Crowdstreet Review 2023: is it Worth Picking? Legitimacy, Pros, Cons, Rate of return.
About Crowd Street
Real estate investing has come a long way in the digital age. Seemingly overnight, buying real estate has transformed from a highly localized endeavor to a highly localized activity where investors primarily seek opportunities in areas they are familiar with, and many investors have never even visited the properties they own.
Perhaps no company better represents this brave new world of investing than Crowdstreet. Since its inception in 2013, Crowdstreet has become a popular and well-respected online real estate crowdfunding platform.
Crowdstreet allows investors to buy everything from managed funds to specific construction projects across the country. To date, hundreds of developers have raised capital through CrowdStreet products, and tens of thousands of Crowdstreet investors have made money investing in these products. Crowdstreet has also made nearly $250 million for its investors since its launch.
Crowdstreet’s solid track record and growing popularity of online investing means it’s time to take a deep dive into whether it’s the right real estate investment platform for you. This article will analyze the legitimacy, Pros, Cons, and rate of return of Crowdstreet for you in detail. Is it worth choosing in the end.
About CrowdStreet Three Ways to Invest
1.Individual Real Estate Investments
CrowdStreet’s primary product is its marketplace, where accredited investors can help fund individual real estate transactions. The image below shows examples of investable deals found in the market while researching this review.
CrowdStreet categorizes transactions on its market on the following scales based on risk profile.
Core: Investments that CrowdStreet considers relatively low risk. Most of these opportunities are in key markets, do not require any improvement, and have steady cash flow.
Core-Plus: Similar to core opportunities, but with greater risk. They are usually high-quality properties that require some maintenance, so their cash flow is less stable.
Added value: Properties that usually require significant improvement. This could limit cash flow in the short term, but could also lead to higher overall returns.
Opportunistic: High-risk trades with the potential for very high returns. These investments often have complex business plans and limited cash flow.
Development: Considered a subset of opportunism, this is the riskiest category on the platform. Development includes “unknown” transactions related to the project, including pre-development risks (investigations, permits, rights, etc.), vertical construction risks, perpetual financing arrangements, leases and rental property management. Development deals do not pay out revenue during the construction phase, but offer the opportunity to earn the highest returns on the platform.
CrowdStreet’s marketplace is user-friendly, making it easy to find key information about every potential investment.
However, there are some disadvantages to using the marketplace, including:
The minimum investment requirement is high. The minimum investment requirement for most deals is $25,000 to $100,000.
Sophisticated investment options. Opportunities in the market have complex business plans and confusing fee structures, so you need to do your own due diligence before investing.
Cumbersome investment process. Investing in CrowdStreet opportunities is not like buying stocks. There is a multi-step process for investors who want to make an offer in a transaction. Even if you do make an offer, there is a chance that there will be too much money in the transaction and your investment will not be accepted.
2.Real Estate Funds
In addition to individual properties, CrowdStreet’s marketplace also lists a number of real estate investment funds. CrowdStreet Advisors — a wholly owned subsidiary of CrowdStreet — sponsors most of these funds.
However, some of them also have external sponsors, as shown in the image below.
The managers of these funds bundle together different assets in the company’s market. Often, there are common themes among the properties in the fund. An example of this is the CrowdStreet C-REIT pictured above, which invests in growth-oriented private commercial real estate transactions with a focus on capital appreciation.
Account holders can then invest these funds to obtain diversified properties without having to invest in each transaction individually.
These funds have some potential advantages.
First, investing in one of these funds reduces the amount of work you have to scrutinize every asset in your portfolio.
Second, investing in a fund also means you don’t have to go through the process of making an offer to trade.
Finally, CrowdStreet’s fund has the same minimum investment of $25,000 as a single property, so choosing to invest in the former over the latter can give you a degree of portfolio diversity at a lower entry point.
Funding on the platform from individual sponsors (i.e. sponsors not provided by CrowdStreet Advisors) has a more complex fee structure. Potential fees vary by project but may include annual management fees, acquisition fees, development and construction management fees, lease fees and property management fees.
3. Tailored Portfolios
CrowdStreet’s Custom Portfolios are professionally managed accounts that invest in individual trades on CrowdStreet’s marketplace on your behalf.
When you sign up for a managed account, you’ll work with a team of CrowdStreet advisors to build a portfolio that meets your goals, risk tolerance, and time horizon. Tailored Portfolio Account holders can also contact their advisors for investment advice.
Since these tailored portfolios are professionally managed accounts, they are designed for people who prefer hands-off real estate investing.
CrowdStreet’s managed accounts have a minimum investment requirement of $250,000.
About Pros & Cons of CrowdStreet
Pros of CrowdStreet.
CrowdStreet does not charge any investor fees and you do not need to provide any capital up front.
The minimum investment is $10,000 and you can split it into 10 different deals based on investment structure, geographic region, sponsor, holding period and risk profile.
The company is 100% focused on the commercial real estate market, which is reflected in the quality of the investment products offered on its webpage.
CrowdStreet offers three ways to invest. You can easily compare them on their website because they place each offer information and documentation in the same format.
They have an excellent online dashboard tool and a 176-page ebook that they update regularly. It provides a lot of useful and useful information.
CrowdStreet offers you the opportunity to invest in commercial real estate directly instead of using an intermediary company.
The CrowdStreet platform allows you to reach trading investors nationwide, not just local. It also displays commercial real estate products in real time.
All investments are thoroughly pre-scanned and are between 36 and 360 months in length.
The company has investment management software, which is a great tool for sponsors who want to offer real estate fundraising. It’s also a great way to offer investment management features directly on their website for existing and future investors to review.
CrowdStreet always offers transparent deals with extensive information and no hidden agenda.
Cons of CrowdStreet?
The minimum investment of $10,000 is slightly higher compared to other real estate crowdfunding companies. Some of them offer a minimum investment of $5,000 or even $1,000 per trade!
There is no liquidity. Like many other real estate investing sites and platforms, CrowdStreet promises you to invest according to their terms. Currently, there is no secondary market to sell your investments to others.
CrowdStreet does not pre-fund its transactions.
Just like any other big company, CrowdStreet has its own competitors. Each of them is trying to rank higher based on their strengths and weaknesses. The commercial real estate investment market is a highly competitive market. Some of CrowdStreet’s competitors are Real Crowd, ArborCrowd, Roofstock, 1031 Crowdfunding, etc.
However, due to its many advantages, CrowdStreet remains one of the premium real estate technology and services companies.
About how Crowdstreet works
At its core, Crowdstreet is a crowdfunding platform, which is where it gets its name from. Developers, builders and other entities in need of funding for real estate projects apply directly to Crowdstreet to see if they can raise funds on the platform. Following this application, Crowdstreet’s team of fund managers and executives conduct a rigorous review of the developer (and its projects) to ensure that the proposed investment meets Crowdstreet’s standards.
Crowdstreet may be more willing to accept high-risk deals with high risk than traditional banks, but they won’t ask investors to make crazy investments in bad deals. That’s why less than 5% of applications to Crowdstreet qualify for it and appear as products on the site. Once the application is approved, they will appear on the Crowdstreet website as a product.
These products can range from equity in new mixed-use developments to shares in opportunity zone funds and everything in between. Crowdstreet investors can then browse the site and find the type of investment they want to make. It doesn’t matter whether you prefer light industrial, residential or commercial developments – Crowdstreet will almost certainly have something you will love.
About the legality of CrowdStreet
The real estate investment market is full of different crowdfunding sites and companies. Many of them have great benefits and operate legally.
However, there are also scammers whose sole purpose is to deceive you and get as much money as possible. That’s why it’s normal if you’re concerned about whether CrowdStreet is legit or a scam.
CrowdStreet is a legitimate business due to its transparent work, quality platform, and user support. It is because of their focus on their business, investors and clients that they have gained the trust of users in the commercial real estate market. And the company tries to highlight the strengths and work to improve the weaknesses.
About who should use CrowdStreet?
At the end of the day, one of the biggest reasons to invest in CrowdStreet (or any good real estate crowdfunding platform, really) is because it allows you to diversify your portfolio. Many people, especially those with net worth in the millions, hold primarily a portfolio of stocks and bonds.
Real estate is arguably the best type of investment asset for long-term financial returns, however, using a real estate investment crowdfunding platform to diversify your portfolio is a smart way to protect your portfolio from depreciation.
Also, investing in commercial real estate, like the one offered by CrowdStreet, offers different returns than traditional stocks and bonds. With an impressive historical annualized return of over 18%, CrowdStreet is a solid option for high net worth investors willing to add illiquid real estate assets to their portfolio. Due to the high risk associated with certain transactions on the platform, it is best suited for those who can properly spread out multiple different transactions.
Commercial real estate generally outperforms stocks and bonds in the long run, which is why many very wealthy people are primarily real estate investors.
In conclusion, CrowdStreet is great for:
Any accredited investor looking to diversify their portfolio
Investors interested in long-term returns
Investors with a strong risk tolerance
Looking to help investors looking for good real estate deals with reasonable assumptions of legitimacy