a debt investment.
Characteristics: Deals offer between 6% and 12% returns and have terms of 6 months to 36 months.
Fundrise eREIT/Platform Funds
The Fundrise eREIT is an innovative model that allows both accredited and unaccredited investors the opportunity to invest as little as $1,000. The Fundrise Income eREIT is focused on debt investments and offers investors a fixed rate of return, low fees, quarterly distributions, and quarterly liquidity.
The Income eREIT is targeting a 15% annualized return.
Liquidity is a bit of a misnomer in this type of investing. When the market is rising it works well. However, in a declining market you don't find a lot of opportunity to exit your investment at a predictable price point.
A Buffet of Funds
Also referred to as a Fund of Funds, this approach invests in funds across the platforms, taking advantage of the best of each. The performance of your basket of investments is going to be dependent upon the managers doing the selection. In mutual funds this approach is used to lower overall risk through diversification across the fund groups of interest to the investor.
Joe Stampone's Top 7 List
I know when I'm out of my depth. Because I write for both real estate professionals and investors, I will keep up with crowdfunding but it's doubtful I'll get into it at the depth it's covered in this report. I'll give you Joe's "140 characters or less" lead-in to each and the minimum investment. This is the tip of the iceberg for the other in-depth information he provides. I want to introduce these to investors and to agents who work with them.
PeerStreet - a marketplace for investing in real estate backed loans. Minimum investment: $5,000
Acquire Real Estate - a real estate crowdfunding platform for Accredited Investors. They pre-fund and co-invest solely in institutional-quality deals. Minimum investment: $1,000.
RealtyShares - an online marketplace for real estate providing investors with access to small balance real estate deals in secondary and tertiary markets. Minimum investment: $5,000 with selected investments as low as $1,000.
Fundrise - uses technology to offer real estate investment opportunities directly, online, and with lower fees – which means you can earn better returns. Minimum investment: $1,000.
RealCrowd - provides its users the ability to invest in quality commercial real estate direct with expert real estate sponsors, fee free, and with full transparency. Minimum investment: varies, but typically $25,000.
CrowdStreet - a comprehensive investor acquisition and management solution designed specifically for commercial real estate. Minimum investment: Varies, but typically $25,000.
AlphaFlow - helps investors easily build and manage real estate portfolios across the crowdfunding industry. Minimum investment $25,000.
This is your introduction, and you'll get a better handle on these platforms in the report, and which may be right for you or your clients.