Real Estate Crowdfunding for Non-Accredited Investors

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Real Estate Crowdfunding for Non-Accredited Investors

If you’re looking for an alternative investment option to add diversification to your portfolio, these real estate crowdfunding platforms for non-accredited investors are excellent options.

Real estate is one of the most popular investments to build long-term wealth, but not everyone wants the responsibilities of being a landlord.

The Jumpstart Our Business Startups (JOBS) Act, passed in 2012, opened up the possibility for real estate crowdfunding. Since that time, well over 100 different websites/companies have been formed for the purpose of allowing individuals to invest in real estate without the need to actually manage any property.

You can now reap the benefits of investing in real estate while doing it in a very passive way.

Aside from the responsibilities and headaches of owning property, one of the other major barriers that prevented many people from investing in real estate was capital. Crowdfunding has also made it possible for people to start investing in real estate on a small scale, breaking down this barrier.

Many of the most popular real estate crowdfunding platforms are available only to accredited investors, due to regulations, which means they’re not relevant to the majority of the population.

To qualify as an accredited investor, you must meet one of the following criteria:

  • Earned annual income of $200,000 for an individual (or $300,000 combined income if married) for the previous two calendar years, with a reasonable expectation for the same level of income in the current year.
  • Net worth exceeding $1,000,000 (individually or combined with a spouse), excluding your primary residence.

If you don’t meet the qualifications to be considered an accredited investor, don’t worry. There are several real estate crowdfunding platforms for non-accredited investors, so you still have plenty of good options.

This article will highlight the best options. Although they all have investment possibilities for accredited and non-accredited investors, the details vary greatly. The minimum investment is one important thing to watch. Also, each platform has its own approach or specialty. Some allow you to invest in residential rental properties and others focus on commercial properties.

Related: 11 Ways to Invest in Real Estate

The Best Real Estate Crowdfunding Platforms for Non-Accredited Investors

Now, let’s take a look at some specific platforms that are options for non-accredited investors.

Important note: Please do your own research on any platform before investing and be sure that you understand and are comfortable with the associated risks.

1. Fundrise

Fundrise

Fundrise was founded in 2012 and is often considered the best option for non-accredited investors. In terms of ease and convenience, Fundrise is a very enticing option. New investors will love the low minimum investment of just $10.

When you invest with Fundrise, you’ll own a share of a portfolio of carefully chosen properties. For the minimum investment, you’ll get the “starter portfolio”, which gives you access to a diversified portfolio of properties.

With an investment of at least $5,000, you can choose your preference of three different core plans: supplemental income, long-term growth, or balanced.

With historical returns between 8-12%, Fundrise can also offer performance in addition to ease and convenience.

When you invest with Fundrise, you’ll be investing in a collection of their eREITs and eFunds (eFunds are like eREITs, except they own residential properties). The portfolio that Fundrise selects for you will be based on the plan you chose.

Overall, it’s a totally hands-free way to get started with real estate investing. Fundrise handles all the details related to vetting investments and managing the properties, so all you need to do is contribute money.

Highlights of Fundrise:

  • Minimum investment of $10
  • Easily invest in a diversified portfolio of eREITs and eFunds
  • Annual asset management fee of 1% fee per year

For disclosure, I’m an investor with Fundrise (since 2018). My experience so far has been positive. The investment has performed well and the user dashboard is excellent, making it easy to check on the details of your investment at any time.

2. Groundfloor

Groundfloor

Groundfloor is a lot different than Fundrise, but it’s an equally enticing option for new real estate investors. If you have experience with peer-to-peer lending, Groundfloor will feel familiar to you.

At Groundfloor, you can invest in individual real estate projects, which are mostly single-family homes or multi-family home renovations. Whereas most other real estate crowdfunding platforms have a long-term approach, the projects at Groundfloor have only 6-12 month terms.

Like Fundrise, Groundfloor also offers an extremely low minimum investment of just $10.

Groundfloor claims historical average returns of over 10% annually. You can select investments by grade, ranging from 5% – 25% in projected returns (most are somewhere between 6% – 12%).

Because of the extremely low minimum investment, you can invest in several different projects to get some diversification without needing to invest a ton of money.

The downside of small investments, investing in individual projects, and short terms is that you may need to spend more time looking at the available projects, as compared to investing in a REIT or eREIT with Fundrise or one of the other sites we’ll look at, like RealtyMogul.

Highlights of Groundfloor:

  • Minimum investment of $10
  • Invest in individual properties (single-family and multi-family homes)
  • Short-term loans (6-12 months)
  • $0 fees for investors

For disclosure, I’ve invested with Groundfloor since 2021. I have small investments in several different properties, but I haven’t been invested long enough to form any opinions on the results.

3. RealtyMogul

Realty Mogul

RealtyMogul offers a few different options, including investments in individual properties and REITs. The individual properties are available only to accredited investors, so we’ll focus on the REITs, which are available to anyone.

The REITs available through RealtyMogul are public and non-traded. This means that they must meet SEC guidelines, but they’re not traded on an exchange. The adherence to SEC requirements should make the investment less risky compared to a private REIT, but since they’re not traded on an exchange, they lack the same level of liquidity as a publicly-traded REIT.

RealtyMogul REITs invest in diverse commercial properties. They currently offer MogulREIT 1 and MogulREIT 2.

MogulREIT 1 invests in commercial property and provides monthly income to investors, with a minimum investment of $5,000. The goal is to provide passive income, and it has typically had about a 6% annual rate of return.

MogulREIT 2 is focused on capital appreciation by investing in multi-family apartment buildings, with a minimum investment of $5,000. It has had about a 4.5% annual return but could be significantly higher when the assets of the REIT are ultimately sold.

Just like Fundrise, when you invest in one of RealtyMoguls REITs, you won’t need to do any research or evaluation of specific properties. You’ll simply invest in the REIT, and RealtyMogul will handle all of the details. It’s an ideal option if you’re looking for a passive investment.

Highlights of RealtyMogul:

  • Minimum investment of $5,000
  • Easily invest in a diversified portfolio with your choice of two eREITs
  • 0.3% – 0.5% fees per year

4. Arrived

Arrived Homes

Arrived is sort of like Groundfloor for rental properties. You’ll be investing in specific properties, like Groundfloor, rather than a diversified fund. But instead of investing in short-term construction or renovation projects, you’ll own a share of a rental property that generates passive cash flow.

There are a number of homes on Arrived and you can view the details of each one. Find one that you want to invest in, and you can get started with as little as $100. Arrived pre-vets each of the properties that appear on the platform, but of course, you’ll want to do your own due diligence as well.

By investing through Arrived, you’ll earn passive income through rental proceeds, and you’ll also have a chance to increase the value of your investment through appreciation as the value of the home increases.

If you’ve always been interested in rental properties but don’t want the headache of managing a property or dealing with tenants, Arrived could be an ideal option.

Highlights of Arrived:

  • Invest in rental properties and generate quarterly income from rental proceeds
  • You’ll choose the specific homes you want to invest in
  • A hands-free way to own shares of rental properties
  • Low minimum investment of just $100

5. DiversyFund

Diversyfund

DiversyFund offers a Growth REIT that’s open to non-accredited investors with a minimum investment of $500. The fund invests in multi-family properties identified by the DiversyFund team. They manage the properties and eventually sell them for a profit (ideally). Your investment will produce monthly dividend income, which can be reinvested.

Each property has an IRR target of 10% – 20% with an estimated value-add cycle of five years. Because you’re investing in DiversyFund and they’re managing the properties, there are no platform fees.

Highlights of DiversyFund:

  • Minimum investment of $500
  • Invest in a portfolio of multi-family properties
  • No platform fees

6. Streitwise

With Streitwise, you can invest in a commercial real estate portfolio for as little as $5,000. They have a strong history, producing 8% dividends since 2017. Their approach is to focus on non-gateway markets, which means the properties are not in the biggest cities like New York City or Los Angeles. They target strategically located properties with a track record of sustained occupancy.

The current offering includes commercial properties in Indianapolis and St. Louis (more properties and locations likely to be added in the future). This investment has a target dividend of 8.9%.

Highlights of Streitwise:

  • Minimum investment of $5,000
  • Invest in a portfolio of commercial properties in non-gateway markets
  • 3% of invested funds go toward organizational and offering costs (does not reduce the number of shares that you own). The sponsor is paid a 2% annual management fee. Distributions quoted are net of fees.

7. Modiv

Modiv

Modiv (formerly known as Rich Uncles) is another option for investing in REITs. The team of real estate professionals at Modiv identifies and vets all properties to be sure that each opportunity is aligned with Modiv’s goals and strategies.

When you invest in Modiv, you’ll own a share of a portfolio of income-generating properties, including office buildings, shopping centers, apartments, student housing, and more. You can view details of the specific properties that are included in their portfolio at the Modiv website.

The minimum investment to get started is $1,000. As the properties in the portfolio generate rental income, dividends are passed on to investors each month.

Highlights of Modiv:

  • Modiv offers REITs that hold income-generating rental properties
  • $1,000 minimum investment
  • Dividends are paid monthly to investors

8. American Homeowner Preservation

AHP

American Homeowner Preservation (AHP) is a lot different than any of the other options listed above. AHP’s goal is to prevent foreclosures, and they accomplish this by purchasing distressed mortgages (from lenders) at deep discounts and then working with the homeowner to try to keep them in the home.

Another key difference is that your earnings as an investor are capped at 10% annually. Investors are paid first, and AHP has a good track record of hitting the target return for investors. Dividends are paid monthly. Anything above 10% is kept by AHP.

The minimum investment is $100. Prior to 2016, AHP was only available to accredited investors, but now it’s available to anyone.

Highlights or AHP:

  • Minimum investment of $100
  • Invest in distressed mortgages
  • Target returns of 10% annually (capped)
  • $0 fees for investors

For disclosure, I’m an investor with AHP (since 2018). So far the investment has performed as expected, producing a 10% return and paying dividends each month. My experience with AHP has been very positive.

9. REIT and eREIT

Some of the platforms mentioned above, like Fundrise and RealtyMogul, offer real estate investment trusts (REITs). However, there are other ways to invest in REITs as well.

REITs allow people to invest in real estate without the need to maintain the property, and with smaller amounts of money as compared to buying a property. When you buy a REIT you’re investing in a portfolio of properties, and many REITs specialize in a particular type of real estate.

REITs have always been available to non-accredited investors with no income requirements and it’s one of the easiest ways to get started with investing in real estate. You can use an investing platform like M1 Finance, Public.com, or Robinhood to invest in REIT ETFs.

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Highlights of REITs:

  • An easy way to get started with real estate investing
  • Can be public (traded on an exchange) or private
  • Public REITs offer more liquidity than other types of real estate investments
  • Fees will vary

Platform

Investment Type

Minimum Investment

Learn More

Fundrise

Portfolio

$10

Groundfloor

Individual Projects

$10

RealtyMogul

REIT

$5,000

Arrived

Individual Projects

$100

DiversyFund

REIT

$500

REIT

$5,000

Modiv

REIT

$1,000

AHP

Portfolio

$100

Which Option Is the Best?

Now that we’ve looked at several different options, it’s time to evaluate the possibilities and determine which is the best fit for you. There’s a lot to like about any of these options, but they all come with some risk as well. Deciding which one is best is really a matter of personal opinion, as well as determining which is the best fit for your own situation and your goals and objectives.

Best for New Investors: Fundrise

Fundrise is my choice as the best option for new investors for a few reasons:

  • Very low minimum investment of $10
  • Invest in a portfolio of carefully chosen properties, without the need to pick properties for yourself
  • Excellent user interface and reporting through the Fundrise website
  • Solid historical returns

A few years ago I invested in Fundrise’s starter portfolio and quickly added more to get into one of their core plans (long-term growth). So far, I’ve had a good experience with Fundrise, and I’m happy with the long-term investment.

Their core plans are a nice way of giving individual investors control over their objectives, while still keeping it easy and hands-free.

Best for Small Investments: Fundrise

Fundrise is also my choice as the best option for small investments since they recently lowered the minimum investment to just $10. You can invest in their starter portfolio and get an introduction to real estate investing in a passive and hands-free way.

Best for Investing in Individual Properties: Groundfloor

Most of the options we covered in this article allow you to invest in a portfolio of properties, but not individual properties. Accredited investors have far more options for investing in individual properties, but for non-accredited investors, your options are limited. Groundfloor is the best choice if you want to invest in individual properties.

Pros and Cons of Real Estate Crowdfunding

Like any other type of investment, real estate crowdfunding has its pros and cons. Let’s take a look.

Pros

1. Low Minimum Investments

One of the most attractive things about real estate crowdfunding is that you can get started with just a small amount of money. The minimum investment will vary from one platform to the next, but some are as low as $10. Even the ones that are high ($5,000 for example) are significantly lower than the amount you would need to invest in real estate the traditional way, by purchasing a property.

The low minimums make it possible for anyone to invest in real estate by removing one of the biggest barriers.

2. Diversification

Because of the low minimums, you can spread your investments around to get great diversification. You can invest in several different real estate assets through the same platform (like Groundfloor), or invest in a portfolio of properties with a platform like Fundrise. Diversification, of course, helps to reduce your risk if one of the investments turns out to be a dud.

3. Options for Investors

You can choose to invest in different types of properties (residential, commercial) and different locations. You can also choose to invest in individual properties or eREITs or larger portfolios of properties.

4. Passive Investments

Possibly the most attractive aspect of real estate crowdfunding is the fact that it’s completely passive (it’s one of the best passive income ideas). You won’t have the responsibilities typically associated with owning property, but you’re still able to get the benefits of an income-generating asset.

5. Vetted Investments

The online platforms will perform their own due diligence and vet deals so only the best ones are available to investors. Of course, there’s still risk involved and you should not invest blindly, but the platforms have a vested interest as well. Each platform wants to provide the best return for investors to keep investors coming back for more, so they will try to see that only good deals are being promoted to investors.

6. Invest in Any Location

You can pursue investment opportunities in properties throughout the United States. There’s no need to limit your investments to your local area, which is usually the case if you are looking to buy property. You can spread your investments out to a lot of different locations and regions, for added diversity. You can also invest in particular regions, or avoid particular regions, based on what you think will turn out to be the best investment.

7. Earn Dividends or Reinvest

While each platform is different, some of them (like Fundrise) will give you the option of receiving dividends in cash or reinvesting the dividends. This gives you some flexibility because you can reinvest the dividends when growth is your priority and then receive dividends in cash in retirement or if you’re living off dividends.

8. Low Correlation to the Stock Market

As an alternative investment, the performance of real estate isn’t directly tied to the stock market. Of course, real estate can be impacted by significant changes in the stock market and vice versa, but it’s also possible to have a successful real estate investment while the stock market is stagnating or headed in the wrong direction.

Cons

1. Lack of History

Real estate crowdfunding sites have only been around since 2012, and many of the platforms have only existed for a few years. While the overall returns have been good so far, there’s just not much history and you should consider your risk tolerance.

2. Blind Investing

Although the deals are vetted by platforms, that doesn’t mean they are safe. The ease and convenience of real estate crowdfunding can give you a false sense of security in blindly investing. The downside of opening up more options for real estate investing to people who have no experience investing in real estate means that they may not even know what to look for when they’re evaluating the options within their risk profile.

3. Platform Risk

Many crowdfunding platforms have already gone under. RealtyShares is a high-profile example. The good news is that as an investor you’re investing in the property, not the platform. In the case of RealtyShares, investors haven’t lost their investments. But there is some inconvenience that can come with the process if a platform goes under.

Final Thoughts

Real estate crowdfunding is an industry that’s growing quickly and has a lot to offer to investors, both accredited and non-accredited. If you have an interest in investing in real estate, these options give you a great way to get started. Whatever platform you choose, be sure to perform your own due diligence before investing.

READ NEXT: 11 Ways to Invest in Real Estate (With or Without Buying Property) 




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