If you were to poll an average group of people who want to invest in real estate and ask them what’s keeping them from doing it, you would probably get the same answer from all of them — cost. The high cost of real estate leaves investors with the ultimate chicken versus the egg conundrum.
You can generate wealth through real estate, but it takes wealth (or access to lots of capital) to buy it in the first place. That was true in the past; especially when it comes to real estate investment trusts (REITs) and managed funds. Thankfully, alternative real estate platforms like Crowdstreet and Streitwise have come along to make real estate investing more accessible.
What is CrowdStreet?
Crowdstreet is a unique investment company that sets out to fill the gap that separates small to medium-sized investors from commercial real estate. It accomplishes this by adapting the idea of crowdfunding established by sites like Gofundme, and gearing it toward commercial properties. Whereas Gofundme solicits crowdfunding for various business or personal ventures, Crowdstreet offers investors the opportunity to buy small percentage slices of various commercial real estate projects in the Crowdstreet portfolio.
Properties available on Crowdstreet run the gamut from multi-family residential and commercial, to self-storage and other light industrial. Unlike a traditional real estate brokerage, which only represents buyers and/or sellers of commercial real estate for an outright purchase, Crowdstreet offers investors the chance to buy a piece of a particular property. This drastically lowers the ante that’s typically needed by investors who want a seat at the commercial real estate ownership table.
Aside from being more financially accessible than most commercial real estate, Crowdstreet offers several significant advantages to potential investors. First of all, Crowdstreet is set up to be user-friendly and offers a vast array of supporting educational information designed to take the mystery out of real estate investing. A quick look at the in-depth nature of the questions and answers on Crowdstreet’s FAQ page will reveal how committed is to helping investors understand how the platform works and where their client’s money goes.
Another big Crowdstreet plus is the sheer variety of properties available for investment, many of which may not fit the profile preferred by fund managers at a typical REIT. Crowdstreet also offers investors the opportunity to purchase debt or equity in properties by selling pieces of the notes or financing instruments attached to them. Until now, buying debt in this manner was something only available to large managed funds, brick and mortar banks or private lenders who buy notes.
Although Crowdstreet focuses on bringing real estate investments within reach of people that have typically been unable to invest in real estate due to cost, it’s still geared toward a particular type of investor. Most of the investments offered through Crowdstreet are classified as Regulation D, Rule 506c offerings — they are only available to accredited investors. The minimum buy-in for Crowdstreet investments is $25,000. Although a lot of money, it’s much less than you would have to contribute as a down payment to get a purchase for commercial real estate over the line.
The accreditation requirement means you need to have a minimum net worth before you can invest with Crowdstreet. The typical Crowdstreet investor is highly liquid with a diversified portfolio. Crowdstreet is also perfect for real estate investors seeking out new opportunities that don’t require the kind of long-term financial commitment and cash outlay that comes with buying a new property.
What is Streitwise?
Streitwise is a private REIT that was set up to allow the “regular” investor to invest in real estate. The founders of Streitwise put the company together because there were precious few REITs available to nonaccredited investors and they wanted to change that. This Los Angeles-based REIT prioritizes multifamily residential income property with its funds because of the low risk and high reliability associated with apartment buildings.
Streitwise was founded by a savvy group of veteran real estate investors who seek out early-stage investments in emerging markets. This allows them to offer investments that maximize growth potential and minimize risk. The low risk and focus on smaller investors come together to make Streitwise a very attractive option for investors looking to break into the real estate market without breaking the bank.
Although it’s a REIT, Streitwise still focuses on the smaller investor and offers several benefits. Perhaps the first and most valuable benefit of investing in Streitwise is its availability. Streitwise’s minimum $5,000 buy-in is much lower than the $25,000 Crowdstreet requirement, which is why potential investors do not have to be accredited to participate. This allows Streitwise to cast a much wider net when attracting new investors.
The company also has a straightforward fee structure that is much lower than other comparable investments. Additionally, the fact that Streitwise is a REIT means investors should be able to count on regular dividends that are paid out on a quarterly basis. Finally, Streitwise was set up to have a user-friendly, easy-to-understand customer interface that its clients can easily navigate.
Streitwise is best suited for investors who wish to diversify their portfolio but can’t afford to buy into traditional private REITs or platforms like Crowdstreet due to their lack of accreditation. Buyers with a net worth of less than $200,000 are welcome at Streitwise. The fact that Streitwise is a REIT also means that the properties the fund invests in are analyzed by an experienced fund manager. This will give investors who are relatively unfamiliar with real estate confidence in the fact that their money is being well spent and properly accounted for.
How are CrowdStreet and Streitwise Different?
Although Crowdstreet and Streitwise are both set up to make real estate investments more accessible to the general public, they have some significant differences. The first and most obvious difference is that Streitwise is an actual REIT that picks and chooses the properties it will use your money to invest in. Crowdstreet, on the other hand, is literally crowdfunding for real estate, and allows you, the investor, to decide what property (or debt) you wish to invest in.
Second, the minimum investments required by both platforms are very different. Whether you’re looking at $5,000 for Streitwise or $25,000 for Crowdstreet, the buy-ins range from high to very high. In either case, however, the initial investments are much lower than you’d have to pay (even as a down payment) to buy income-producing real estate of your own.
Another significant difference between Crowdstreet and Streitwise is the time before investors see a return. Crowdstreet investments can have a much longer life (2-3 years) before an investor can expect a return on certain deals, while Streitwises’s REIT structure could produce dividends as soon as the next quarter after an investment is made.
Additionally, the business models for the two sites are somewhat different. Crowdstreit has a wider range of investment opportunities that puts investors in the driver’s seat when it comes to where their money goes. Streitwise on the other hand, is a managed fund, which means they have a fund manager who selects the properties for the REIT. That translates to less investor control but the theory is that a seasoned fund manager will be better at selecting properties and growing wealth than the everyday investor.
A very important point to note is that while Streitwise is backed by an experienced team of real estate investors, the platform itself is still fairly young so it's more difficult to predict long-term gains. Since the minimum investment term is 5 years to be able to redeem your shares with no penalty and the REIT is only 4 years old, no investors have yet received fully realized returns. CrowdStreet, on the other hand, has 56 fully realized investments with an average return of 17.1% over an average term of 2.3 years.
Last and perhaps most importantly for some investors, Crowdstreet requires investor accreditation for eligibility, and Streitwise does not.
Which Real Estate Investing Platform is Best?
As is always the case with investments, which one is better is a subjective conclusion based on a number of factors, such as risk tolerance, investor liquidity and the type of returns the investor wants. However, in the case of Crowdstreet versus Streitwise, there is at least one very clear line of demarcation between the two: Crowdstreet has a history of realized investments to prove its long-term performance.
If you are liquid enough to invest in either platform, then the question of which one is best boils down to how you like to do your investing. If you’re the type of investor who likes the idea of pouring over different properties, analyzing data and then placing bets based on your ability to read the tea leaves, Crowdstreet may be the best for you. If, on the other hand, you prefer the type of investment where you can “set it and forget it” and just wait for your quarterly dividends, perhaps an investment Streitwise is more your style.
Alternative Real Estate Platforms
Crowdstreet and Streitwise are both unique investment platforms that make commercial real estate investments more accessible to the general public, but they are far from the only ones. Modern technology and the advent of crowdfunding has led to an entirely new class of alternative real estate investment platforms. If you want to learn more about these platforms, Benzinga has taken the liberty of compiling a list of the top alternative real estate platforms and their individual pros and cons here:
The Last Word of CrowdStreet vs Streitwise
Crowdstreet and Streitwise are both examples of how modern technology and innovation have come together to bring commercial real estate investments closer to the average investor. Each platform offers its own individual pros in its favor along with some limitations that all investors must consider.
While the loss of principal is still a possibility, the relatively low entry costs for both platforms allow investors to dip one (or more) toes into the commercial real estate pool without feeling like they’re going to drown. In either case, investors looking for a neutral take on the individual benefits of alternative real estate investment platforms would be wise to avail themselves of the wealth of information available on sites like Benzinga before taking the plunge.
Do you have to be an accredited investor to use Crowdstreet?
Yes. Even though investing in Crowdstreet costs less than traditional commercial real estate purchases, its investments are classified as a Regulation D, Rule 506c offering, which means it’s only available to accredited investors. The reason for this is that there is a risk of loss and the loss of a $25,000 buy-in could prove to be catastrophic for a non-accredited investor.
Which is better, Crowdstreet or Fundrise?
A. There is no one right answer to this question. It’s almost like asking which is the best type of dessert. You’ll ask a dozen people and get a dozen different answers based on their individual tastes and preferences.
Alternative real estate investing platforms are very similar, and preferences boil down to the individual. It’s up to each investor to figure out what kind of returns they are looking for, how much risk they can stand and how long they are willing to wait before seeing a return.
How can I invest in commerical real estate without a lot of money?
You can use platforms that utilize REITs to gain entry into the world of commerical ral estate investing.
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