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- Easy To Use Online Platform
- Solid Customer Support
- Low Commission Rate
- Low Liquidity
- Accredited Investors Only
- High Minimum Buy-In
CrowdStreet is an online commercial real estate crowdfunding investment platform that offers a unique alternative to investing compared to traditional stocks and ETFs.
According to its website, CrowdStreet’s goal is to help you build wealth. The platform enables you to make direct investments in commercial real estate opportunities across the U.S. from the comfort of your own home.
By moving a traditionally analog process online, CrowdStreet is making commercial real estate investing more accessible for individual investors. You can compare multiple deals, learn more about commercial real estate, and manage all of your investments from one spot.
I’ve been hearing lots of buzz lately about crowdfunded real estate, and CrowdStreet is one of the leading players in this space. This post is going to cover how CrowdStreet works so you can decide if the company has investment opportunities worth adding to your portfolio.
In This Article:
What is CrowdStreet?
CrowdStreet is a crowdfunding commercial real estate investment platform for high-net-worth individuals. With a CrowdStreet account, you’ll be able to invest in individual commercial real estate projects. You can also invest in a portfolio that’s spread out across dozens of properties (I’ll dive into these different account types shortly).
However, not just anybody can invest with CrowdStreet — only accredited investors can.
According to the U.S. Securities and Exchange Commission (SEC), people who earn over $200,000 annually for at least two years in a row are considered accredited investors. Married couples that want to open a joint account must collectively earn over $300,000 for at least two years. If you don’t meet the annual income requirements, you may qualify if your net worth is over $1 million. Accredited investors can also be corporations, LLCs, or partnerships that hold over $5 million in assets.
With that in mind, CrowdStreet is not for most people. As you’ll see in this post, the minimum buy-ins are much higher than you might find with traditional stock market investments.
The History of CrowdStreet
CrowdStreet was founded in 2014 with the goal of leveraging technology to facilitate commercial real estate investing.
The company is currently headquartered in Portland and serves over 76,000 investors. At the time of this writing, the company has raised over $972 million in capital across over 375 commercial properties and has distributed over $90 million to investors.
Suffice it to say that CrowdStreet is building momentum and might be worth considering if you have lots of extra cash sitting in your high-yield savings account.
How Does CrowdStreet Work?
Anyone can create an account, but as I mentioned earlier, you need to be an accredited investor to invest with CrowdStreet.
If you qualify, you’ll be able to invest in individual real estate deals that the company has identified and partnered with, or open a portfolio. Let’s take a closer look at how these different investment options work.
1. Direct Investing
If you want to manage exactly where your money goes, direct investments allow you to identify and invest in individual properties or projects that appeal to you.
For example, one of the recent investment opportunities was for Metro Gateway Apartments, a multi-unit residential apartment complex in Riverside, Calif.
As you can see in the above screenshot, the project is targeting a 14.7% internal rate of return (IRR). However, investors needed to put down at least $25,000 in order to buy in.
Another direct investment option was Crosstown Preserve, in Eden Prairie, Minn., which targets a 20.7% IRR over a four-year investment period. Again, you needed to chalk up at least $25,000 to play ball.
2. Blended Portfolios
If you’re looking for more diversification than what you might get by picking your own single investments, CrowdStreet’s Funds and Blended Portfolios offer just that.
These funds are built by an algorithm and include multiple properties from their Marketplace. It’s kind of like investing in a mutual fund, but for commercial real estate–your investment is spread across multiple projects. The minimum buy-in for blended portfolios is also $25,000—the same as with most individual investments.
It’s free to sign up for CrowdStreet, and there are no fees for having an account or browsing the company’s investment opportunities. The company does, however, earn commissions on the individual investment options, blended portfolios, and funds that it offers.
- Funds and Portfolios: You’ll pay a 1% assets under management fee.
- Private Managed Account: you’ll pay a management fee from 2% to 2.5% during the first year. After year one, the fee drops to 0.25%. Keep in mind that you need $250,000 to open a private managed account.
Signing Up and Getting Started
To sign up for a CrowdStreet account, click the Sign-Up Today button right on their website.
Provide Basic Information
Next, you’ll be asked to enter your email address, first name, last name, password, and phone number. You’ll also be asked if you’re an accredited investor. You can also create an account by logging in with Google or LinkedIn.
Identify Preferred Direct Investment or Portfolio Option
After your account is registered, you’ll be directed to your account dashboard. From there, you can see the currently active direct investments, funds, and blended portfolios that CrowdStreet offers.
If you identify a direct investment that you’d like to invest in, you then have to click the Indicate Interest button. There is also a webinar held before the launch of every offering that reviews the key deal points and allows investors to ask questions directly to the sponsor. 30 minutes into the webinar, the Invest Now button becomes available, and the deal is open for investments.
If you want to invest in a blended portfolio, it’s a little more straightforward. In the Marketplace section of your account, you’ll first select the portfolio that you want to invest in. Let’s take the CrowdStreet Blended Portfolio – Series V as an example.
If you like this portfolio, have at least $25,000 to put down, and are an accredited investor, click on the gold Invest Now button.
You’ll then be taken to the Transaction Center, where you can indicate how much money you’re interested in investing. You’ll be asked to submit proof of your accreditation status in order to actually buy-in.
I’m not seeing any special promotions or incentives for creating a CrowdStreet account or making investments.
However, once your account is registered, you can earn a $200 Visa gift card for each friend or family member you refer who also makes an investment.
CrowdStreet has security standards and procedures in place designed to prevent unauthorized access to your accounts and personal information.
Their website is built upon a secure infrastructure with multiple layers of protection, and they use industry-standard encryption technologies to safeguard your information.
Users are required to identify and authenticate themselves prior to accessing restricted portions of the Services.
CrowdStreet Customer Service and Support
CrowdStreet offers customer support by means of phone, email, and live chat. Visit their contact us page to submit an online request.
You can also visit their Help Center to find answers to frequently asked questions.
Pros and Cons of CrowdStreet
- Innovative way for accredited investors to diversify their investments
- Tech-savvy company with an easy-to-use online platform
- Solid customer support
- You might see significantly better returns than you would in the stock market. (Of course, you might also lose money)
- Low liquidity; your money will be tied up for several years
- Real estate might be risky compared to traditional ETFs
- Only available to accredited investors that earn over $200,000/year
- High minimum buy-ins (e.g., $10,000 to $25,000 for funds/portfolios, $250,000 for privately managed accounts)
Alternatives to CrowdStreet
CrowdStreet is not the only real estate crowdfunding platform on the market. Some of its main competitors include:
Is CrowdStreet a Good Investment?
As with all investments, risk is a part of the equation. If you’re keen on getting your feet wet in the commercial real estate investing space and you have lots of money saved up (like several hundred grand) then CrowdStreet might be a good platform for you to explore investment opportunities.
At the same time, there’s a high buy-in and most people aren’t going to qualify as accredited investors. Real estate investing also carries its own risks, which are complex, and different than traditional stock marketing investing.
With that in mind, I highly recommend reading CrowdStreet’s disclosure below:
“Direct and indirect purchase of real property involves significant risks, including without limitation market risks, risk related to sale of land and risks specific to a given property. The securities offerings posted on the Marketplace (including CrowdStreet vehicles) are speculative. Marketplace investments are NOT insured by the FDIC or by any other Federal Government Agency, are NOT Bank deposits, are NOT guaranteed by CrowdStreet, and MAY lose value. Neither the information nor any opinion expressed on any CrowdStreet webpages, including without limitation, the Marketplace, shall be construed as an offer to buy, or the solicitation of an offer to sell, any securities. Investments can and do lose money and you should be prepared to lose your entire investment in any investment made available on the Marketplace (including CrowdStreet vehicles).”
How Much Does CrowdStreet Cost?
It’s free to sign up for CrowdStreet, and there are no fees for having an account or browsing the company’s investment opportunities.
However, there are fees paid by sponsors in order to be on the CrowdStreet Marketplace, and the sponsors may pass that fee either directly onto individual deals and funds, or indirectly to the investors in the deal. The sponsor fees vary and are dependent on a variety of factors, but are disclosed on the offering detail page and other offering documents.
CrowdStreet does charge fees for the CrowdStreet Blended Portfolio. Those fees generally range from .4% to 1.0% of invested capital on an annual basis.
So, Is CrowdStreet the Right Choice for My Portfolio?
If you’re an accredited investor and would like some skin in the commercial real estate game, CrowdStreet is worth checking out. The company offers an intuitive way to invest in commercial real estate in a way that hasn’t always been accessible to individual investors.
At the same time, commercial real estate is not an investment avenue for the beginning investor. There are significant risks involved, and your money will be tied up for several years.
Whichever direction you choose, the end goal is the same: financial freedom paid for by the calculated investments that you make.
Here’s to making the financial decisions that work best for your unique situation!
CrowdStreet, Inc. (“CrowdStreet”) uses “partner affiliates” (e.g. bloggers and content websites) to market the CrowdStreet Marketplace. Such partner affiliates are generally compensated a fixed amount for each investor that registers on the marketplace as an accredited investor. Millennial Money is a partner affiliate of CrowdStreet. CrowdStreet is not a registered broker-dealer or investment adviser. Nothing herein should be construed as an offer, recommendation, or solicitation to buy or sell any security or investment product issued by CrowdStreet or otherwise. This article is not intended to be relied upon as advice to investors or potential investors and does not take into account the investment objectives, financial situation or needs of any investor. All investing involves risk, including the possible loss of money you invest, and past performance does not guarantee future performance. All investors should consider such factors in consultation with a professional advisor of their choosing when deciding if an investment is appropriate.