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As the nation’s largest online crowdfunded real estate investment platform, CrowdStreet provides a wide selection of private equity investment opportunities across several asset classes.
With its high minimum investment requirements and higher-than-average risk, we wondered what made CrowdStreet so attractive to investors. So we did a deep dive on the pros and cons of its services, plus took a close look at dozens of customer reviews to find out why people like, or don’t like, investing on CrowdStreet.
CrowdStreet is a crowdfunded commercial real estate investment platform for accredited investors. It provides investment opportunities across 10 asset classes, including multifamily retail, industrial, and hospitality properties, plus direct access to sponsors, without charging fees to investors.
Find out the #1 thing experienced investors insist on to ensure satisfaction with CrowdStreet and learn about its pros and cons, plus how to get started, in our complete review below.
WHAT IS CROWDSTREET?
In a nutshell, CrowdStreet is a crowdfunding real estate investment platform. This allows you to invest in real estate investment opportunities and projects by networking you directly with project sponsors or developers.
Said sponsors and developers gather the funding they need to bring their projects to life through crowdfunding – you and other investors essentially share the financial burden for a project, making it less financially risky for any individual party.
Since real estate is still a solid investment choice during COVID-19, many people are jumping on these platforms and the opportunities they provide.
As an online investment platform, CrowdStreet allows investors and project developers to meet, decide on terms, and fulfill investment agreements almost instantaneously, and much more efficiently than in the past. Furthermore, by providing an investment marketplace/browsing screen, CrowdStreet provides easy investment options for those who don’t know where to go for their next great investment deal.
Such a direct-to-investor platform is valuable because it represents a lower overall risk to investors on average. Since there isn’t a middleman or special purpose vehicle acting as an intermediary (like a bank), marketplace insolvency is less of an issue, and investors and project developers can continue working together as it suits them.
CrowdStreet is particularly notable because they provide tons of in-depth information and several documents on each project before you have to invest. Furthermore, CrowdStreet does an excellent job of due diligence, and only showcases worthwhile and legitimate real estate investment opportunities.
CrowdStreet Review: Quick Snapshot
Minimum Investment: $10,000, with most deals having a $25,000 minimum.
Account Fees: None for investors in individual deals, as the fees are borne by the Sponsor.
Accreditation: Need to be an accredited investor, those with income over $200,000 or net worths over $1 million excluding primary residence.
Offering Types: Mainly equity and preferred equity deals.
Property Offerings: Mainly commercial real estate and apartment complexes.
Regions Served: All 50 states.
Secondary Market: None.
Self-Directed IRA: Available.
1031 Exchange: Available.
Pre-funded: No
Pre-vetted: Yes. Every investment opportunity applying for inclusion to the CrowdStreet Marketplace is subjected to a rigorous, objective vetting process. Only 2% of all applicants successfully pass this process and appear on CrowdStreet’s marketplace.
Special Feature: Investors invest directly with Sponsors. CrowdStreet is a rare marketplace to operate under a direct-to-investor model, whereby investors are able to invest directly with the sponsor instead of through a special purpose vehicle. As a result, the direct-to-investor model may result in lower overall risk to the investor.
It removes the platform risk of a marketplace insolvency and any associated disruption to the administration of funds contained in special purpose vehicles.
WHO IS CROWDSTREET BEST FOR
CrowdStreet is very clear that they are for high net worth individuals. CrowdStreet investors are:
- Accredited investors looking for high quality commercial real estate deals
- Those with at least $25,000 to invest[
- Those who don’t need liquidity for 3 to 10 years
These requirements might away turn smaller investors. But it lets CrowdStreet offer higher quality deals with higher potential returns to those who can put up the extra cash.
Pros
- Allows access to top-tier commercial real estate deals
- Provides tons of resources for user due diligence
- No fees for investors
- Has educational materials
- User interface is easy to use
- Stable, long-term investment options
Cons
- Investments are illiquid
- Only available to accredited investors
- Minimum investments are quite high
CrowdStreet Review: Sponsor Vetting Process
One of the absolute most important value-adds a real estate marketplace can provide is a thorough vetting process. Ideally, only the best-of-the-best real estate deals make it. Investors then do their own research and individually choose.
CrowdStreet’s vetting and screening process includes vetting the sponsor, the specific real estate property and the sponsor’s specific offer. Here is their vetting process:
1) Analyze the sponsor’s background and results with corresponding designations:
- Emerging — 2–5 years’ experience with portfolio activity up to $100M, experience in both geographical region and proposed asset class.
- Seasoned — 5+ years’ experience with portfolio activity over $100M, with an existing network of repeat investors and established banking relationships.
- Tenured — 10+ years’ experience with portfolio activity of over $500M, with principals who have invested together through multiple real estate cycles, and the company has a dedicated staff for investor relations and accounting.
2) After the sponsor meets the criteria, the asset the sponsor is funding is screened based on the business plan, market data, operating statements, pro formas, appraisals and other due diligence documents.
3) Finally, the terms of the sponsor’s specific offer are vetted and evaluated resulting in a classification of:
- Common equity;
- Preferred equity; or
- Mezzanine or 2nd position
HOW TO START INVESTING ON CROWDSTREET
Investing in a CrowdStreet property or fund is easy. Here’s how it works:
- Create an account for free.
- Confirm your accreditation status.
- Browse deals on the CrowdStreet Marketplace.
- Submit your offer.
- Once approved, fund your offer via wire, ACH or check.
You can immediately view all of Crowdstreet’s current deals once you’ve opened your account. You can see their investment stats, like the expected IRR, cash yield, and holding period.
The way you make money depends on what kind of project it is. You earn returns as interest (for debt investors) or as a share of profits (for equity investors).
CrowdStreet’s User Interface
CrowdStreet features a relatively intuitive user interface that gives you a quick overview of all your investment properties and their progress on the main dashboard. This dashboard also comes with pages where you can view updates on particular projects or track how your investments are performing versus their targets.
Furthermore, the CrowdStreet dashboard makes it easy to download specific documents for projects/investments.
More importantly, the CrowdStreet interface makes it easy to browse through various investment opportunities. You’ll be able to split these between existing investment opportunities and brand-new projects that are looking for “ground-floor” investors.
There’s always plenty of information available so you see all the details about a particular deal, including how many investors are currently participating and how much money has been raised so far (which can be good to gauge other investors’ confidence in a particular project).
The platform also includes a marketplace performance page where you can see how different completed deals have shaken out over time. You’ll even be able to directly compare their actual returns versus their targeted returns to see the aforementioned value of CrowdStreet’s rigorous deal-vetting process for yourself.
Actually selecting and investing in a project or opportunity is fairly straightforward. Select the deal you want to invest in, choose how much money you want to invest, then submit the offer. Remember, CrowdStreet is a peer-to-peer marketplace, so you invest personally with the project sponsor instead of a bank.
Lastly, we’d be remiss not to mention the “Resources” section you can find on every project page. This section contains instructional articles and videos you can use to become a better investor and make sure you understand the investing topics surrounding the platform. It’s a fantastic resource for beginning investors.
Ways to Invest on CrowdStreet
CrowdStreets gives investors 3 ways to invest, depending on how involved you want to be. We’ll go over them below.
1. INDIVIDUAL DEALS
You can browse the individual deals on the CrowdStreet Marketplace. Each listing shows the relevant stats and the value proposition.
Property types include:
- Office
- Multi-family
- Hotels
- Industrial
- Retail
- New developments
Each investment is categorized by a “Investment Profile.” This tells you the risk/returns projection, planned work on the building, and how it generates income.
You can find new construction developments to established properties with long-term tenants.
The minimum investment for CrowdStreet deals generally start at $25,000.
The investment period is usually 3 to 5 years. Some projects go up to 10 years.
CrowdStreet provides extensive info for each investment property. Each deal includes:
- An archive of legal documents
- The sponsor’s offering memorandum
- Business plan
- Property details
- Video of the elevator pitch for their project
- The sponsor’s contact info
2. FUNDS AND VEHICLES
CrowdStreet’s Funds & Vehicles gives you easy diversification with just one investment.
They’re a great option if you don’t have the time or expertise to research your own properties.
You can invest in either Crowdstreet’s own funds or a sponsor’s fund. Crowdstreet funds are managed by their in-house real estate professionals.
They also offer funds from their sponsors (such as from Rainbow Realty Group or Priam Capital).
Each fund focuses on a specific investment strategy, property type, or region. Examples may include a multi-family fund or an industrial development fund.
Minimums for CrowdStreet funds also start at $25,000. Instead of investing in only one deal, you’re invested in multiple projects.
3. TAILORED PORTFOLIO
The last way to invest is the privately managed account option by Crowdstreet advisors. The minimum investment is $250,000.
Professional advisors will create a custom investment strategy for you based on your goals. They can help you diversify your portfolio with different property types and risk profiles.
Once you agree to a strategy, they will invest in properties on your behalf. They also handle the day-to-day management of your portfolio.
The first year will have 2% to 2.5% management fees. After that, the fee is 0.25% in subsequent years.
Who’s CrowdStreet Not Great For?
While there’s a lot to like about CrowdStreet, it’s also not the perfect investment platform for everyone. Remember that you have to be an accredited investor to make an account on the platform, so it’s obviously not a great choice if you don’t have the required capital or net worth.
Furthermore, CrowdStreet only offers a limited variety of commercial projects, and these projects may take quite a while before you see any kind of return. Therefore, it’s a poor platform for short-term investment needs or if you want to play with the greater stock market.
Additionally, given that CrowdStreet has you invest in commercial real estate, your liquidity for those investments is practically nonexistent. You’re committed to the investments you make for the entire duration of the project in most cases, and you won’t be able to sell your investment to others given the lack of a middleman.
CrowdStreet isn’t the best choice for:
- investors without a lot of capital or net worth
- investors interested in short-term returns
- investors that want to invest in assets with some liquidity or flexibility
BOTTOM LINE: IS CROWDSTREET WORTH IT?
Our assessment is yes, CrowdStreet is definitely worth it for accredited investors.
They have some of the best offerings in the private real estate crowdfunding space. It boasts high-quality properties, above average returns, and are backed by experienced sponsors.
They also include a ton of detailed information and research on each deal. This adds to our confidence in their ability to scout out good deals.
CrowdStreet offers something for all investors – whether you want to hand-pick your properties or want a simple diversified portfolio.
The biggest drawback to investing with CrowdStreet is their high minimums. But if you’re able to put up the extra cash, it’s worth it based on the strong performance it’s had.
