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If you’re interested in investing in real estate but want to put someone else in charge of doing the legwork, you’re in the right place. With real estate crowdfunding, you can gain access to a pre-vetted set of investments without doing the work yourself. Today, I’m talking about three of the most popular real estate crowdfunding options. In this comparison of Fundrise vs CrowdStreet vs RealtyMogul, I’ll help you find the best platform for your investments. Let’s get started!
What is Real Estate Crowdfunding?
First, what is real estate crowdfunding? At a high level, crowdfunding is a concept where a group of investors funds a project, each putting up a small piece of the investment. Take a simple example of a $100,000 house. With real estate crowdfunding, 100 investors can purchase the house, each putting up just $1,000.
Fundrise, CrowdStreet, and RealtyMogul each have a slightly different take on real estate crowdfunding, but all of them have the same goal – to help you acquire a portfolio of real estate investments.
Let’s start with an overview of each of these platforms.
Fundrise: What it is and How it Works
Fundrise is perhaps the most popular real estate crowdfunding service. They have over 150,000 active investors and have done over $5.1 billion in real estate transactions.
Fundrise built its platform around creating private real estate investment trusts (REITs). Historically, most REITs are publicly traded, but Fundrise aims to change that with its private REIT investments. Fundrise’s eREITs are pretty similar to publicly traded REITs in that you are buying a basket of real estate packaged into a fund.
The difference between their eREIT product and a publicly-traded REIT is that it is only available to Fundrise investors. By originating investments directly on behalf of its investors, Fundrise can cut out the middlemen associated with publicly-traded REITs, reducing fees in the process.
Here’s an example of how investing in Fundrise works. Assume you start by putting just $10 to work at Fundrise (their current investment minimum). Fundrise will then allocate your investment across a variety of eREITs – packages of real estate investments. As you invest, you’ll achieve instant diversification and become a part-owner in dozens of real estate projects.
Then, Fundrise pays quarterly dividends to investors for the returns realized on their investments.
I have been investing with Fundrise for years now, and I have been tremendously pleased with the results. If you want to learn more about Fundrise in particular, check out this After School Finance review.
Fundrise
Fundrise is my favorite tool for getting started with real estate investing. It allows you to invest in a diversified portfolio of commercial real estate at low costs and with a great deal of transparency. Check out my full review to see if this tool is right for you!
CrowdStreet: What it is and How it Works
CrowdStreet is another real estate investing solution to consider. To date, CrowdStreet has done 473 deals and managed the investment of over $1.69 billion through its platform.
CrowdStreet is somewhat similar to Fundrise in that it offers investments through diversified investment funds. However, CrowdStreet offers two kinds of funds.
First are CrowdStreet funds, which are built and managed by CrowdStreet; this works much the same as Fundrise (though they’re generally only available to accredited investors – more on that in a minute). However, CrowdStreet also offers real estate funds with a single sponsor. What does this mean? It means that a real estate firm other than CrowdStreet finds and manages investments in a fund, often focusing on a particular asset class or geography.
In addition to the various fund investments offered by CrowdStreet, you can also invest in individual deals for CrowdStreet. Private placements are CrowdStreet’s bread and butter – allowing you to invest in individual deals. So, rather than buying a portfolio of investments through a fund, you can invest in individual transactions. The value of CrowdStreet is that their team has vetted the investments, and you have immediate access to individual deals without having to go out and find them yourself.
Finally, for investors looking to invest a large amount of money through CrowdStreet ($250k minimum), it is also possible to gain access to custom-built portfolios from CrowdStreet. These portfolios are tailored to your specific investing goals.
RealtyMogul: What it is and How it Works
RealtyMogul is also a popular investing platform, having financed over $3.1 billion of real estate thanks to its more than 212,000 members.
They offer both REIT-style investments as well as private placements for investors interested in acquiring individual assets.
At present, RealtyMogul offers two different REIT products, The Income REIT and The Apartment Growth REIT. The former has historically provided a 6% annualized distribution, while the latter has provided a 4.5% annualized distribution. The Income REIT invests in a broad array of commercial real estate, while The Apartment Growth REIT focuses entirely on multifamily apartment buildings (and a greater focus on capital appreciation).
RealtyMogul’s private placements offer investment opportunities in individual commercial real estate properties, including multifamily housing, retail and office space, etc.
How Are they the Same?
Despite their differences, comparing Fundrise vs CrowdStreet vs RealtyMogul, these platforms have much in common.
All three of them remove barriers to entry for investors looking to put money to work in real estate. They bring the investment opportunities to you – all you have to do is find the type of opportunity you’re looking for and invest alongside other investors.
Like all real estate investments, investing on any of these platforms means investing in illiquid assets. Said differently, if you plan to invest in real estate, you’re committing your money for the long haul. In many cases, it can be difficult (if not impossible) to get your cash out, and doing so often requires taking some sort of financial penalty. However, the power of real estate is in holding investments for long periods. And this requires patience.
Second, all three of these platforms carry risk. While there are many reasons that real estate can make an excellent investment, it is also easy to lose money. There are no sure bets, so do your homework before putting your money to work on any of these platforms.
Finally, all three of these platforms provide some form of fund offering to investors, allowing you to gain instant diversification without having to buy properties individually (helping to reduce barriers to entry). For example, investing $5,000 on Fundrise means owning a stake in dozens of real estate investments.
How are they Different?
The most significant difference comparing Fundrise vs CrowdStreet vs RealtyMogul is their target client base. Fundrise targets the everyday investor who wants to dip their toes into real estate. The investment minimum is minimal (more on that in a minute), and it’s simple to get started.
RealtyMogul is a step up in that they offer both REITs and private placement options. However, the investment minimum with RealtyMogul is a bit higher than Fundrise, meaning you’ll need to put more money to work. That said, RealtyMogul is a platform with which you can grow. Once you reach accredited investor status, you can begin investing in their private placement options, selecting individual investments that meet your needs.
Finally, CrowdStreet is undoubtedly the most advanced of these three platforms. One look at the investor marketplace will tell you why. When you start viewing potential investments, you’ll start seeing words and phrases like the capital stack, equity multiple, target IRR, capital calls, etc. Once you understand real estate investing, these aren’t complex concepts but make no mistake about it – CrowdStreet is not for amateur investors.
Unique Features
Features Unique to Fundrise
Fundrise stands out due to its simplicity. When you invest, you simply choose a plan that aligns with your overall investing goals (capital preservation, balanced, or growth), and Fundrise will appropriately allocate your money. However, with this comes the least amount of investment flexibility – you can’t choose individual investments.
However, this is perhaps Fundrise’s greatest strength. Their platform helps you gain instant diversification with the least amount of work. Ultimately, this helps reduce your exposure to any individual investment.
Features Unique to CrowdStreet
CrowdStreet is unique in that it is perhaps the most robust crowdfunding marketplace for accredited investors looking to invest in individual real estate transactions.
A quick scan through the marketplace indicates opportunities that range from apartment buildings to an Amazon Fresh marketplace to self-storage. If you want the opportunity to invest in individual real estate deals with the greatest amount of control, CrowdStreet is the place for you.
Having access to multiple asset classes, geographies, etc., helps CrowdStreet stand out.
Features Unique to RealtyMogul
CrowdStreet is unique in that it takes the best of Fundrise and the best of CrowdStreet and brings them together under one roof – offering both individual investments (private placements) and REITs.
This makes RealtyMogul a fit even as your investments grow and you want more flexibility to invest in individual deals.
Minimum Investment
Let’s get down to brass tax. Now that you know a bit about each of these platforms, there are some key details you need to know to decide which is best for you.
The first detail you’re probably wondering is just how much you need to invest.
Fundrise has the lowest hurdle to get started. With just $10, you can begin investing with Fundrise. It is that easy. Now, again, bear in mind that any money you invest will have limited liquidity. But if you want to dip your toes into real estate, Fundrise is the best place to start.
The next step up from Fundrise is RealtyMogul. RealtyMogul requires a $5,000 initial investment to gain access to either of its REIT investments. While this is a big step up, RealtyMogul is a platform with which you can grow. However, taking a look at its REIT investments, I feel there is less diversification than can be achieved with Fundrise despite the higher investment minimum.
If you wish to invest in private placements through RealtyMogul, most deals require a minimum investment of $25,000 – $35,000. If you want to achieve diversification, you’ll need to invest in multiple private placements, making the hurdle for investment relatively high.
Finally, with CrowdStreet, most investments are individual assets rather than funds. Many of these investments have a hurdle of $25,000 to get started. Again, if you wish to invest in individual deals, you’ll need to play in a big way to achieve diversification.
Investor Accreditation
Comparing Fundrise vs CrowdStreet vs RealtyMogul, here’s where things get a bit tricky. The SEC tries to look out for the little guy. They don’t want the person who makes $75,000 per year investing big chunks of cash in what they consider to be riskier investments.
So, they created a concept called investor accreditation. Many private investments mandate you to meet specific requirements to invest.
While there are multiple ways to meet the accreditation requirement set by the SEC, the most common way is to have $200,000 or more in income ($300k for couples) or to have a net worth of more than $1 million excluding your primary residence. This can get complicated, so I suggest checking out the SEC rule for details.
Some real estate crowdfunding platforms require you to be an accredited investor to participate.
Fundrise is simple. You do not need to be an accredited investor. Yes, that means anyone can invest in Fundrise.
So, here’s where it gets a bit more complicated. With RealtyMogul, you do not need to be an accredited investor to invest in the REIT offerings. However, if you want to invest in private placements, you need to be an accredited investor.
Finally, most deals on CrowdStreet do require investor accreditation.
Here’s the easy way to remember this. If you’re investing in a basket of real estate, you probably don’t need to be an accredited investor. But if you’re investing in individual deals, you likely need to be an accredited investor.
For many, this may mean CrowdStreet is not an option, and RealtyMogul is only an option through the REIT product.
Fees
When it comes to investment fees, things can get pretty complex with real estate crowdfunding platforms.
Fundrise charges a 1% annual fee. So, if you invest $1,000, you can expect to pay $10 per year in fees. This fee structure is a bit simpler to understand than CrowdStreet and RealtyMogul.
With CrowdStreet and RealtyMogul, the fees are much more complicated. I suggest you evaluate the fees of any individual investment (or REIT in the case of RealtyMogul) to understand the fees before investing. While CrowdStreet does not charge fees directly, there are deal-level fees of which you should be aware.
Customer Service
Fundrise does offer customer support, but unfortunately, it is provided entirely via email. Similarly, CrowdStreet seems to handle all of its contact requests via email.
RealtyMogul gets the nod from us, as it’s easy to find a phone number to find someone to talk to if you have questions.
Ultimately, while you can ask questions about the platform, the burden is on you to make prudent investment decisions.
Security
All three of these platforms use security measures that are in line with other financial services firms.
Fundrise uses bank-level security, and all information is encrypted with an AES bit symmetric key, and each connection to the website uses encryption over HTTPS with Transport Layer Security. CrowdStreet uses similar security measures to help keep your data safe.
RealtyMogul conducts internal and external data security reviews, uses specialized firewalls/encryption, and closely monitors its systems infrastructure.
Fundrise vs CrowdStreet vs RealtyMogul: Which is Best for You?
Are you still wondering which is best, Fundrise, CrowdStreet, or RealtyMogul? The answer, like many things in life, is it depends. Here are my recommendations:
- If you want to start investing in real estate with as little as possible, I suggest starting with Fundrise. You’ll achieve an outstanding level of diversification with a small $10 minimum investment.
- If you are not yet an accredited investor but someday think you might be, RealtyMogul is a terrific option. The platform allows you to start by investing in REITs and eventually “graduate” to private placement investing.
- Finally, if you’re already an accredited investor and looking to deploy substantial capital in real estate, CrowdStreet is the place for you. They offer the greatest variety of individual deals in which you can invest. Just know that CrowdStreet is for folks who know what they’re doing and are looking for easy access to deal flow.
For most investors, I recommend starting with Fundrise. It’s easy to get started and a great way to see if real estate is the right fit for your portfolio.
No matter which platform you choose, the most important thing is to get started investing. Because the sooner you do, the sooner you’ll be able to watch your wealth grow!
