Best Real Estate Crowdfunding for Non-Accredited Investors

While the options for nonaccredited investors to invest in real estate crowdfunding have been limited in the past, a few crowdfunding platforms are opening up real estate investing to virtually anyone. Keep reading to find out which options are available and what the best platforms are for real estate crowdfunding for nonaccredited investors.

Best Real Estate Crowdfunding Options for Nonaccredited Investors

If you're looking for real estate investment options as a nonaccredited investor, below is Benzinga’s list of top picks for the best real estate crowdfunding platforms for nonaccredited investors.

• Best Overall: Arrives Homes
• Best for Low Minimum Investment: Fundrise
• Best for Investing in Debt: Groudfloor
• Best for Ease of Use: Steitwise
• Best for Easy Market Access: LEX Markets

1. Best Overall: Arrived Homes

Arrived Homes is a real estate investing platform that allows investors to purchase shares of individual rental properties. The company makes it possible to invest in rental properties for as little as $100. Arrived Homes also handles property management responsibilities, making investments completely passive.

Investors who don’t want to fork over the cash for a down payment on their own rental property can get started with real estate investing and grow their portfolios over time with small $100 investments.

2. Best for Low Minimum Investment:  Fundrise

Fundrise provides a wide range of real estate investment options for nonaccredited investors, with minimum investments starting at just $10. The platform automatically allocates your investment across multiple projects to maximize returns and provide a hedge against risks.

3. Best for Investing in Debt: Groundfloor

Groundfloor allows nonaccredited investors to invest in crowdfunding through short-term loans made to real estate investors and home builders. It offers the lowest minimum investment crowdfunding option available, allowing investors to get started with as little as $10.

Groundfloor offers short-term loans on residential properties and sells portions of those loans to its investors through a limited recourse obligation (LRO). Investors can browse available loans and invest in whichever ones they want in $10 increments. Most loans on the platform pay an interest rate between 7% to 12% with terms of 6 to 12 months.

Investors can schedule recurring deposits into their Groundfloor account and set up automatic investing based on the criteria they set.

4. Best for Ease of Use: Streitwise

Streitwise offers a private real estate investment trust (REIT) for accredited and nonaccredited investors with an investment minimum of around $5,000. The company focuses on investing in low-risk rental commercial real estate aimed at providing clients with consistent high-yield returns. The team invests in markets that are steadily growing. While it is still young and expanding, the company has built the business based on solid experience coupled with a vision for the future of investing. If you’re looking to diversify your current investment portfolio but fear real estate is too lofty a goal, Streitwise can be worth exploring.

5. Easy Market Access: LEX Markets

LEX Markets is a commercial real estate investing platform that allows accredited and nonaccredited investors to buy into large projects without bankrolling the whole thing themselves. You can buy shares of these projects without lockups, and the shares start at $250.

The platform also uses proprietary technology that is similar to the security protocols used by some of the largest securities markets across the globe. As a result, investors can protect their information and enjoy the stability that a commercial real estate investment can provide. Plus, owners retain operational control of their properties, allowing them a partial voice in how these properties are managed.

What is Real Estate Crowdfunding?

Real estate crowdfunding is a method real estate investors and developers use to raise capital to acquire or develop an investment property. Multiple investors who want to earn passive income pool their money for a real estate project. The investors will share a portion of the equity or provide the money as a loan and earn interest on their investments.

Investing through crowdfunding has become so simple that you can easily invest in real estate online by signing up with the platform that's right for you, funding your account and choosing which offerings you want to invest in.

Since crowdfunding regulations allow real estate companies to raise capital without registering with the U.S. Securities and Exchange Commission (SEC), there are rules in place to protect investors. These rules limit who can invest in crowdfunded deals based on what regulation the offering falls under.

Difference Between Accredited and Nonaccredited Investors

The SEC has rules in place to determine who can invest in which type of real estate crowdfunding offering based on whether they’re an accredited investor or a nonaccredited investor.

Accredited Investor

An accredited investor can participate in all types of crowdfunding deals. To be an accredited investor, an individual must meet one of the following requirements:

• An annual income of at least $200,000 ($300,000 if married) in each of the prior two years, and reasonably expects the same for the current year.
• A net worth of at least $1 million, excluding the value of the person’s primary residence.
• Hold a Series 7, 65 or 82 license in good standing.

Companies and trusts are also categorized as accredited or nonaccredited investors. For an organization to have accredited status, they must meet one of the following requirements:

• A trust with over $5 million in total assets that is not formed to purchase securities in the subject investment and is directed by a sophisticated person
• An entity with total investments of at least $5 million that is not formed to specifically purchase securities in the subject investment
• An entity in which all equity owners are accredited investors

Accredited investors are the only type of investor that can participate in Regulation D Rule 506(c) offerings. Under Rule 506(c), accredited investors are not limited to how much they can invest.

Nonaccredited Investor

A nonaccredited investor is anyone who doesn’t meet the requirements to be accredited. Since crowdfunding is presumed to be a higher-risk investment than publicly traded stocks or bonds, these rules were put in place to help protect nonaccredited investors from losing their life savings.

Can Nonaccredited Investors Invest in Crowdfunding?

While there are fewer options available for nonaccredited investors to get involved with crowdfunded real estate deals, an increasing number of real estate crowdfunding platforms with offerings are available to nonaccredited investors.

Regulation A+ Crowdfunding

Regulation A+ offerings are sometimes referred to as mini IPOs. This type of crowdfunding requires companies to have their offering qualified by the SEC. There are also additional reporting and disclosure requirements depending on whether the deal is a Tier 1 or Tier 2 Regulation A+ offering.

Since this type of offering involves more oversight from the SEC than a Regulation D offering, investments are open to accredited and nonaccredited investors. The only limitation is that a nonaccredited investor can’t contribute more than 10% of their annual income or net worth to a Tier 2 offering.

Regulation Crowdfunding (CF)

Regulation CF is the newest form of crowdfunding for nonaccredited investors. This type of offering hasn’t gained much popularity for real estate investing yet because the amount a company can raise is limited.

Until recently, companies were limited to raising a maximum of only $1,070,000 per year through Regulation CF. However, recent rule changes have raised that maximum to $5 million. Even with the higher amount, it’s difficult for companies to raise enough capital to provide attractive investment opportunities to passive investors.

Investing in Crowdfunding as a Nonaccredited Investor

Real estate crowdfunding offered through Regulation A+ offers a way for nonaccredited investors to invest in real estate without having to purchase their own properties. Crowdfunding companies don’t have to follow the same regulations as publicly traded REITs. This means it’s important to be thorough when conducting due diligence on a crowdfunding platform and its individual offerings. Real estate crowdfunding can provide excellent returns but only when smart investments are made.

Related Link: DIVERSYFUND VS. FUNDRISE. DiversyFund and Fundrise are real estate crowdfunding platforms that provide everyday investors with lower financial barriers to enter the real estate market and earn money through income-generating properties.

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