Real Estate Crowdfunding for Non-Accredited Investors
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In this article, we’ll explore the best real estate crowdfunding sites for non-accredited investors.
Real estate can be an exciting opportunity for investors. It can also be frightening when you consider how expensive and risky it is. But real estate crowdfunding platforms have made it easy for investors to make money from real estate safely and passively.
Simply put, crowdfunding removes many of the barriers and risks associated with traditional real estate purchases. Instead of buying individual properties outright, real estate crowdfunding enables you to go in on real estate deals with a group of other investors.
There’s just one problem: Many of these real estate crowdfunding sites require you to be an accredited investor to participate. That means you must consistently earn $200,000 per year or have a net worth above $1 million.
Luckily, we’ve found some real estate crowdfunding platforms that will let you in on the fun even if you’re a non-accredited investor.
In this article, we’ll list the biggest players in the space, give you an overview of how crowdfunding works, and share some tips for maximizing your revenue.
Keep reading to learn whether a real estate crowdfunding investment makes sense for your specific situation.
Accredited vs. non-accredited: What’s the difference?
Before jumping in, it’s important to do your due diligence and see which investment platforms you qualify for and which ones you don’t.
If you’re like most people, you’re a non-accredited investor. Therefore, you aren’t eligible to participate in some crowdfunding platforms that are open only to accredited investors (e.g., CrowdStreet).
In case you’re unfamiliar with the differences between accredited and non-accredited investors, here’s a quick primer.
- According to the Securities and Exchange Commission (SEC), accredited investors are individual investors who earn at least $200,000 in income in two of the most recent years, or couples who earn at least $300,000 for the two most recent years.
- Alternatively, if the individual or couple has a net worth of at least $1 million at the time of the transaction, that also counts as being accredited.
- Non-accredited investors include the vast majority of the population that earns under the above amounts and has less than $1 million in net worth.
As you might expect, only a small handful of investors are accredited. With that in mind, here are some of the top crowdfunding sites for non-accredited investors for you to explore in 2021.
Best Real Estate Crowdfunding Sites for Non-accredited Investors
Fundrise is a leading crowdfunding platform that follows a “value investing” strategy. In that approach, the firm strives to acquire undervalued properties and upgrade them to generate a profit for its investors.
Fundrise has a relatively low minimum investment level of only $500 (for its Starter Plan). If you have at least $1,000 to invest, you can select one of Fundrise’s three Core Plans, which follow a particular investment goal:
- Supplemental Income
- Balanced Investing
- Long-term Growth
BOTTOM LINE: Fundrise is appealing to new investors because of its user-friendly platform and low barrier to entry.
RealtyMogul is a popular crowdfunding site that lets both accredited and non-accredited investors invest in commercial real estate opportunities.
There’s a $5,000 minimum investment required to start. Unfortunately, that’s going to be a deal-breaker for some.
Once you’re enrolled, you can share your investing goals and view your eligible investments. Accredited investors can invest in any of RealtyMogul’s funds. But non-accredited investors are limited to the firm’s in-house real estate investment trusts (REITs) — MogulREIT I and MogulREIT II. Essentially, these are managed real estate portfolios.
RealtyMogul also offers an auto investing feature for its REIT investors.
BOTTOM LINE: RealtyMogul might be an attractive option if you have at least $5,000 to invest.
DiversyFund is a real estate crowdfunding platform that focuses on only multifamily apartment buildings of 100 units or more. Another unique feature about the firm is that it owns all of the properties under management.
Overall, DiversyFund is a great option for everyday investors because it comes with fully automated investing services, no management fees, and a minimum starting investment of just $500.
If that sounds appealing to you, check out DiversyFund’s high-growth REIT, which is available to all U.S. residents.
BOTTOM LINE: DiversyFund offers one of the easiest ways to earn income from massive multifamily apartment buildings.
4. Modiv (formerly Rich Uncles)
Modiv started out as Rich Uncles and is a fully investor-owned platform.
Under the Modiv name, non-accredited investors can purchase shares of revenue-generating commercial real estate assets.
The company has over $400 million worth of real estate assets under management and is the largest crowdfunded equity REIT in the US. Check out Modiv’s full portfolio here.
The minimum starting investment is $1,000, putting Modiv in the middle of the road in terms of deposit requirements.
BOTTOM LINE: Modiv offers a unique experience from the competition because it’s investor-owned.
Streitwise is a crowdfunding platform that allows both accredited and non-accredited investors to purchase shares of federally registered real estate offerings.
Technically, Streitwise is a non-traded REIT, meaning that the asset class isn’t traded on Wall Street. Therefore, it’s not subject to stock market volatility.
At the time of this writing, the minimum investment for Streitwise is $1,021, which gets you about 100 shares of its sole current offering, 1st Streit Office.
BOTTOM LINE: Streiwise offers a unique approach to crowdfunding in that it’s a non-traded REIT and only has one investment available. It might be an appealing choice for investors that want a simple real estate portfolio.
Real Estate Crowdfunding: A Deeper Look
As you can see, each real estate crowdfunding company has its own unique approach. So you’ll want to research the market to find a platform that aligns with your specific goals and needs, just as you would do before investing in a stock.
However, the concept is basically the same across all the platforms. On a fundamental level, crowdfunding involves using crowdsourcing to generate capital to pay for real estate investments. You don’t have to come up with a lump sum on your own, and you don’t have to take out a massive mortgage, either.
Equity vs. debt investments in crowdfunding
There are two ways that crowdfunding companies make money. These are through equity and debt investments.
In an equity investment, investors purchase properties and gain ownership stake.
With a debt investment, crowdfunding investors instead put their money into mortgage loans for specific properties. Shares of interest are then distributed as the loan is paid back.
It’s impossible to say whether equity or debt investments are better. Both can be highly lucrative, depending on the types of properties that are involved. Investors often choose to put their money into both equity and debt investments at the same time to maximize earning potential and balance risk.
One thing to keep in mind is that payouts for equity investments can be very complex. As such, it’s important to do your research before you make this type of investment to know how you’ll get repaid.
Tips for real estate crowdfunding
Here are some of our best tips for real estate crowdfunding.
Make sure you’re comfortable using the platform
There are a variety of crowdfunding providers to explore, and some offer better user experiences than others. As such, it’s important to explore your options to make sure you wind up with an app you’re comfortable with.
When vetting which company to go with, watch out for shady websites or apps that are difficult to access or use. As with any other online platform, you should feel good about using the app and in control of the experience. If the service doesn’t offer a stellar user experience, steer clear of it.
Look for transparency
The crowdfunding platform you work with should offer full transparency into the properties in its portfolio, including an abundance of data. You should also be able to speak to an expert at any time to get answers to your questions about the properties that you’re investing in.
Be wary of platforms that try to limit or restrict what you can access. The more information you have at your fingertips when crowdfunding, the better.
Consider buying direct property, too
Don’t get so caught up in real estate crowdfunding that you forget about other types of real estate investment options. Remember that while crowdfunding can be highly lucrative, it’s only one way to invest in real estate.
The traditional approach involves buying properties directly to either rent or flip them. This approach is much more hands-on. But it’s a great way to potentially benefit from a strong monthly cash flow or net gain, depending on whether you rent a property or flip it.
If you have enough money to fund a down payment and go through the real estate closing process (typically, at least $20,000 to $40,000 or more), consider scoping out some properties and hiring a real estate agent to walk you through the purchase.
Ideally, your real estate portfolio will contain a healthy mix of crowdfunded REITs and physical properties, producing dividends and cash payments for you on a monthly basis.
Make sure you’re in a position to invest
As you get older and more of your friends start getting into real estate investing, it’s going to be tempting to join the party.
Just remember that the key to real estate is managing debt properly and using it to get ahead and make big gains. At the same time, debt can hold you back and wreck your finances.
For example, if you’re in debt from credit cards and student loans, get out first and then worry about putting your money into real estate. You can’t get ahead until you get out of the hole that you’re in.
Keep an eye on your overall portfolio
Lastly, as you move forward with real estate, don’t neglect your other investments.
Most young investors should strive to maintain a balanced portfolio with a healthy mix of growth stocks, conservative stocks, bonds, index funds, and mutual funds, to name just a few examples.
Going all-in on real estate can be very risky. For the best results, diversify your portfolio for long-term success and stability.
Frequently Asked Questions
Here are the most frequently asked questions about real estate crowdfunding for non-accredited investors.
What is the best real estate crowdfunding platform?
It’s impossible to say what the best real estate crowdfunding platform is. It all depends on the type of platform that you’re looking for and your specific situation. Research each of the above-listed platforms in advance to determine which one is right for you.
What is a REIT?
A real estate investment trust (REIT) is a company that invests in income-producing commercial properties. When you invest in a REIT, you buy shares of that company and benefit from the properties it invests in. As such, it’s considered an indirect method of investing in real estate, unlike buying direct commercial properties.
Do you need a minimum annual income for crowdfunding?
A non-accredited crowdfunding platform typically won’t require you to meet any specific income requirements. However, you will most likely need to make a minimum investment — usually somewhere between $500 and $5,000.
Accredited investing is a whole different beast. To do this, you need to earn a high amount ($200,000 for individuals, $300,000 for couples) or have over $1 million in net worth (more on that above). Most people can’t afford accredited investment opportunities.
Are single-family homes better than multifamily homes in real estate?
If you’re exploring buying residential properties, you should know the differences between single-family and multifamily homes. And you should also learn how to recognize good deals.
Single-family homes produce less income than multifamily homes. However, they also typically come with less maintenance because they’re smaller. And you also have to deal with fewer tenants.
That said, if you can get a multifamily home and rent out all of the units, you’ll be able to pay down your mortgage faster on your rental property.
Is real estate an alternative investment?
Yes. Crowdfunding can be classified as an alternative investment asset in your portfolio. This puts crowdfunding in the same category as commodities, private equity, hedge funds, antiques, and fine art.
Alternative investments should make up only a fraction of your portfolio. If your portfolio is heavily weighted in alternatives, you may want to focus on achieving greater balance in your strategy.
Is Groundfloor a crowdfunding platform?
According to Groundfloor, its services do not constitute crowdfunding as described in the Title III of the Jumpstart Our Business Startups Act (JOBS Act).
That said, Groundfloor is still worth checking out if you’re curious about real estate investing.
The Bottom Line
Crowdfunding is a clever real estate investing strategy that can expose lucrative real estate projects to new and old investors alike.
No matter where you are in your real estate investing journey, you can potentially benefit from this opportunity.
Here’s a disclaimer: Real estate crowdsourcing is still risky. Just because you’re not investing in physical properties doesn’t mean you’re out of the woods in terms of risk. That being the case, you should still be cautious when entering into this market.
To be a successful real estate investor, diversification is key. Keep growing and diversifying your portfolio. Also, look into different types of opportunities to make money and increase your net worth.
If you start earning good money from real estate crowdfunding, it could propel you forward on your path to true financial freedom.
Who knows? A few years from now, you just may find yourself sipping a cool drink on your private yacht, thanking your lucky stars that you stumbled across real estate crowdfunding in the first place.
Wouldn’t that really put the “fun” in crowdfunding?