Accredited investors who are looking for commercial real estate investments can use CrowdStreet’s platform to find opportunities. CrowdStreet is a real estate crowdfunding marketplace that sets itself apart with its extensive marketplace and vetting process.
Real estate investing platforms have exploded in popularity in recent years. How do CrowdStreet’s commercial real estate offerings compare? Let’s learn how accredited investors might benefit by reading this CrowdStreet review.
What is CrowdStreet?
CrowdStreet is a real estate crowdfunding platform that started in 2013. This platform allows accredited investors to invest money into a variety of commercial real estate opportunities. Investors can begin investing in managed funds or specific building projects across the United States.
Real estate operators and developers get connected with Crowdstreet investors that wish to invest in their real estate projects. CrowdStreet has listed over 360 real estate investments to date.
According to CrowdStreet’s website, out of 100 potential commercial real estate deals, only 5 make it onto its marketplace. Its investment team has a comprehensive review process that potential real estate investment offerings must undergo.
How Does CrowdStreet work?
As a crowdfunding platform, CrowdStreet allows developers, builders, and others who wish to fund a real estate project to use its platform. They must apply directly with CrowdStreet and undergo their intense vetting process to be accepted onto its platform.
About 5% of applications are accepted and added to the CrowdStreet Marketplace. Real estate projects range from residential to commercial and even light industrial developments.
CrowdStreet employs a group of real estate professionals who have extensive experience in the space to determine if a real estate asset can join its platform. Below are the key steps in its vetting process below:
In the first step, the team evaluates the firm. CrowdStreet advisors are looking for high-quality and reputable partners to work with. Sponsors are subject to the following review:
- Background check – The background of the firm and principals are looked at. Consists of deep background checks, interviews, reference checks, and in-debt online news and social media research.
- Track record review – CrowdStreet looks over the sponsor’s history of successful projects in the asset type they seek to bring to the real estate investing platform.
- Sponsor designation – Each sponsor is organized into four categories that are determined by its experience and background:
- Enterprise – 15+ years of existence, 30+ years of principal experience, $5B+ in total portfolio value
- Tenured – 10+ years of existence, 20+ years of principal experience, $500M+ in total portfolio value
- Seasoned – 5+ years of existence, 10+ years of principal experience, $100M+ in total portfolio value
- Emerging – <5 years of existence, at least 2 years of principal experience, <$100M in total portfolio value
Investment offerings undergo an evaluation where the team finds answers to four main questions:
- Is the project within the core competency of the sponsor?
- Does the material demonstrate professionalism and conform to industry standards?
- Are the deal assumptions supported by market data?
- Does the project match CrowdStreet investor preferences in terms of asset type, projected returns, and location?
Some of the documentation that CrowdStreet may ask for include:
- Project overviews
- Pro Formas
- Historical operating statements
- Rent rolls
- Market data
- Sales comparables
- Feasibility studies
- Third-party data reports
- Lease comparables
Deal Materials Evaluation
The deal’s legal documents are reviewed to ensure there are no discrepancies or otherwise concerns between CrowdStreet and the sponsor. Crowdstreet will raise any issue before the launch, and the sponsor can adjust the terms or withdraw the deal.
Documentation that CrowdStreet may review includes:
- Loan documents
- Zoning report
- Purchase and Sale Agreement
- Settlement Statement
- Property Condition Report
- Environmental report
- Deed of Trust
- Lender Term Sheet
Who is CrowdStreet Best for?
If you’re interested in investing in a real estate deal on the CrowdStreet platform, it might be ideal for you if you are:
- An accredited investor
- Willing to keep your real estate investments for several years
- Tolerant of risk
- Willing to do your due diligence before investing
If you wish to get into real estate investing with CrowdStreet, you must be an accredited investor. These are individuals or business entities that can trade securities that may not be registered with financial regulatory bodies (i.e., Securities and Exchange Commission)
Accredited investors fall into this category if:
- Exceed $200,000 in the last two years of individual income or with a spouse exceeding $300,000
- Have an individual net worth or combined with a spouse have a net worth of at least $1 million dollars; This excludes the value of the primary residence of the individual/joint
Non-accredited investors must look elsewhere for real estate investment platforms. Fear not if you fall into this category, though; there are options out there, like DiversyFund, that offer real-estate investing for non-accredited investors.
There are three ways to get into real estate investing with CrowdStreet. Here is a look at the financial products that they offer:
Funds and Vehicles
Diversify your investment portfolio easily by getting a piece of multiple property types that are available in different geographic, sponsors, and sizes. CrowdStreet’s registered investment advisor team will manage your funds and vehicles.
This option works like mutual funds do in how it spreads various investments to enable diversified funds.
There are two types of funds can you can get access to:
- CrowdStreet funds – offers a broad array of asset classes that are managed by CrowdStreet
- Single-Sponsor funds – led by one real estate firm and has a narrower group of asset class opportunities or may focus on certain regions
You’ll receive updates, reports, tax information, and more. This is a great option for the accredited investor that wants to take the hands-off approach.
Depending on the real estate investment and vehicle, you will have different minimum investment requirements, property types, features, and more to review.
Management fees and other costs for accredited investors typically don’t come at a cost. CrowdStreet makes its money by charging its real estate sponsors a variety of fees.
These fees vary from anywhere between 1-5%. It is possible for sponsors to also charge investors certain fees as well.
Perhaps you like to have more control over your CrowdStreet investments. You can go the individual deals route instead to find a steady cash flow.
You can explore CrowdStreet’s marketplace to find commercial real estate projects that you want to invest in. You choose the investment opportunities to evaluate and add to your portfolio.
You can also join other individual investors to pool your money towards compelling real estate deals. Since there are no intermediaries on its real estate investing platform, the capital all goes to the sponsor of the project.
This is called “online syndication.”
Important information like the sponsor history, deal documents, and investor support is provided to real estate investors of this option.
Opening up a CrowdStreet Private Managed Account services is for investors that want an investment strategy that’s built to meet their specific financial goals.
Your custom-built portfolio is based on your individual needs. This option is ideal if you have long-term financial goals that you want to support building and maintaining. Financial decisions will be managed by an individualized Investment Policy Statement (IPS).
You’ll need to make a minimum investment of at least $250,000 to take part in CrowdStreet’s advisory services.
Individual offerings on CrowdStreet’s platform include important details about the individual projects. There’s a video webinar that you can listen to live and submit questions to the project sponsor.
If you’re not able to catch the live webinar session, a recording is available to watch later.
CrowdStreet has what’s called an Investment Thesis feature that enables potential investors to look at how deals are being evaluated. It s “StreetBeats” is a video series that gives you their perspective on the commercial real estate market and what’s going on on a week-to-week basis.
There is also a resource section included on each project page. You can find general investment advice and help on how to get started with CrowdStreet.
Commercial Real Estate Investing and Minimum Investment
The commercial real estate investing opportunities found on CrowdStreet is primarily available to accredited investors. Ruling out non-accredited investors makes the platform unavailable for the vast majority of investors.
The company has opened up its marketplace more recently, so you can find some opportunities for that latter group.
The minimum investment varies by opportunity and can sometimes be as low as $10,000.
Liquidity & Holding Periods
Investing in opportunities on CrowdStreet will not deliver steady cash flow. You can’t sell your real estate funds until the holding period is over.
Therefore, you should consider your investor money as a mid to long-term investment.
The typical holding periods are three to five years. But some deals on its platform take as long as 10 years before you can withdraw them.
CrowdStreet lacks features that some other crowdfunding companies have where you can sell your shares. These secondary marketplaces make liquidity less of an issue.
Pricing Structure and Fees
One of the key benefits of CrowdStreet is that it doesn’t charge its investors with management fees or other costs. The drawback is that sponsors can charge investors a fee for providing the opportunity.
There are several different possible sponsor fees that you can check out in more detail by visiting CrowdStreet’s website. The fees can range from 2% to 5% and may also depend on the project.
CrowdStreet Pros and Cons
Pro: Doesn’t charge fees to Investors
Investors won’t be charged any fees by CrowdStreet to take part in its commercial real estate platform. This lack of direct fees is still a great advantage even though sponsors can assess certain fees to investors.
Pro: Comparing different options is easy
The same format is used for offering information and documents. That makes it easy to look at different deals and compare them.
Pro: Extensive Sponsor Tools
The investment management software for sponsors is a great tool for helping you reach your goal of raising capital. Sponsors can also use it to show off its investment management capabilities to current or potential investors.
Pro: Offers only Commercial Real Estate Investments
Other similar platforms offer real estate, like single-family and fix-and-flips, along with commercial real estate. Since CrowdStreet solely focuses on commercial opportunities, there is a clear difference in the quality of offerings found on its platform.
Pro: Provides Transparent information
When you’re looking at an individual deal or other offerings on CrowdStreet’s platform, you will notice their effort to ensure there’s ample transparency. Each offering has detailed information, and there’s no fine print that you’ll miss.
Pro: Access to Deals
Without CrowdStreet, investors wouldn’t know about these opportunities. There would also be no ability to make a direct investment in these individual deals.
It makes local and national deals available to the investor community. The offerings are also shown in real-time.
Pro: Online Dashboard Tools
CrowdStreet has focused on continually updating its dashboard to be as useful to investors as possible. It offers valuable tools like projections, deal comparison, and comprehensive portfolio analytics.
Pro: Thorough Vetting
Individual projects that make it onto CrowdStreet’s platform go through an extensive vetting process. You can rest assured that sponsors that make it onto its platform have a thorough business plan.
Con: Lack of Liquidity
Equity owners in a project are committed to the investment for the long run. Publicly traded REITs tend to allow you to sell your shares and cash out.
But this is not the case with crowdfunding and real estate investments like CrowdStreet. The platform doesn’t offer a secondary market where your investment can be sold to others.
Con: High Minimums
Many of the deals found on its platform require a minimum investment of $25,000. Other crowdfunding sites have lower minimums. Fundrise is a competitor that offers investments starting at $10.
Con: No Pre-Funds on Deals
None of the deals, including its single-asset projects, are pre-funded.
Con: Not a viable option for most Investors
Non-accredited investors are almost completely left out of real estate investments on CrowdStreet’s platform. Most of its offerings are available to accredited investors only.
The company has made some recent efforts in opening up opportunities to non-accredited investors. However, these available deals are few and far between. Plus, since its minimums are high for most deals, it’s still beyond the reach of many.
FAQ: CrowdStreet Review
What products does CrowdStreet offer?
CrowdStreet focuses on commercial real estate properties. You will find a variety of investment types to create a well-blended portfolio. Hospitals, mixed-use developments, single-family home developments, multifamily real estate, and commercial buildings are among its investment offerings.
You can have the choice of how you want to invest, whether it’s a certain deal or you want a mix of investment types similar to a mutual fund.
Is CrowdStreet easy to use?
CrowdStreet is very easy to use. The signup process is straightforward and simple. Since most of CrowdStreet’s offerings are available to accredited investors, you will need to verify that status.
Once your account is up and running, you can use its scroll-down menu to find investments and create your blended portfolio.
Does CrowdStreet charge any fees?
Investors don’t get charged any fees by CrowdStreet. Most of the fees for its services are the responsibility of builders, developers, and sponsors that have deals on the site.
But sponsors do have the capability of charging investors for being able to invest in its offering.
Does CrowdStreet offer education tools?
The investor education tools that CrowdStreet offers are exceptional. There is a full section for new investors that includes a quick start guide and orientation.
These are webinars that are organized by dates. If you miss an event, it’s saved as on-demand content that you can access later. CrowdStreet does provide investment advice on learning the basics of local markets, as well as advanced topics like the effect of capital markets on your investments.
How is CrowdStreet’s customer support?
The crowdfunding platform also excels at its customer service. There’s a live chat feature, called the CrowdStreet Assistant that appears on the website’s landing site.
The chat window enables both potential and existing investors to get answers to questions they may have. You can use the “Contact Us” page to submit a question via email and even designate the urgency of the message. Its help center provides a variety of guides on how to do various activities using its platform.
Bottom Line: CrowdStreet
You must be an accredited investor, which means your net worth or annual salary meets the guidelines for that status. Otherwise, most of the deals won’t be available to you. But if your qualify, CrowdStreet offers compelling investment opportunities.
The quality of deals on its platform is noticeably better than other crowdfunding platforms due to its vetting process. The robust offering description outlines key deal points and other necessary information to make an informed decision. CrowdStreet is a good choice for accredited investors that want to add commercial real estate to their portfolios.