At one time, it was extremely difficult and limited to secure quality investments in commercial real estate, and not all borrowers qualified for traditional bank loans. However, thanks to the “Jumpstart Our Business Startups” act of 2012, also known as the JOBS Act, the opportunity to market private investments to the public arose. Due to this crowdfunding began, thus allowing a new tier of quality investors to reach those seeking investments.
In the years since 2012, many commercial real estate crowdfunding platforms have arisen. These platforms vary, but most of them usually have a vetting process for investors and investment properties alike, require investment minimums and offer financial investment advice and customer service. However, these platforms all vary, so let’s take a look at some of the big names in crowdfunding.
Patch of Land pairs investors and lenders looking for alternative sources of funding for their CRE investments. They are backed by personal guarantees and the provider originates, underwrites and services loans. They specifically focus on high yield, short-term endeavors.
Crowdstreet utilizes a 26-point review process to vet the offerings and investors available on its site. With their very discerning approval process, they can ensure the investor has a good history, track record, and asset class. Additionally, they do due diligence on the deal by pulling necessary information. They even go a step further to ensure the deal is in line with what is acceptable in the current market. With one of the most stringent review processes, it only accepts about 3% of applicants.
Small Change has a unique model. It focuses on improving communities. Utilizing their patented index, they gauge what impact the project will have on the community and surrounding area. Subsequently, the properties on Small Change have ties to enhancing a community’s wellbeing. Investors on the site are also not charged a fee to join, which can be an attractive incentive.
Known as the online marketplace for CRE investing, RealtyMogul allows investors to invest as little as $1,000. The RealtyMogul team spends about $1 million per year to vet investments and investors. They pride themselves in hosting low-risk investments with proven cash flow. RealtyMogul also offers customer service and round the clock specialists to answer any questions.
Fundrise allows investors to browse opportunities by various factors. They can conduct the full process from beginning to end online and track their returns via an online portfolio. Fundrise’s starter portfolio has a $500 minimum and a 90-day trial. If an investor invests $1000 they can upgrade their plan for free. Additionally, Fundrise dotes the lowest acceptance rate with stringent criteria. They only accept about 2% of the 2000 applicants and they use a variety of analytical techniques to ensure the projects meet their standards.
Though there are other crowdfunding platforms out there, and new platforms appearing as time passes, the ones listed above have made a name for themselves as big players in the field. Each platform is unique and provides various services, regulations, vetting processes, etc. So be sure to take a look next time crowdfunding crosses your mind.