Real estate can be confusing for many investors. Unlike stocks or bonds, real estate isn’t sold on a public exchange at 9:30 a.m. every weekday. Real estate is by nature highly illiquid and owners/sellers have far more information about their properties than buyers. However, commercial real estate investments can provide diversification away from the stock market and offer outsized returns.
Stocks move in lockstep because of bundled ETFs and mutual funds and systemic risk in the market is unavoidable. Real estate is a great way to park capital in an asset that’s not beholden to the fluctuations of the major stock indexes. But like all investments, real estate has its drawbacks and CrowdStreet tends to accentuate the pros and glosses over the cons.
Who’s CrowdStreet For?
CrowdStreet isn’t a brokerage firm like TD Ameritrade or Charles Schwab. CrowdStreet is a crowdfunding marketplace where sponsors get access to a new network of investors who want to deploy capital into commercial real estate ventures.
If you’re planning for retirement and want to add real estate assets to your portfolio, you’d normally have to buy residential property or invest in a real estate investment trust (REIT). With CrowdStreet, you can invest directly in commercial real estate. Pick and choose properties yourself, use a pre-built portfolio, or get help from an advisory service. CrowdStreet isn’t for active traders who want to turn $500 into $25,000.
Most investments require $25,000 to get started and you’ll be locked into the deal for a specific amount of time, with minimums around 2 to 3 years. For buy-and-hold investors, this isn’t a problem. But if you want to make a quick buck, commercial real estate probably isn’t your best avenue. If you aren’t an accredited investor, you won’t be able to get in on the deals, anyway.
CrowdStreet’s Platform and Tools
CrowdStreet’s platform is very easy to navigate and new clients will have no trouble reading up on its latest offerings. This list can be filtered by a number of different criteria, including targeted internal rate of return (IRR), minimum hold period, minimum capital needed to invest, region and property type.
You can build a DIY real estate portfolio by picking and choosing properties that best fit your goals or mindset. Direct investing means you’ll interact directly with property sponsors and choose as many (or as few) offerings as you please.
Investing one-by-one might be too risky (or rich) for your blood. If so, CrowdStreet offers the Blended Portfolio, which acts like a mutual fund for commercial real estate.
You’ll make one contribution into a basket of 30-50 properties and pay a management fee of 1%. The minimum investment in the Blended Portfolio is $25,000, but incremental deposits of $1,000 can be made after the initial $25,000. Note that CrowdStreet does offer a REIT for non-accredited investors, but it carries much higher fees.
CrowdStreet will do the work for you if you don’t mind coming up with the initial capital. CrowdStreet’s advisors will deploy your capital to maximize your goals. You’ll need at least $250,000 in capital to get started with managed investing options and the management fee is 2% to 2.5% of assets in the first year (0.25% in subsequent years).
Your capital is pooled into an LLC or another vehicle. With CrowdStreet, you can put your cash right into the hands of sponsors. You’ll find no quirky legal structures with CrowdStreet’s managed investing.
CrowdStreet’s Research Offerings
CrowdStreet leverages several different types of technology to provide quality real estate news and research for both current and prospective clients. CrowdStreet has a commercial real estate investment course for novices with three different classes.
You’ll learn the basics of commercial real estate investing in 101, then the different types of properties and classes in 201. Finally, 301 teaches you metrics like cap rate and cash-on-cash return and how to properly measure risk and reward. You’ll find many in-depth articles and anyone who visits the site can use it.
CrowdStreet hosts webinars on its current offerings, including live-streamed tours of new listings or previews of future properties. Articles in the learning center discuss the latest trends in commercial real estate, interviews with experts and how to use common metrics and analytics.
CrowdStreet’s Commission and Fees
CrowdStreet doesn’t require membership or startup fees to join. Anyone can sign up and browse the Marketplace for free, but only accredited investors can invest. To be an accredited investor, you’ll need to have:
- A net worth over $1 million
- Annual income over $200,000 ($300,000 for married couples)
- Membership to a trust with more than $5 million in assets
You’ll need to prove your status as an accredited investor before submitting your final offer. Once there, you’ll need a minimum of $10,000 to get started, although many options require an initial investment of $25,000 or more.
CrowdStreet charges a 1% management fee for its Blended Portfolio and also charges a 1.75% management fee on the REITs available to non-accredited investors, plus a 1% financing fee.
The managed investments option also carries a 2% to 2.75% fee on assets under management for the first year before it drops down to 0.25%. CrowdStreet doesn’t hide these costs, but fees and minimums at other crowdfunding sites are lower.
All client personal information is encrypted with the latest network security protections. Your account and banking info will have limited access to only specific CrowdStreet employees. Sponsors for projects are also subject to quality control by their Investments Team.
Prospective investors can track the history of potential sponsors by clicking on the details page on “Track Record.” You’ll get a company history of each sponsor and a list of past and current offerings.
CrowdStreet’s Customer Support
CrowdStreet has a help center for clients who have questions. Articles that answer commonly asked questions can be easily located via search and a chatbot can help guide you in the right direction if you get stuck.
Crowdstreet’s Tradable Asset Classes
CrowdStreet is 100% commercial real estate. You’ll find a curated list of real estate opportunities carefully vetted by the CrowdStreet team.
Crowdstreet vets over 400 offerings each month and accepts only 3% of the proposals made by sponsors. Right now, the Marketplace lists several different property offerings. Investors can choose properties offering both debt and equity structures with timeframes that last from 2 to 10 years.
Individual real estate listings make up the bulk of the assets available, but the Blended Portfolio is a fund made up of over 30+ different properties. Sometimes, the platform offers Impact Housing and Medalist Diversified REITs for non-accredited investors. Your investment options are limited to what’s on the Marketplace and you’ll need to lock your money up for at least a few years. You won’t find any real estate stocks like Simon Property Group or funds like the Homebuilders ETF.
CrowdStreet’s Ease of Use
CrowdStreet’s platform is easy for both novice and experienced real estate investors to find deals that fit your objectives. You can filter different metrics and categories and the research center is filled with articles about everything from real estate basics to specific strategies for maximizing profits.
CrowdStreet has a straightforward operation where investors give money directly to property sponsors. Few crowdfunding platforms give clients this type of access to commercial real estate ventures. Even the best online brokers don’t have options like this.
Final Thoughts on CrowdStreet
Private commercial real estate has become more accessible to individual investors since the 2012 Jobs Act. CrowdStreet seeks to create a transparent network where investors can directly deploy capital to sponsors without middlemen or complex investment vehicles.
Competitors have opened their doors to more non-accredited investors but CrowdStreet’s strict standards and direct marketplace structure provide quite an advantage. The deals offered on CrowdStreet are pure commercial real estate plays with easy-to-digest terms. CrowdStreet is a promising entry into crowdfunding that promises a simple and transparent investment process.