We’ll examine the top real estate crowdfunding platforms for unaccredited investors in this post.
For investors, real estate may be a thrilling prospect. It may be frightful when you realize how costly and dangerous it is. However, real estate crowdfunding platforms have made it simple for investors to profit securely and passively from real estate.
Simply explained, crowdsourcing eliminates many of the obstacles and dangers involved with conventional real estate acquisitions. Real estate crowdfunding allows you to participate in real estate purchases with a group of other investors rather than purchasing individual properties outright.
The only issue is that many of these real estate crowdfunding platforms need accredited investor status in order to participate. In other words, you must regularly make $200,000 annually or have a net worth of more than $1 million.
Fortunately, there are certain real estate crowdfunding sites that will enable non-accredited investors to participate as well.
This post will provide you with an overview of crowdfunding, identify the major participants in the market, and offer some advice on how to increase your earnings.
Continue reading to find out whether investing in real estate via crowdfunding makes sense for your particular circumstance.
What Is The Difference Between Accredited And Non-Accredited?
It’s crucial to complete your research before investing and determine which investment platforms you are eligible for.
If you’re like the majority of individuals, you invest without being authorized. As a result, you are not permitted to use some crowdfunding services that are only accessible to authorized investors (e.g., CrowdStreet).
Here’s a brief overview of the distinctions between accredited and non-accredited investors in case you’re not aware.
- Accredited investors, as defined by the Securities and Exchange Commission (SEC), are individuals or couples who have earned at least $200,000 in income over the course of the two most recent years.
- A person or couple also qualifies as accredited if they have a net worth of at least $1 million at the time of the transaction.
- The great majority of people who earn less than the aforementioned sums and have a net worth of less than $1 million are considered non-accredited investors.
As you may anticipate, there aren’t many accredited investors. In light of this, we’ve compiled a list of the best non-accredited investor crowdfunding platforms for you to check out in 2022.
Best Websites For Non-Accredited Investors To Crowdfund Real Estate
Leading crowdfunding site Fundrise uses a “value investing” approach. According to that strategy, the company looks to buy cheap buildings and enhance them in order to make money for its investors.
The minimal investment amount with Fundrise is a mere $500. (for its Starter Plan). The three Core Plans offered by Fundrise, each of which has a specific investment objective and may be chosen if you have at least $1,000 to invest, are as follows:
- Long-term growth,
- Balanced investing,
- More income
Verdict: Fundrise’s user-friendly interface and low entrance threshold make it enticing to novice investors.
A well-known crowdfunding platform called RealtyMogul enables accredited and unaccredited investors to engage in commercial real estate possibilities.
A $5,000 minimum commitment is needed to get started. Unfortunately, for some people, it will be a deal-breaker.
After enrolling, you may check your qualifying assets and discuss your investing objectives. Any of RealtyMogul’s funds are open to accredited investors. However, non-accredited investors are only allowed to participate in the company’s own REITs, MogulREIT I and MogulREIT II. These are essentially managed real estate holdings.
For its REIT investors, RealtyMogul also provides an auto-investing tool.
Bottom line: If you have at least $5,000 to invest, RealtyMogul can be a desirable choice.
3. Modiv (formerly Rich Uncles)
Rich Uncles was the platform’s original name; now, Modiv is 100 percent investor-owned.
Non-accredited investors may buy shares of commercial real estate assets that generate income under the Modiv moniker.
The business is the biggest crowdfunded equity REIT in the US and manages real estate assets worth more than $400 million. View the whole portfolio of Modiv here.
With a $1,000 minimum first commitment, Modiv falls in the center of the pack in terms of required deposits.
Verdict: Because it is investor-owned, Modiv provides a distinctive experience from competitors.
Accredited and unaccredited investors may buy shares of federally registered real estate offers via the crowdfunding website Streitwise.
Since the asset class isn’t listed on Wall Street, Streitwise is technically a non-traded REIT. As a result, it is immune to the volatility of the stock market.
The minimum investment in Streitwise at the time of writing is $1,021, which entitles you to about 100 shares of its only current offering, 1st Streit Office.
The fact that Streiwise is a non-traded REIT and only provides one investment makes it stand out from other crowdfunding platforms. Investors seeking a straightforward real estate portfolio could find it to be an intriguing option.
Crowdfunding for Real Estate: A Closer Look
As you can see, every real estate crowdfunding firm has a different strategy. As you would before buying a stock, you should do market research to locate a platform that fits your unique requirements and ambitions.
Nevertheless, the idea is essentially the same on all platforms. Crowdfunding, at its core, is the use of crowdsourcing to raise money for real estate projects. You are not required to come up with a large amount on your own or take out a sizable mortgage.
Crowdfunding investments: equity versus debt
Companies that use crowdsourcing might profit in two different ways. Through loan and equity investments, respectively.
When making an equity investment, investors buy real estate and acquire ownership interests.
Instead of making an equity investment, debt investors use crowdsourcing to finance mortgage loans for certain homes. As the loan is repaid, interest shares are distributed.
It’s hard to determine whether investments in debt or equity are preferable. Depending on the sorts of properties involved, both may be quite profitable. To maximize earnings potential and manage risk, investors sometimes decide to participate in both stock and debt assets at the same time.
Payouts for stock investments may be highly complicated, so bear that in mind. As a result, it’s crucial to complete your homework before making this sort of investment in order to understand how you’ll be reimbursed.
Recommendations for real estate crowdfunding
Here are some of our top real estate crowdfunding recommendations.
Ensure that you feel at ease utilizing the platform.
There are many different crowdfunding service providers to look at, and some give users superior experiences than others. As a result, it’s crucial to weigh your alternatives to ensure that you choose an app that you feel at ease using.
Watch out for sketchy websites or applications that are difficult to access or use when deciding which business to choose. You should feel comfortable using the app and be in charge of the experience, just as with any other online platform. Avoid using a service if it doesn’t provide an excellent user experience.
The crowdfunding website you choose should provide complete openness about the properties in its portfolio, along with a wealth of information. Additionally, you should always be able to contact an authority to ask inquiries regarding the properties you’re investing in.
Platforms that attempt to restrict your access should be avoided. When crowdfunding, the more knowledge you have available to you, the better.
Think about purchasing a direct property.
Avoid losing sight of other real estate investment opportunities by becoming too engrossed in real estate crowdfunding. Although investing in real estate via crowdfunding might be very profitable, it is just one option.
The conventional method is purchasing real estate directly with the intention of renting it out or selling it. This strategy is a lot more practical. But regardless of whether you decide to sell the home or rent it out, it’s a terrific method to perhaps generate a healthy monthly cash flow or net gain.
Consider looking at various houses and employing a real estate agent to guide you through the purchase if you have the necessary funds to make a down payment and complete the real estate closing procedure (usually, at least $20,000 to $40,000 or more).
Your real estate portfolio should ideally include a well-balanced mix of physically owned properties and crowdfunded REITs, providing you with monthly dividends and cash payments.
Make sure you have the funds to invest.
It will be tempting to join the group as you become older and more of your friends start investing in real estate.
Just keep in mind that the secret to successful real estate investing is smart debt management. Debt may also hinder you and wreak havoc on your finances.
For instance, pay off your credit card and school loan debts first before worrying about investing in real estate. You need to dig yourself out of the hole you’re in before you can go on.
Monitor your whole portfolio.
Last but not least, keep your other assets in mind as you proceed with real estate.
A balanced portfolio should aim to include a good mix of growth companies, conservative stocks, bonds, index funds, and mutual funds, to mention a few.
Real estate investing may be quite dangerous. Diversify your portfolio for the greatest outcomes if you want long-term success and stability.
Questions and Answers
The top queries concerning real estate crowdfunding from non-accredited investors are listed below.
Which platform for real estate crowdfunding is best?
It’s tough to identify the top site for real estate crowdfunding. Everything relies on the kind of platform you’re searching for and your unique circumstance. To choose the platform that is best for you, do some advance research on each of the platforms mentioned above.
What is a REIT?
A business that invests in commercial buildings with an income stream is known as a real estate investment trust (REIT). By purchasing shares of a REIT, you have access to the properties the business invests in. As a result, in contrast to purchasing direct commercial properties, it is regarded as an indirect means of investing in real estate.
Is there a minimum yearly income needed for crowdfunding?
You won’t normally need to fulfill any particular income restrictions to use a non-accredited crowdfunding site. However, you will probably need to spend a minimum amount, often between $500 and $5,000.
A whole different animal is an accredited investment. You need to make a lot of money ($200,000 for singles, $300,000 for couples) or have a net worth of more than $1 million to be able to accomplish this (more on that above). Most individuals lack the financial means to invest in authorized chances.
In terms of real estate, are single-family houses superior than multifamily dwellings?
If you’re thinking about purchasing residential real estate, you should be aware of the distinctions between single-family and multifamily dwellings. Additionally, you should develop your ability to spot excellent offers.
Compared to multifamily dwellings, single-family homes generate less revenue. However, since they are smaller, they often need less upkeep. There are also less renters for you to deal with.
Having said that, you’ll be able to pay off your mortgage on your rental property more quickly if you can purchase a multifamily house and rent out every unit.
Is buying real estate a different kind of investment?
Yes. Crowdfunding is a kind of alternative investment that you may include in your portfolio. Accordingly, crowdfunding is placed in the same class as goods, private equity, hedge funds, antiques, and fine art.
Only a small portion of your portfolio should be made up of alternative assets. You may want to concentrate on attaining better balance in your approach if your portfolio is significantly skewed toward alternatives.
Is Groundfloor a platform for crowdsourcing?
Groundfloor claims that its services do not qualify as crowdfunding under Title III of the Jumpstart Our Business Startups Act (JOBS Act).
That being said, if you’re interested in real estate investment, Groundfloor is still worthwhile reading.
By exposing profitable real estate projects to both new and experienced investors, crowdfunding is a savvy real estate investment technique.
You may profit from this opportunity regardless of where you are in your real estate investment career.
A warning: Crowdsourcing for real estate still carries risk. Simply because you aren’t investing in physical things doesn’t mean that you are risk-free. In spite of this, you need use caution while joining this market.
Diversification is important for real estate investors to succeed. Continue to expand and diversify your portfolio. Additionally, investigate several avenues for earning money and boosting your net worth.
Real estate crowdfunding might advance you on the road to actual financial independence if you start making decent money from it.
The future? You may be enjoying a refreshing beverage on your own boat in a few years, thanking your fortunate stars that you came onto real estate crowdfunding in the first place.