The Best Real Estate Crowdfunding Sites For Investors

The Best Real Estate Crowdfunding Sites For InvestorsMost of the people are already know:

You shouldn’t buy a property in order to invest in real estate.

Crowdfunding has become an option to raise money for all types of causes and needs. Recently, even the real estate industry has thrown its hat into the fray.  Over the last two years, a heap of sites has popped up to help investors around the world invest in real estate.  In this regard, we want to present a compilation of the best real estate crowdfunding sites around.

The real estate market continues to be the biggest sector of the US economy and it appears to be tireless. Investing in property is always a good move for two major reasons.  First, it is relatively safe from a lot of risks that comes with other options.  Second, investments generally increase in value over the long term. The promising housing market in the past years has inspired people to put up crowdfunding sites.

The legalization of real estate crowdfunding

The idea of raising money for a property is not new and has been around for a while.  Before 2012, there hardly was any regulation or restriction for the practice.  This situation turned off many investors.  On April 5, 2012, President Barack Obama signed the Jumpstart Our Business Startups Act, or JOBS Act, into law. This legislation paved the way for small business to access capital by lowering some barriers in the securities laws. It also changed the way people can raise money for real estate.  Significantly, Titles II and III of the JOBS Act of 2012 also provided for legitimizing equity crowdfunding.

Popular Crowdfunding Sites For Investors

Popular crowdfunding sites like Kickstarter and Indiegogo sets the pace for crowdfunding action.  However, they are rewards-based sites, or platforms that generate contributions for a business in exchange for possible rewards.  Real estate crowdfunding carries the potential to be a colossal market.  Currently, many institutions provide trillions of dollars in capital that go to assets like apartment buildings, condominiums, and malls.  They are bound to find their way online to the real estate crowdfunding sites named below.

A word of caution though:

Not all crowdfunding sites are the same.  It would be best to read the Frequently-Asked Questions (FAQs) on each site to see how it works. Some sites invest directly in real estate, some purchase mortgages, while other just make peer-to-peer loans.

Realtyshares

Realtyshares offer investors a wide range of property choices.  They list residential, mixed-use, commercial, multifamily, and retail properties.  They pass on the fees to the property holders and spare the investors of the burden. Investors can start seeing returns on their investments in just a few weeks. The site also allows investors to come in for as low as $5,000 initial investment.

Its platform lists both residential and commercial properties and there are no hidden charges. The site reports that they have sourced over $500 million investments through its platform.  Investors can search for properties using the site’s filters for location, asset types and desired returns.  They offer excellent deals and if they can keep that up, they’ll be around for a long time.

EquityMultiple

This site is quickly becoming a favorite because of the great deals they offer online. The company specializes in commercial real estate deals that cover both debt and equity.  They have a more stringent vetting process than the other sites. Nevertheless, they claim that their team has closed over $70 billion in real estate transactions.

Of course, the real test is in how well the platform analyzes and validates the deal.  Their special touch is that they co-invest in every deal – perhaps to demonstrate that it’s a good choice.

Funsrise

This is one of the most popular crowdfunding sites.  They only require a minimum investment of $1,000 and charges 0-3% in fees.  The site is quite unforgiving in selecting projects.  On the average, it gets about 250 new deal proposals each week.  Only about 5% of these proposals will actually meet the rigorous standards and receive approval.  Similarly, Fundrise has a lot of good investment properties to choose from.  Another plus is that they allow everybody to invest – one does not need to be an accredited investor.

They are currently one of the few platforms to have this practice.  Investors can filter their choices online by risk levels, return profile, asset class and location.  The company helps finance projects ranging from new constructions to improvements covering an array of property types.  Investors can finish their entire transactions online and track their returns via the same platform.

Realty Mogul

Realty Mogul started in 2013, making it one of the earliest players in the real estate crowdfunding game.  They handle a variety of deals – debt and equity, residential and commercial.  The Better Business Bureau rates them A+.  They have a very stable capital and boast of a seasoned management team.

Investors who want to join can start with as little as $5,000.  However, the platform allows them to participate in large-scale projects – like the Prune Tree Shopping Center in Salinas. Members can fund real estate loans or purchase an equity share in a property through the site.

Prodigy Network

Investors who want to start small could probably go to Fundrise. Those who want to go big, go to Prodigy Network. This is the premium steakhouse of the real estate crowdfunding community. The site says that investors can start at $10,000.  However, they have deals that require an initial investment of $100,000 and can go as high as $250,000.   For this amount, the investor gets personal service.  The company will make deals by phone, email or even in person.

iFunding

William Skelley and Sohin Shah established iFunding in 2012. The company offers investors a good choice of properties to invest in.  They have high-rise buildings in Manhattan and single detached homes in Arizona.  Investors can start with a low $5,000.  This is a great deal better than shelling out $50,000 to 100,000 to get into real estate a few years ago.  Investors can get help in picking out their investment choices. They can review information about the property such as estimated rate of return and length of the investment. Investors can also check the details of other companies and individuals involved in the investment.

The site also hosts webinars for prospective investors. These sessions provide investors with a showcase of the different real estate projects.  Participants can also ask questions about the projects or about the investment process. IFunding offers real estate investments that consist of multifamily, office, industrial, retail, hospitality and land.

Alphaflow

This site is a bit different from the rest.  They invest in real estate debt or bridge loans.  The company spreads the investors’ money across 75-100 individual short-term notes secured by real estate.  In effect, an investor may be lending to borrowers located in 15 different states.

In short, Alphaflow will use your money to buy fractional shares of crowdfunding deals.  The initial investment is quite high at $10,000 and they will only deal with accredited investors.

Patch of Land

Patch of Land concentrates on a slightly different area than the other crowdfunding sites. Their main listing of real estate has to do with funding rehabilitation and flip projects for other investors.  With Patch of Land, investors can receive monthly interest payments for their investments.

They can also be lien holders of the property.  Investors need a minimum of $5,000 to invest in a large selection of properties mentioned on the site.

PeerStreet

PeerStreet has become a popular real estate peer-to-peer lender after getting an endorsement from major finance personalities.  They focus exclusively on high-quality private real estate loans.  Like other sites, they use data-driven technology and offer account protection. Investors can start with a low investment of $1,000.

Summary

Real estate crowdfunding has indeed revolutionized the real estate investing arena.  Average investors now have a higher level of access to real estate investment options.  Many investors were able to include properties in their investment portfolios through these sites.  The combined active members of the major sites already run up to millions.  These sites have also channeled billions of dollars worth of investments in different real estate projects throughout the country.

Remember:

As we always say, there’s always a risk in any investment.  Should there be (again) a downturn in the real estate market, investors are bound to lose money.  Expect to read about big losses if that happens. So here is a safeguard we’d like to offer.  Choose a site with a really good platform, an experienced and credible management team, and follows a stringent vetting process.  Hopefully, this will help you sleep better at night.

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Baruch Silvermann

Investment research writer, business journalism, and financial analyst. Covers the vast spectrum of the financial topics in investments, real estate, equities, fixed income and personal finance. Twitter: https://twitter.com/BSilvermann

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