Presently, there are a plethora of indirect real estate investment opportunities available to investors. One simple method is through crowdsourcing for real estate.
As an early success story, Fundrise spread the idea among small investors. In addition to more complex investments for qualified investors, they also provide private REITs (real estate investment trusts) for non-accredited investors with a minimum commitment of just $1,000. They are, however, not alone in the real estate crowdfunding space, and many financiers have begun seeking for novel investment opportunities.
If you’re looking for an alternative to Fundrise while you consider new investing opportunities, consider the following top picks.
Crowdfunding for Real Estate for Non-Accredited Investors
The U.S. government restricts most of us from investing in the same possibilities as wealthy investors because we are not accredited investors, defined as having a net worth of $1,000,000 or an annual income of $200,000 ($300,000 for married couples).
Today, non-accredited investors may take part in real estate crowdfunding thanks to a growing number of platforms that do so.
Crowdfunding platforms for real estate make various claims concerning the administration costs required. But the reality is, if they want to, there are countless methods for them to conceal expenditures that fill their own coffers, such as taking care of maintenance in-house and charging exorbitant rates. Instead than focusing on claims of low or no fees, evaluate their net returns, both historical and anticipated. Here are some ideas for investing in real estate without buying the property outright.
Five Thousand Dollars Is The Bare Minimum To Invest
Streitwise invests in commercial and mixed-use assets, whereas Fundrise prefers residential investments such as apartment buildings and single-family rentals.
They have always met or exceeded their yearly dividend target of 8% to 9% since its founding. This includes the time when commercial office buildings were struck harder than most sectors by the coronavirus outbreak.
While Streitwise controls share prices, investors may benefit from price appreciation if they choose to hold onto their shares rather than selling them on the open market. So far they haven’t moved much, so buy for the income and think of appreciation as a bonus.
Avoid planning on making a profit during the first five years by selling. These shares are intended to be held for an extended period of time, much like other real estate crowdfunded ventures.
Streitwise focuses on investments in secondary markets like Indianapolis and St. Louis. They avoid cities like San Francisco and New York because of their exorbitant housing and food costs.
Streitwise is a trustworthy investment vehicle; I’ve made money with them passively. However, everything is possible, and corporate finance attorneys are fond of repeating that the past is no guarantee of the future.
Nonetheless, I have no need to change my monthly investment plan, which includes reinvesting dividends.
Initial Capital Required: $500
Diversyfund uses an alternative investing strategy in which dividends are not distributed and profits are instead expected to grow through capital appreciation.
Like Fundrise, Diversyfund focuses on investing in multi-family dwellings around the country. To create a broad, diverse portfolio, they put all of their earnings back into purchasing other homes.
Diversyfund’s Growth REIT is a non-tradeable, long-term investment that requires a minimum five-year commitment. Avoid putting money you might need soon into their real estate investing platform.
Diversyfund’s cheap entry point for investors is an advantage over other crowdfunding sites. You may launch an enterprise with as little as $500, a sixth of the entry-level needs of rivals such as Streitwise or RealtyMogul (more on them shortly).
Investing at a bare minimum of $10
GroundFloor’s design is fantastic, and not only because it’s unique among flooring companies. Short-term loans are GroundFloor’s specialty as a hard money lender. So, rather than participating in equity crowdfunding, in which investors pool money to buy tiny fractions of a property, you will be supporting loans backed by real estate.
Of course, Fundrise also has certain collateralized loans. What makes GroundFloor unique is that you may pick and choose whatever loans you wish to sponsor. GroundFloor assigns each loan a risk rating, which determines the interest rate, which may be anywhere from 6.5% to 14%.
The best part is that you may start paying down a loan with as little as $10. Because of this, GroundFloor is the most user-friendly option for real estate crowdfunding.
You also have the option of investing directly in GroundFloor and letting them make loans using the money. However, returns are lower than average, capping out at 7% for a 12-month commitment and requiring a minimum investment of $1,000.
I have had success with GroundFloor, earning 9–9.5% on my money by focusing on “B” and “C” loans. When the loan-to-value ratio of a property is less than 70%, I know that GroundFloor can successfully foreclose and get back the majority, if not all, of my investment if the borrower fails.
Loans from GroundFloor often only last between six and twelve months since the company works with “flippers.” As a result, GroundFloor is unique among crowdfunded investments due to its exceptionally fast return.
Five Thousand Dollars Is The Bare Minimum To Invest
RealtyMogul provides private placements with particular properties to approved investors, in addition to two private REITs for non-accredited investors. The second type of ownership allows you to have a smaller stake in a single property or a collection of properties.
The first of them, with the catchy moniker MogulREIT I, distributes its earnings once each month at a rate of 6% per year. Its focus is on generating revenue rather than expanding the business, so shareholders may expect just a little increase in value over the long run. The portfolio of the fund includes commercial and office buildings in addition to apartment complexes located throughout the United States.
MogulREIT II, their other fund, offers a better compromise between growth and dividends. It distributes dividends four times a year, at an annual rate of 4.5 percent. The fund, unlike MogulREIT I, only buys and sells apartment complexes.
The starting point for investing in either of these ETFs is $5,000.
While RealtyMogul is intended as a long-term investment, you can resell your shares with a minimal penalty of just 2% if you do so during the first year. At the end of the second year, the fee is reduced to 1%, and at the end of the third year, you can sell your shares back at the then-current price. Most crowdfunded real estate REITs have minimum investment terms of five years and often impose severe penalties for selling shares before that time.
Invest a minimum of $1,000
Yieldstreet’s Prism Fund is unique in that it invests in more than simply real estate. Fine art, consumer debt, business debt, and other assets are among its other holdings.
The Prism Fund is restricted to non-accredited investors. Prism Fund offers short-term notes and a tailored portfolio of hand-selected assets to accredited investors (loans). Gains can be made through dividend yields of 8% and possible price gain. Yieldstreet is less convincing because it disclaims in the small print that “The Fund’s payout may exceed its earnings.” To that end, you should consider the possibility that some or all of the dividend you receive from the Fund will be a return of capital to you.
That 8% dividend yield might not even be a dividend. In the event that Yieldstreet’s investments underperform, the company may backtrack and say that the dividends were really merely a return of capital.
Think of this as a warning. They have a modest entry price of only $1,000, so it’s easy to get started. As a result, you should think of the Prism Fund from Yieldstreet as a high-risk, high-reward option.
Complete purchase price of rental property
Roofstock is not a real estate crowdfunding site, but it simplifies direct investment in rental homes.
It’s a marketplace where investors can purchase and sell fully furnished rental houses. There are currently renters in some of these homes, while others are available immediately.
This is where Roofstock’s openness really shines. The first indicator is the minimal costs they charge, which are a percentage of the sale price for both the vendor and the buyer.
However, the openness of their listings extends to the homes themselves, since they aim to attract out-of-town investors who are comfortable purchasing houses without first setting foot on the premises.
Home inspection reports, neighborhood stats, tax assessment histories, school reports, and even local property worth estimates are all common features of real estate listings. This is in addition to the standard financial data, like rentals, cap rates, and anticipated costs, that is often included in a report evaluating a property’s performance.
- Arrived Homes
Invest a minimum of $100.
Buying a rental property altogether can be a lengthy and complicated process, but Arrived Homes eliminates those barriers. Start-up costs for a single Arrived Homes investment property are as little as $100, however most investors put up more than that. And there’s no need for accreditation; that’s good news if you don’t make six figures a year or have a seven figure net worth.
What you need to know about Arrived Homes is as follows:
- It is possible to make direct investments in certain buildings. Rather with more abstract products like debt or REITs, Arrived Homes provides direct exposure to the rental housing market through shares in specific homes. When a property is rented, you receive a piece of the rent collected.
- Your Investment Will Not Subject You to Personal Liability. Since Arrived Homes takes responsibility for its properties, you won’t have to worry about legal action or financial consequences stemming from your platform participation.
- You Have Options When Considering Real Estate Markets in the United States. Multiple real estate markets in the United States are served by Arrived Homes, many of which are located in the south and are experiencing rapid population expansion. Because of this, investing in foreign real estate may be a good way to diversify your portfolio and gain exposure to different markets outside of your own.
- It is not necessary for you to conduct your own screening of potential tenants or rental properties. Before making any purchases or signing any leases, Arrived Homes conducts thorough investigations of both the properties and the prospective tenants. You don’t have to bother about verifying tenants’ credit or organizing your own property inspections with Arrived Homes. However, you should still make sure a particular home is suited for your investment objectives and goals and that Arrived Homes, in general, is acceptable for your investing style.
With LEX, both accredited and non-accredited investors have access to a novel commercial real estate investment platform.
You may invest LEX in commercial real estate so that you can receive dividends from those investments. If the value of your assets rises, you will get a proportional portion of that gain. Both scenarios have you reaping the same financial benefits as the properties’ majority owners.
You can sell your shares on the secondary market of LEX at any time, with no lockup period. While liquidity on LEX’s secondary market isn’t guaranteed, it’s still preferable to the illiquidity and haircuts of private REITs and real estate crowdfunding alternatives.
The fact that LEX doesn’t require any kind of guidance from its creators is probably its strongest feature. There is no one telling you how to invest, and you may put together a real estate portfolio that fits your needs and comfort level with risk exactly the way you want it to.
Alternatives to Fundrise for Accredited Investors Only
As a person who has previously met the requirements to be considered an accredited investor, you have more freedom to choose investments than the ordinary Joe. If you have a lot of money to invest, you might want to check out some crowdfunding opportunities in the real estate market.
Invest a minimum of $25,000
CrowdStreet’s Impact Housing REIT and Medalist Diversified REIT were the company’s first forays into the realm of soliciting funds from non-accredited investors. Unfortunately, CrowdStreet has closed both funds and does not currently accept investments from non-accredited investors at this time of writing.
However, for approved investors, they do provide the option of highly liquid investments with competitive returns. Apartment complexes, hotels, mixed-use structures, and even self-storage facilities are all viable investment options. You may either invest directly in one of their properties, or in one of their funds that pool the profits from many properties.
They have properties with yields of up to 12%, and many of them have annual return goals of 30% or more. Advanced investors may use CrowdStreet to invest in real estate via a self-directed IRA or do 1031 swaps.
There are prohibitively expensive entry prices. Current minimums start at $25,000, and some of their investments demand as much as $150,000.
CrowdStreet has shown to be an excellent platform for generating diverse high profits. Just don’t think you can try them out with a little outlay of money at first.
One thousand dollars is the very minimum to invest.
Although EquityMultiple is not the simplest method to invest in commercial real estate, it does provide a variety of options and some really cutting-edge strategies.
This covers both more conventional private REIT funds and alternative funds such as opportunity funds. There’s a wide range of investment terms available, each with its own unique combination of risk and reward potential. In the world of locked real estate crowdfunding, their minimum commitment period of six months is a breath of fresh air.
Investments in Qualified Opportunity Zones and 1031 exchanges are among the tax planning options made possible by EquityMultiple. The firm claims they have given investors an average return of 14.5 percent. The results weren’t too bad.
Their minimum investment is rather high, but so is the case with other crowdfunding sites that only accept investments from certified investors. Some investments can be made with as little as $10,000, although the minimum is set much higher.
Usually between $20,000 and $25,000 is the bare minimum.
When it comes to real estate investments, AcreTrader is unique in that it focuses on farms rather than the more common commercial and multi-family buildings.
The firm claims that farmland is an unsexy but high-performance asset class since it has outperformed the S&P 500 over the previous three decades. They compare the returns of farmland against those of other investments since 1990 and display the results in a neat graphic. According to them, in 1930, a $10,000 investment in farmland would have been worth more than $199,700 by today’s standards.
AcreTrader argues convincingly that farmland is a low-risk, high-reward investment option. In addition, like other real assets, it provides a useful protection against inflation.
There are a variety of farm investment opportunities available for you to choose from, but only a select handful are really available at any one moment. The average dividend yield on a deal is between 3 and 4 percent, and yearly returns of 8 to 9 percent might be expected. However, they have seen dividend yields of over 12% and overall returns in the teens from a few of their investments.
The minimum amount you’ll need to invest varies from offer to bargain. Minimum investments for most agreements are between $20,000 and $25,000.
Initial Investment Required: $15,000.
AcreTrader’s biggest rival in the agricultural crowdfunding business is FarmTogether.
They both provide similar dividend yields (between 3% and 9%) and total returns (between 7% and 15% each year). The company has begun a test program to sell shares on the secondary market to investors who wish to cash out before the five to twelve year commitment period is up.
FarmTogether provides individualized solutions, including single ownership, for investors who are interested in farm ownership. However, you need a budget of at least $1,000,000 to be able to purchase a farm outright.
FarmTogether’s fund offerings and single-ownership investments are both eligible for 1031 exchanges.
Lowest Possible Outlay: Uncertain
HoneyBricks is an innovative platform for purchasing commercial real estate using a variety of major cryptocurrencies.
Accredited domestic and international investors can purchase equity interests in HoneyBricks’ properties and portfolios. Shares are represented by digital tokens, which are records of ownership stored on the blockchain and whose value fluctuates in reaction to market conditions and user demand.
Tokens can be acquired with either cryptocurrency or fiat cash, or by staking an already existent coin. HoneyBricks supports several different cryptocurrencies, including Bitcoin, and all of them are eligible for dividend payouts.
You can get a loan against your assets with an annual percentage rate (APR) anywhere from 3% to 12%. After the SEC-mandated 12-month holding period has passed, you may sell your HoneyBricks Tokens on the secondary market or return them to HoneyBricks in exchange for cash.
While I haven’t been overly thrilled with my profits from Fundrise, I also haven’t been too disappointed. Despite the polished appearance of their portal, I am not impressed with the company’s performance reports or the fact that it no longer displays predicted returns for individual funds.
Nonetheless, I think real estate crowdfunding is a great way to diversify your portfolio and supplement equities. They complement each other well due to their high returns and low volatility, although little liquidity. They help me achieve my goal of early financial independence by providing a steady stream of passive income.
Besides Fundraise, I use a few other investment crowdsourcing sites to diversify my real estate portfolio. Learn the ropes and assess your level of comfort with a small initial investment, then build up your portfolio as your confidence grows.