Best Real Estate Crowdfunding Marketplace Reviews
For the longest time, institutional investors have taken advantage of a very profitable asset class that has generated historical 10%+ returns while experiencing less volatility than the stock market: direct purchase of private real estate.
Individual investors have long been unable to tap into many sectors of this lucrative asset class because of the huge costs required to participate and still maintain diversification. All this changed with the introduction of the JOBS Act in 2013 which made it legal to crowdfund all sorts of securities, including real estate.
Marketplaces have sprung up to allow individual investors to aggregate their money into a variety of different real estate investment projects with amounts as little as $5000, which enables a level of diversification previously impossible for the everyday investor.
We built this comparison page to review the top real estate crowdfunding platforms so you can easily choose the marketplace that best meets your needs.
I have $ and am looking for a platform that has
Assets Under Management
Patch of Land
|$5,000||2013||0-2% management fees on interest distributions for investors||$100 Billion||Sign Up|
|$500||2012||The eDirect funds (eREITs and eFunds) pay a 0.85% annual asset management fee. In addition, clients of the investment services and management system pay a 0.15% annual investment advisory fee. In total, Fundrise eDirect investors will pay 1.0% in fees, which is significantly less than the 1.37%-6.45% in asset management fees typically incurred with comparable traditional investments. Investors also incur an upfront cost of 2% in asset origination fees, which is significantly less than the 25-40% charged in many traditional real estate deals, saving investors 23% to 40% upfront.||$1.36 Billion||Sign Up|
|$5,000||2013||Free for investors||$90 Million||Sign Up|
|$1,000||2013||1-2% management fees for investors depending on deal||$200 Million||Sign Up|
|$5,000||2013||1-2% management fees for investors||Unknown||Sign Up|
|$1,000||2013||0.5-1% for investors, deducted from distributions as they are paid||$250 Million||Sign Up|
|$25,000||2013||Free for investors||$1 Billion||Sign Up|
|$5,000||2014||Flat fee of $30-$40 annually for accreditation verification.||Unknown||Sign Up|
|$10,000||2014||5.7-7% total fees for investors; initial fee of 0.7-2% plus a variable return of capital fee, typically around 5%||Unknown||Sign Up|
|$5,000||2015||0.5% annual fee, 10% of investor profits after investors have received their initial investment back||Unknown||Sign Up|
|$25,000||2015||5-7% investor fee||Unknown||Sign Up|
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Below are some of the factors you want to consider when deciding on a real estate crowdfunding platform:
This is the minimum amount required by the real estate crowdfunding platform to get in on a deal. Obviously, lower is better as it allows you to participate in more deals and therefore better diversify your risk.
Most crowdfunding sites currently require participants be accredited investors, which means anyone with a net worth of $1 million in assets (excluding primary residence) or have made $200,000 annually for the last three years.
This restriction was previously a legal condition, but as of May 16, 2016, Title III of the JOBS Act came into effect which removes this requirement, so that anyone can participate.
As a result, real estate crowdfunding sites have slowly started opening up to non-accredited investors, so we make special note of this in the comparison table.
There are two ways that real estate crowdfunding marketplaces fund their deals: pre-funding and post-funding.
Most sites post-fund, which means that they don't give the money to the property developer until enough investors join in on the offering;this may mean that the deal NEVER gets funded if there isn't enough interest, similar to a Kickstarter campaign that didn't meet its goal.
However, some sites pre-fund, which means that they invest in the deal themselves first, and then offer investors to join in.
This is clearly better for you as an investor because it ensures that the platform has done a lot of due diligence since if no investors join,they're still in on the deal. It also means that your money gets put to work straight away instead of waiting for the deal to successfully close. Finally, it's good for the real estate developer too, since it means they get the funds immediately to start working on the property.
What happens if the real estate crowdfunding platform you invest with goes out of business - who will manage your investment?
Many sites have already asked this question and come up with contingency plans in case they're no longer able to administer the investments.
Most sites separate each investment's legal entity from the platform marketplace so that a bankruptcy court can't use the real estate to pay the debt of the platform.
But that's just the minimum requirement; there still needs to be a method to keep the investment running in case of a bankruptcy.
Two sites (currently DiversyFund and Full Capital Stack) have rules that allow investors to vote on a new administrator in case of bankrutcy, but that process takes time to execute.
Elite sites (at the moment Patch of Land, Realty Shares, and iFunding) have already designated a backup administrator in advance, so that should anything happen a third party is standing by to handle the transition without a hitch.