Main Crowdfunding Platform You Need to Know
The following are short summaries of the 10 main real estate crowdfunding platforms. These differ among themselves by the amount of assets under management, types of deals available, and level of costs associated with the services.
1031 Crowdfunding was launched in 2015 and focuses on a particular niche: 1031 exchange. The platform helps to originate deals through the 1031 exchange in order to defer capital gains taxes from the current investment. In contrast to many crowdfunding platforms the company doesn’t originate deals but connects investors with third-party syndicators.
The majority of the deals shown on 1031 Crowdfunding are portfolios of commercial real estate rather than individual properties. Portfolios range from $9m to $55m and are either diversified or focused on a particular asset. The minimum investment here is $25,000. Accredited investor status is required for participation in the deals. Account fees are relatively high with upfront fees of 5-7% in addition to the fees related to deal syndication. Over time, the platform has raised more than $ 2 billion.
The crowdfunding platform provides access to transactions funded by Carlton Group, which are generally large commercial real estate deals of above $40 million. The deals available on the Carlton Crowdfunding platform offer the full range of investment strategies, from conservative cash flowing properties to opportunistic value-add investments which aim to secure above-average capital returns. Thus, the platform is suitable for investors of any risk profile.
The average expected IRR on the deals of Carlton is above 20%. The minimum investment here is $250,000. Accredited investor status is required for participation in the deals. There are no account fees to use this platform thus only relevant sponsor fees apply. The company doesn’t disclose the number and value of deals performed up to date but the parent company, Carlton Group, has historically completed above $125 billion.
CK Mack offers only single-family properties that are already let and generating cash flow. Investors are committed to holding their interest for at least 12 months, after which time they are able to request CK Mack to buy back their share. The company gives investors the right to receive regular rental income attributable to the share of ownership. However, investors do not acquire a share of ownership in the property along with the right to cash flow.
There is very low minimum investment of only $25. Accredited investor status is required for participation in the deals except for the states of Montana and Washington. Account fees are above 5% in addition to the acquisition fees charged by CK Mack. In addition, investors might be willing to hire CK Mack as their property manager which would increase the deal related fees further up. Historically the platform has raised more than $ 2 billion.
Crowdstreet does not originate deals but only provides space for Investors and sponsors to meet. The platform focuses on larger, accredited investors. The average investor with Crowdstreet has five investments using their platform, and over 20% of investors have placed more than $1m. The holding period for investments can be extended up to 30 years but on average is between 2 years at the short end, and 12 for the longer-term projects.
According to the company, it targets an IRR of 18% and cash yields of 9.6%. The minimum investment required by Crowdstreet is $10,000. Accredited investor status is also required for participation in the deals. There are no account fees for accessing the platform as the company charges fees to sponsors for the opportunity to promote their deals. Historically the platform has funded more than $ 5.8 billion with 1,850+ deals.
GroundFloor focuses on bridge loans for single-family and small multifamily projects, with loan sizes between $75,000 and $400,000. Yields targeted are from 6-14%. Loans can run up to 90% of cost and 70% of ARV (After Repair Value).
The company claims 12% annualized returns over the past 3 years, and low default rates – 0.47% loss. The minimum investment is extremely low at $10 which allows for high diversification across the platform. Accredited investor status is not required for participation in the deals. GroundFloor does not charge investors any fees at this time as their business model is based on charging applicants for the loans. So far the platform has raised more than $ 54 million for the loans.
Patch of Land
Patch of Land is a real estate marketplace created to bring together real estate lenders and investors. Patch of Land concentrates on the residential market with 79% of its deals in single family properties, 10% in multifamily, and 10% in commercial projects. Its loans are mainly for residential fix-and-flip or bridge loans, although some ground-up construction financing is also available on the platform.
The majority of the loans are short term, from 6 to 12 months duration. The minimum investment required by Patch of Land is $5,000. Accredited investor status is required for participation in the deals. Patch of Land charges up to 3% plus extra servicing fees in the event of default. Generally, investors will pay 1-2% interest spread. However, there is no annual fee. The platform has raised more than $442 million for 986 real estate projects to date.
Peer Street is another marketplace dedicated to connecting borrowers and lenders. The platform sources deal from major lenders rather than dealing directly with borrowers. Peer Street specializes in private money loans, generally focused on special purpose loans such as fix-and-flip. Most loans offer between 6% and 9% annualized returns, with LTV of 75% or lower.
The minimum investment here is only $1,000. Accredited investor status is required for participation in the deals. Loans on Peer Street website have maturities from 6 months up to 2 years, with the majority within the 12- to 18-month range. There are no separate account fees for accessing this platform. Peer Street is remunerated only by the interest spread on loans. Since 2015 the platform has raised more than $1 billion.
Prodigy network is a unique crowdfunding platform in that it’s neither a marketplace nor an arm of a major real estate firm. Prodigy is a developer which crowdfunds itself. It specializes in developing real estate in New York City. Prodigy focuses on co-living and co-working spaces as well as mixed-use short-term rentals and boutique hotels.
The time frame envisaged varies by property but in the majority of the cases the holding period for the project starts at 2 years. Investments in Prodigy’s developments are restricted securities, which cannot legally be resold and only transferred for any reason. Thus, the platform is illiquid. The minimum investment is currently $20,000 which was reduced from $250,000. Accredited investor status is required for participation in the deals. Prodigy charges an asset management fee of 2% while no periodic account fees apply. The platform has raised more than $ 600 million for its projects so far.
Real Crowd was launched in 2013 and is one of the older generation crowdfunding platforms. Real Crowd is a pure marketplace platform. The company itself neither funds any deals nor acts as a broker nor dealer. The crowdfund is known for the rigorous vetting process of the sponsors. The average deal size is $30 million and ranges between $15 million and $150 million.
The holding period for the properties varies depending on the project but is generally within a range of 3 to 7 years. The minimum investment required by Real Crowd is $25,000. Accredited investor status is required for participation in the deals. Real Crowd does not charge investors a fee. It makes its money through charging sponsors advertising fees for each transaction. Historically the platform has raised more than $225 million for more than 120 commercial deals.
Roofstock funded its first transaction in March 2016. Roofstock provides a turnkey online marketplace for residential rental investors. The company secures already occupied properties so that they yield rental income from day one but doesn’t actually own any properties.
The platform works with residential REITs that need to sell off individual properties in order to rebalance their portfolios or free up funds for investing in refurbishment. Deals typically require around $80,000 to $130,000 initial investment. Roofstock operates in 125 markets across the US. Accredited investor status is NOT required for participation in the deals. There are no account fees associated with the platform. However, the 0.5% fee is paid on reservation of the property, by credit card. Additionally, financing can then be arranged with the help of Roofstock. The platform has raised over $1 billion to date.
SBRE Funds offers a number of funds that invest in commercial real estate, from self-storage and shopping centers to multifamily apartments. There are also a number of single-asset deals available on the platform. Funds may focus on different strategies (prioritizing income or capital appreciation, investing in value-add properties or completed and fully let real estate), or be specialized in specific geographies or asset types.
There is no specific minimum investment requirement established by the platform as a whole but each of the funds makes its own requirement with initial investment typically starting at $50,000. The platform does not charge investors any account fees although funds themselves set their own charges depending on the type of property in the portfolio and the level of management required. The amount of assets under management for SBRE Funds is currently above $100 million.
Sharestates was founded in 2013 and officially launched in February 2015. The platform is currently one of the largest companies in the sector. Sharestates offers a very small number of equity deals, the vast majority of transactions being debt financing. Target returns are within 8 – 12%. Sharestates is active across 19 states, including Texas and California but with a strong emphasis on the east coast.
The minimum investment is $1,000 per deal, but this increases to $5,000 after participation in the first 5 investments. Sharestates charges a 1% yield spread, which is par for the course in crowdfunded debt, and no annual account commitments. The platform requires an accredited investor title to participate in their deals. Historically the platform has raised more than $1 billion for more than 1,172 real estate projects.
Origin Investments originated as a property company in 2007 and only later transformed itself into an internet business. Origin offers only 2 types of real estate: office and multi-family investments. Each of the funds has 10-20 properties, giving adequate diversification. The funds focus on properties that will generate income over the medium term of 6 to 8 years. The funds aim to add value, whether through redevelopment, purchasing sites with potential for further development, or improving occupancy.
The minimum required investment in the funds is $100,000. Accredited investor status is required for participation in the deals. Origin charges a 1.5% annual fee. There is also a one-off fee on transaction, charged at 3% on investments below $500,000 and 1.5% for larger amounts. Additionally, Origin as a sponsor will also participate in a profit split, the terms of which will depend on the investment agreement. The company currently has $700 million in funds under management.
Lending Home was founded in October 2013 and made its first loan on 1st April 2014. Lending Home is involved in syndication of loans along with proving investors with access to investment deals. The company specializes in ‘fix and flip’ short-term loans (‘hard money loans’).
The platform has created its own risk-based pricing matrix, mainly determined by the LTV ratio and borrower credit rating, with adjustments for local market conditions, property type, foreclosure laws, and personal guarantees for entity borrowers. Interest rates payable on the loans vary from 5% to 10%. minimum investment here is $50,000. Accredited investor status is required for participation in the deals. The service fee is 10% of the gross coupon paid by the borrower. In addition, Lending Home gets an incentive fee on successfully repaid loans of 1-2%. The platform has raised more than $2 billion to date.