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Over the past decade, technological advancements have revolutionized the way we invest. One of the sectors that has benefited immensely from this digital shift is real estate. Traditionally, property investment has been an avenue reserved for those with substantial capital, but recent innovations have democratized access to this lucrative market. Enter: real estate crowdfunding.
What is Real Estate Crowdfunding?
At its core, real estate crowdfunding allows individuals to invest small amounts of money into properties, either equity or debt. Instead of one or two investors purchasing an entire property, hundreds or even thousands of people can now pool their resources to buy a share in a property. Each investor then earns a portion of the rental income and/or benefits from the appreciation of the property, proportional to their investment.
Top 5 Real Estate Crowdfunding Sites
Launched in 2015, EquityMultiple primarily centers its efforts on commercial real estate at an institutional level. Furthermore, the platform provides avenues for equity, preferred equity, and senior debt ventures.
With a starting investment threshold of $5,000, EquityMultiple strives to demystify real estate investing, promoting clarity and wider accessibility for regular investors. Their offerings span a gamut of private commercial assets such as office locations, senior care residences, hotels, and data hubs.
Catering to accredited investors, the platform has investment commitments that vary between $10,000 to $40,000, with durations ranging from half a year to a decade or even longer. For affluent investors keen on broadening their horizons and exploring diverse ventures, EquityMultiple stands as a prime starting point.
2. Honey Bricks
Launched in 2022, HoneyBricks is an online investing platform for multifamily real estate. They help get investors fractional access to institutional quality, pre-vetted multi-family investments with less fees, lower minimums and more liquidity.
They believe that engaging with seasoned real estate experts is the optimal route for investors to achieve returns that surpass market averages.
The approach is threefold: pinpointing burgeoning markets, forging robust collaborations with top-tier sponsors in these areas, and enhancing the investment diligence process. This methodology facilitates split ownership, letting investors easily engage via a easy to use digital platform.
Since its establishment in 2013, with its base in Austin, Texas, CrowdStreet has showcased over 700 commercial property investment opportunities. The platform has captured the interest of over 100,000 American investors.
Quoting CrowdStreet, “With our ‘Blended Portfolio' offering, individual investors can seamlessly invest in commercial real estate.”
To date, the platform has celebrated distributions exceeding $220 million to its investors. Investment avenues at CrowdStreet encompass funds, standalone deals, and a curated, expert-driven portfolio.
Established in 2013, PeerStreet operates as a digital platform that allows qualified investors to channel their money into top-tier private real estate loans. In essence, when you invest, you're providing the necessary funds for lenders to offer loans to real estate enthusiasts. Subsequently, PeerStreet manages the collection of monthly repayments from these borrowers, ensuring that you, as an investor, receive a portion of these returns.
With PeerStreet, you have the flexibility to diversify your investments either on your own or via automated selections, spanning a wide range of geographical areas, lenders, borrowers, asset categories, durations, LTV percentages, and interest rates.
Since launching in 2012, RealtyMogul has garnered the attention of over 274,000 investors, eager to tap into its REITs and exclusive market propositions. The platform is lauded for its rigorous vetting process; every property contender undergoes a hands-on evaluation, and each deal is meticulously assessed through specialized techniques and models.
Investors are presented with three primary goals: securing passive income, aiming for growth, and achieving portfolio diversification. The available investment avenues encompass REITs and specific property types, including multifamily units, office spaces, industrial sites, and retail outlets.
Why is Real Estate Crowdfunding Potentially Valuable?
- Accessibility: It breaks down the financial barriers that previously prevented most individuals from entering the property market. Now, with as little as a few hundred dollars, one can begin their investment journey.
- Diversification: Investors can distribute their capital across multiple properties or even geographies, reducing the risk associated with traditional real estate investments that rely on the performance of a single property.
- Transparency: Most crowdfunding platforms provide detailed information about the properties, expected returns, and the track record of the developers or managers. This allows investors to make informed decisions.
- Professional Management: The majority of crowdfunding platforms collaborate with real estate professionals who manage the properties, eliminating the need for investors to have expertise in property management.
- Liquidity: Some platforms have secondary markets, enabling investors to sell their shares before the property is sold, although this is not guaranteed.
In conclusion, real estate crowdfunding has not only democratized property investment but also added an element of convenience and transparency that was previously missing. As with any investment, potential backers should conduct their research, understand the risks, and make informed decisions. But for those looking to dip their toes in the property market with lesser capital, real estate crowdfunding might just be the perfect avenue.