- CrowdStreet offers accredited investors the opportunity to invest into commercial real estate.
- You can invest either in an individual project or a portfolio of projects through CrowdStreet’s funds.
- Many deals feature minimum investment amounts of $25,000 and two year investment terms.
If you are looking for opportunities to add real estate to your investment portfolio, CrowdStreet offers accredited investors a unique way of approaching pre-qualified investment deals while reducing your risk and exposure to the underlying asset.
But is it the right fractional real estate investing service for you, especially given there are so many to choose from? Read on for how CrowdStreet works, what they offer investors, pros, cons, alternatives, and more.
Inside this review
What is CrowdStreet?
CrowdStreet is a crowdfunding platform matching investors with real estate developers seeking funding for their projects. CrowdStreet conducts all the due diligence on the investment before offering it to its user base of investors.
This model helps new investors, who don't have the time or experience to research investment properties, get into commercial real estate. With CrowdStreet, they get a pre-qualified property they can trust.
CrowdStreet offers several options and different deals to invest on its platform. Investors can go all-in on a single deal or choose to spread their risk and portfolio across several investment options.
CrowdStreet has multiple investment options on its platform, although investors should recognize that a single investment into one of the assets could come with a minimum $25,000 deposit. There are no fees for registering on the platform, but CrowdStreet will conduct due diligence on your identity, income, and net worth to ensure you meet accredited investor status.
Who is it designed for?
CrowdStreet suits accredited investors. After the last real estate crisis in 2007, the US government put regulations in place to prevent unaccredited investors from investing in deals with excessive risk. As a result, only individuals with income exceeding a specific amount or owning significant assets can apply to invest with CrowdStreet.
Accredited investors must have a minimum net worth of $1 million or an annual income of $200,000 for singles and $300,000 for couples for at least two years. If you're not an accredited investor, another platform offering similar services is Fundrise.
Who would not be a good fit for CrowdStreet
Non-accredited investors would not be a good fit for CrowdStreet as all of their investments are available solely to accredited investors.
Investing through CrowdStreet also assumes you have a long-term investment horizon. That means that if you're looking for potential access to your capital before the maturity date on the investment, you're going to pay heavy penalty fees.
Some investors may have problems with illiquid investments, and it's important to know that you're locking up your capital for a significant period with a CrowdStreet investment.
How does it work?
CrowdStreet provides its platform members with commercial property deals available for investment. However, the investors don't buy the property outright themselves. Instead, they purchase a stake in the investment, with the potential return from the investment coming through cash flow and the property's eventual sale.
The website offers 5 or more unique investment opportunities in single assets or CrowdStreet’s real estate funds along with transparent terms and due diligence findings on each.
When users sign up with CrowdStreet, they benefit from the company doing the research and due diligence on the investment themselves. CrowdStreet has a strong track record of providing profitable investments for its users.
The company makes it easy for new investors to get started, helping them understand the dynamics of the platform and the investments they make. It's totally transparent with the investment process and all fees incurred by the investor.
CrowdStreet's investing strategy
The CrowdStreet investment strategy involves sourcing high-quality commercial real estate deals to pitch to its investors. The more deals the company finds and lists, the more it can create income through management fees and equity deals.
If you invest in a CrowdStreet opportunity, the due diligence sets out the terms and conditions of what the investor can expect from each investment strategy. These are fairly complex commercial transactions each with unique terms and conditions. Some deals turn cash flow right away, while others may take years for the investor to see returns. It’s in their best interest for investors to conduct additional due diligence prior to committing funds.
CrowdStreet has a good performance track record. Since 2014, CrowdStreet investors funded 524 deals, 56 of which have been sold at an average IRR of 17.1% post an average 2.3 year holding period.
As a new fintech, the company still has a long way to go to establish a reputation like a bank. However, as far as competitors go, CrowdStreet is one of the larger brands in the space, with an strong industry reputation.
How much does it cost?
CrowdStreet offers its users free signup for its platform. There are no membership fees due from the user. However, the CrowdStreet investor incurs a management fee on their investment, taken by CrowdStreet.
Investors pay 1% on the total value of their investment per year. Therefore, it's critical that investors understand the terms and conditions of each transaction they take on the platform. As mentioned, CrowdStreet has a variety of deals available at any time. However, not all of them are suitable for all investment strategies and each has different terms and minimum investment amounts. Therefore, it's important that you understand the risk in the deal before entering with your investment.
How to sign up
Signing up for CrowdStreet is easy. Visit the company's official website and start the signup process. The platform AI guides you through the registration, and then you'll have to submit personal information to help the CrowdStreet team conduct their due diligence on your investor status.
In most cases, companies use your social security number to trace your tax records and your reported income. If you apply and don't meet the accredited investor status, CrowdStreet will reject your application.
Pros & cons
- Access to commercial real estate deals.
- Professional due diligence with potential for high returns.
- Project developers are vetted including background checks and references.
- User-friendly interface for easy investing.
- Strong — though short — track record of performance.
- Educational resources on general investing and real estate investments.
- Complex commercial transactions, each with its own terms.
- Low portfolio liquidity with a long lock-up period.
- High minimum investment requirement of $25,000 or more.
- Only available to accredited investors with $1 million net worth or minimum annual income of $200,000.
CrowdStreet is one of a growing number of crowdfunded fractional real estate investment platforms. These are some of the most prominent alternatives to CrowdStreet for your consideration.
- Fundrise. Access lower investment minimums of $500, and its available to non-accredited investors. However, CrowdStreet's management fees are considerably lower.
- DiversyFund. This crowdfunding real estate platform offers investors real estate investment opportunities with zero fees and a $500 account minimum.
- Streitwise. Offers investors the chance to park their capital in a high-yielding real estate investment trust. The trust is like an ETF, bunching together income-producing properties into a business model that pays dividends to investors. Like CrowdStreet, it's also a somewhat illiquid investment with high minimums, but investors get cash flows through dividends.
- RoofStock. Offers no-accredited and accredited investors the chance to invest in crowdfunded real estate deals. RoofStock gives you partial "ownership" in an investment, and you share in the money cash flows from your exposure to the risk in the income-producing asset.
If you are an accredited investor with a well-diversified portfolio across multiple asset classes, CrowdStreet may be a good option for you to add commercial real estate to your portfolio. CrowdStreet does significant work and diligence on bringing a diverse portfolio of potential transactions. Though these projects are higher risk and require additional diligence on your part as well as a high minimum investment amount, they offer the potential for commensurately higher returns.