Previously we took at look at what it’s like to invest using RealtyMogul, a popular site for crowdfunded real estate investing. This is a fairly new innovation, and there are several of these types of companies popping up to get into this space. We promised to look at each one and give you the lowdown. Here’s what happened when we used RealtyShares, YieldStreet, and CrowdStreet.
The table below compares the basics. Each site offers a slightly different type of investment opportunities, but RealtyMogul wins hands down for one reason. In addition to offering the lowest minimum investment, it’s the only one of these sites that is open to investment from non-accredited investors. That’s a pretty big deal for individual investors who are trying to use these sites to get involved in commercial real estate. Accredited investors need to earn at least $200K per year or have at least $1M in total assets, excluding a primary residence. Those are steep criteria that beg the question: What is the point of crowdfunding for accredited investors? They already have the necessary capital to access all sorts of existing real estate investment opportunities.
|Commercial Real Estate Fund and Individual Projects||Individual Residential Real Estate Projects Investment and Funding||Commercial Real Estate Portfolios and Other Alternative Investments||
Commercial Real Estate Funds and Individual Projects
Flagship REIT Target return
|Open to Un-Accredited Investors||YES||NO||NO||
RealtyShares offers exactly the type of investment opportunities that an individual investor might be looking to get involved with, but not have the funding: multi-family residential properties. Here’s an example of the opportunities they offer:
Unfortunately, as we mentioned above, in order to get access to these opportunities, you need to be an accredited. Here’s the message you get if you’re not:
One interesting feature of RealtyShares is that in addition to investment opportunities, the site also offers the ability to get funding for an individual project:
We didn’t test this out, but the odds are, if you go this route, you’re likely going to pay higher interest rates than you would if you went through a bank. Our guess is that interest rates here would be somewhere between traditional bank loans and hard money lender rates.
YieldStreet is interesting because in addition to commercial real estate investments, it also offers other types of alternative investment opportunities, like Pre-settlement portfolios. These are contracts with personal injury lawyers where an advanced payment is made and underwritten by an eventual legal judgement. Yes, these are fairly arcane, but their potential return makes them attractive. Here’s a sample of YieldStreet’s offers:
Again, all this is moot for those investors who are not accredited. However, YieldStreet does mention they’re working on getting regulator approval to open up their funds to non-accredited investors. Time will tell.
CrowdStreet offers many opportunities for investing in individual commercial real estate projects. The flagship fund, Priam Capital REIT, however is the most accessible, with their lowest minimum investment threshold of $10,000.
The target return of 17% makes this fund look very attractive, but again, you’ll see from their Closing Process Overview that their offerings are open only to accredited investors.
To date the fledgling market for crowdfunded real estate investing is mostly unavailable to individual investors who are not accredited. In our view, this defeats the purpose, and it’s not clear yet what advantages are offered above just investing in standard stock-market traded REITs.
There is potential though. If these companies can get approved by regulators to take money from non-accredited investors – as they appear determined to do – there appears to be many attractive investments to be had. In the meantime, you’ll have to develop investment opportunities on your own. Keep reading our Newsletter for help identifying the best markets.