Real estate can be a valuable part of a well-diversified portfolio and generally has a risk and return profile that falls between that of stocks and bonds. Here are a few key benefits of real estate:
- Real estate is a physical thing, unlike stocks and bonds. This adds stability—because it’s a tangible asset, it will always hold some value even in tougher market conditions, as opposed to some financial assets whose values can dwindle down to zero, or in some cases, negative value.
- It’s less affected by inflation. Real estate values are generally tied to GDP—when the economy grows, demand for real estate tends to follow. This allows rents and sale prices to keep pace with inflation, maintaining the buying power of the invested capital.
- Its value generally appreciates over time, meaning you can potentially earn returns by simply owning and maintaining a real estate asset for a long enough period of time before sale. Making improvements to a real estate asset can also increase appreciation.
- It can generate income. Renting out real estate assets can provide monthly cash flow if/when the total rental income is greater than the mortgage payments and operating expenses.
What is real estate crowdfunding?
Real estate crowdfunding is a method of raising money for real estate deals. Just like any other kind of business-related crowdfunding, a larger group of people invest smaller amounts of money to quickly raise capital for a project.
Real estate developers or “sponsors” create a plan to purchase an asset and make any necessary changes to turn a profit—for example, an apartment complex that needs some updates to attract new tenants.
The sponsor lists the deal on a platform like CrowdStreet to raise the money they need to pull off their business plan from multiple individual investors. Then, as the sponsor enacts the plan and the asset (hopefully) becomes profitable, those investors will get their share of the returns.
Unlike more traditional real estate investing, crowdfunding has a lower barrier to entry. The old-school investing process for big real estate deals usually involved extremely high minimum investments, as well as some personal connection to the sponsor or developer.
Regulatory changes in the last decade, however, have made it possible for sponsors to list their deals on online platforms like CrowdStreet and market them to individual investors. This increase in access has made it far easier for the average investor to take advantage of the benefits of investing in real estate.
What is CrowdStreet?
Named Investopedia’s Best Overall Crowdfunding Platform for 2021, CrowdStreet is an industry-leading online real estate investing platform.
To date, they’ve launched more than 488 deals, including both individual assets and funds, and some of the world’s largest sponsors, including Greystar and Harbor Group International, have used CrowdStreet to raise capital. Since 2014, the CrowdStreet investor community has committed more than $1.90 billion in investments and earned nearly $200 million in distributions.
Through the Marketplace, investors have access to dozens of deals across every real estate asset class and risk profile, allowing them to choose the right investment opportunity for them and their portfolio. Each deal, and the sponsor behind them, undergoes a detailed review process for inclusion on the Marketplace.
CrowdStreet enables investors to submit their offers, finalize their investments, and track the performance of their investments from one easy-to-use online platform.
In early 2020, they officially crossed the $1 billion milestone for total online investments by individual investors. Crossing this threshold for equity invested is a significant milestone for CrowdStreet and the commercial real estate industry overall.
As real estate sponsors continue to move their fundraising operations and investment management activities online, and as more investors expect more online investing options, supply and demand feed off each other. As sponsors allocate more investment opportunities to CrowdStreet, and more investors select to participate in the deals, even more sponsors see the value in bringing their deals to the Marketplace.
It’s a virtuous cycle that results in CrowdStreet having one of the largest and most diverse online marketplaces for developers and operators to raise capital and individual investors to diversify their investment portfolios.
Why should you use CrowdStreet to invest in real estate?
Real estate is a valuable part of any well-diversified investment strategy and commercial real estate (CRE) offers unique value to investors. Through the CrowdStreet Marketplace, investors have access to institutional-quality real estate investment opportunities across every asset class and risk profile, allowing them to choose the right investment opportunity for you and your portfolio.
They have some of the highest deal flow volume of any online platform so whether you’re a seasoned real estate expert or completely new to real estate investing, they make it easy to find the approach that’s right for you.
Just like you can pick individual stocks and bonds, investors can pick individual deals on the CrowdStreet Marketplace. A direct real estate investment is just that—you can invest directly into the equity of the project of your choosing, not a fund that picks the assets for you.
As a passive investor, you’ll leverage the power of online syndication (a.k.a. crowdfunding) and join dozens, potentially hundreds, of other individual investors to contribute to the equity stack in a real estate deal. Your capital will go directly to the sponsor/issuer for use in the proposed project.
To support their investor community and demonstrate their commitment to transparency, in 2020 CrowdStreet formally published their Investment Thesis. They kicked off 2021 with their first-ever “Best Places to Invest” report, which breaks down their top markets (both nationally and by asset class) so inventors can see not only what kinds of deals CrowdStreet is considering but where they’re looking.
Editorial Disclaimer: This article was written by an employee of CrowdStreet, Inc. (“CrowdStreet”) and has been prepared solely for informational purposes. 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.