CrowdStreet is an investing platform that makes it easier for accredited investors to get exposure to residential and commercial real estate. This CrowdStreet review will explain how the platform works, its features, and its pros and cons.
CrowdStreet is one of the longest-running real estate investment platforms on the market for accredited investors. Most of the company's real estate offerings have a minimum investment requirement of $25,000 and target hold periods of three to five years. CrowdStreet has an impressive historical annualized return of more than 18%, making it a solid option for high-net-worth investors who are willing to add illiquid real estate assets to their portfolios. Because of the high risk associated with some of the deals on the platform, it’s best for those who can properly diversify across a number of different deals.
- Long-running company with a strong historical performance.
- Opportunity to invest in either individual properties or real estate funds.
- Supports both residential and commercial real estate opportunities.
- Option for a professionally-managed real estate portfolio.
- Must be an accredited investor to use the platform.
- Fees can vary widely between real estate projects.
- Highly illiquid assets with no secondary market available.
- Most opportunities have a $25,000 minimum investment.
- CrowdStreet itself doesn’t have skin in the game on most deals.
CrowdStreet At A Glance
CrowdStreet enables investors to diversify their portfolios through a range of real estate projects, including residential and commercial real estate. It offers both self-directed and professionally-managed accounts.
CrowdStreet stands out in the rapidly-growing market of real estate investing platforms for a few important reasons:
- Diversified offerings. The investment opportunities on CrowdStreet include properties from many different aspects of the commercial real estate market — from hotels and medical offices to industrial buildings and retail properties. CrowdStreet also offers residential investments like multi-family homes.
- Due diligence checks. Each individual investment offered on CrowdStreet is promoted by a sponsor. Before that sponsor can list their opportunity on the platform, it needs to complete a multi-stage review process. CrowdStreet says that it approves only 5% of the sponsor deals it receives.
- Solid historical performance. CrowdStreet has a historical annualized IRR of 18.3%. Of course, past performance is no guarantee of future returns, but this IRR suggests that CrowdStreet has a good investment performance track record.
CrowdStreet Features Explained
There are three ways to invest on CrowdStreet. Here’s an in-depth look at how the platform works.
Individual Real Estate Investments
CrowdStreet’s primary offering is its marketplace, where accredited investors can help fund individual real estate deals. The picture below shows an example of investable deals found on the marketplace while researching for this review.
Each investment opportunity comes with information about the proposed project, including the sponsor behind the deal, any fees you’ll pay, the target holding period, and the sponsor’s predicted IRR.
CrowdStreet categorizes the deals on its marketplace by risk profile, according to the following scale.
- Core: Investments that CrowdStreet deems relatively low risk. Most of these opportunities are in major markets, don’t need any improvements, and have a stable cash flow.
- Core-Plus: Similar to Core opportunities, but with more risk. They’re generally high-quality properties that need some maintenance, so they have less stable cash flow.
- Value-Add: Typically properties that need major improvements. This can limit cash flow in the short term but it can also lead to higher overall returns.
- Opportunistic: High-risk deals that have the potential for very high rewards. These investments normally have complicated business plans and limited cash flow.
- Development: Considered a subset of Opportunistic, this is the riskiest category on the platform. Development includes deals that have “unknowns” associated with the project, including pre-development risk (surveys, permitting, entitlement, etc.), vertical construction risk, arrangement of permanent financing, leasing, and hiring property management. Development deals don’t pay out income during the construction phase, but offer the chance for the highest returns on the platform.
CrowdStreet’s marketplace is user-friendly and makes it easy to find key information about each potential investment.
However, there are some downsides to using the marketplace, including:
- High minimum investment requirements. Most deals have a minimum investment requirement of $25,000 to $100,000.
- Complex investment choices. The opportunities on the marketplace have complex business plans and confusing fee structures, so you need to do your own due diligence before investing any money.
- Tedious investment process. Investing in a CrowdStreet opportunity isn’t like buying stock shares. There’s a multi-step process in place for investors who want to make offers on a deal. Even if you do make an offer, there’s a chance that a deal will be overfunded and your investment won’t be accepted.
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, a few of them have external sponsors as well, such as the one shown below.
The managers of these funds bundle together different properties from the company’s marketplace. Typically, there’s a common theme among the properties in the fund. One example of this is the above-pictured CrowdStreet C-REIT, which invests in growth-oriented private commercial real estate deals focused on capital appreciation.
Account-holders can then invest in these funds to get access to a diversified set of properties without the need to invest in each deal individually.
There are a few potential advantages to these funds.
First, investing in one of these funds reduces the amount of effort you have to spend reviewing each asset in your portfolio.
Second, investing in a fund also means that you don’t have to go through the process of making offers on deals.
Finally, CrowdStreet’s funds have the same $25,000 minimum investment as individual properties, so choosing to invest in the former over the latter gives you a degree of portfolio diversity at a lower entry point.
The funds on the platform from individual sponsors (i.e., those not offered by CrowdStreet Advisors), have more complicated fee structures. Potential fees vary by project but can include an annual management fee, plus acquisition fees, development and construction management fees, leasing fees, and property management fees.
CrowdStreet’s tailored portfolios are professionally-managed accounts that invest in individual deals 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’re designed for people who prefer to take a hands-off approach to real estate investing.
CrowdStreet’s managed accounts have a $250,000 minimum investment requirement.
CrowdStreet Historical Returns
To date, CrowdStreet account-holders have invested more than $3.16 billion dollars and funded over 620 deals. More than 100 of those deals are fully realized, which means that their underlying properties were sold and funds were distributed back to investors.
The company reports an annualized historic IRR of 18.3%, which is competitive for the industry. For comparison, Cadre reported a historical rate of return of 18.2% (see our Cadre review), while EquityMultiple reported a historical rate of return of 17.4%.
CrowdStreet’s investors can get returns on their holdings in multiple ways, including:
- Distributions. Some real estate companies that sponsor deals on CrowdStreet provide dividend distributions from the profits that they generate on their properties.
- Interest payments. Some deal sponsors pay investors interest on their debt. You can find out if a sponsor pays interest in the Offerings Summary of the individual deal. Often, this is referred to as Project Cash Flow.
- Debt repayments. Debt repayments are the main source of return for CrowdStreet investors. Once a sponsor sells the investment property, investors should receive the principal balance that they invested plus their share of any profit that the property generated. But if the property sells at a loss, you may not receive all the money that you originally invested.
Remember that returns aren’t guaranteed. While CrowdStreet’s returns to date are impressive, they may not reflect your experience on the platform.
Out of the 103 deals that have been finalized, there are currently six that had a -100% return (as shown in the dot plot below).
In other words, in these six cases, investors lost their entire investment.
This is why it’s vitally important to have a plan for diversification across the platform — which, if not investing in a fund, may require considerable assets, since you need to meet the minimum investment amount on each deal.
It’s also important to keep in mind that it was the JOBS Act of 2012 that launched the crowdsourced investing trend.
2012 was the bottom of the real estate market, and the years since have been some of the best years for investors in recent decades.
As is the case with most real estate investing platforms, investments made through CrowdStreet are very illiquid.
Real estate is one of the more illiquid alternative asset classes, as it can take years for a property to appreciate in value. Selling properties can also be a challenge in certain markets, so real estate investors on CrowdStreet need to be OK with having their money locked into an investment opportunity for years on end.
With CrowdStreet, there’s also no secondary market for your assets. This means that you can’t sell your holdings whenever you need cash, like you might do with stock or mutual fund investments (or other platforms).
Each sponsor determines the target hold period for specific real estate property investments. Most of the assets on the platform have target hold periods of three to five years, but they can be as long as 10 years.
However, keep in mind that these are target hold periods — they’re not set in stone. The investment opportunity sponsor is responsible for managing the property after the funding round ends. If the sponsor wants to wait to sell the property for a few years after the target hold period ends, they can do so.
This means that anyone using CrowdStreet has to be prepared to have their money tied up for years with little control over when they can withdraw funds. Ultimately, the business model of most sponsors is to get in and out of deals within the target hold period.
This maximizes their own ROI as well as yours. However, be aware that economic conditions and many other variables can change a target hold period.
If you want slightly more liquidity in your investment, consider a platform with a secondary market like Cadre.
CrowdStreet Fees Explained
CrowdStreet’s fees are slightly different from what you might find at other online real estate investing platforms.
Unlike many other companies, CrowdStreet doesn’t directly charge investors any fees for its investment opportunities.
But this doesn’t mean that CrowdStreet is free to use.
Rather, real estate sponsors who list individual deals on CrowdStreet are responsible for setting their own fees. Sponsors can charge many different kinds of fees, including acquisition and property management fees. These fees vary substantially by opportunity, so you need to do your own due diligence when reviewing a potential deal.
Fees for investing in funds are more straightforward. Each fund charges a management fee, which is typically between 0.50% and 2.50%. But fees can vary from fund to fund depending on the investment structure, so always double check any potential charges before signing up.
Due to the nature of CrowdStreet’s investment offerings, it’s hard to compare the platform’s fees with what you can get at other companies. Ultimately, you may be able to get low fees with some of CrowdStreet’s opportunities, but calculating what you’ll pay over the lifetime of your investment can be a challenge.
CrowdStreet vs. Fundrise
Fundrise is one of CrowdStreet’s biggest competitors, so comparing these companies can help you better understand each firm’s pros and cons.
Here’s a quick overview of the differences between the two:
- Investor requirements: Fundrise is open to non-accredited investors while CrowdStreet only works with accredited investors.
- Minimum investment: You can start investing on Fundrise with $10. CrowdStreet’s opportunities have investment minimums of $25,000 or more.
- Fee structure: Most of Fundrise’s opportunities have annual fees of around 1%. Fees at CrowdStreet vary widely from deal to deal.
- Investment offerings: Fundrise only lets you invest in funds, not individual properties. With CrowdStreet, you can invest in either funds or specific properties.
- Returns on investment: Historically, Fundrise’s platform-wide return on investment is around 10%. CrowdStreet’s historical returns are around 18%.
There are notable advantages to using Fundrise, especially if you’re working on a limited budget. But if you want to choose the specific residential and commercial real estate opportunities that you invest in, or if you’re looking to maximize your long-term returns, CrowdStreet is an interesting option.
Read our Fundrise review to learn more.
CrowdStreet makes money by charging fees to the sponsors that list deals on their platform. The company also licenses its investment management software to sponsors to make it easier for firms to handle the administrative tasks that come with commercial real estate crowdfunding.
Yes, you can lose money on CrowdStreet. If a property that you invest in on the platform ends up depreciating in value over time, you may not recover your initial capital. To date, CrowdStreet has had six deals with returns of -100% IRR. Five more deals have had a negative IRR.
There’s no foolproof way to predict the IRR of a CrowdStreet project. Sponsors will list their target IRR on their advertised real estate deals, but there’s no guarantee that you’ll see this rate of return in real life. Instead of focusing too much on trying to predict the precise future performance of an opportunity, consider taking a more holistic view of the investment by looking at the potential risks and benefits of that opportunity to determine if it’s right for you.
Closing Thoughts: When Is CrowdStreet Right For You?
CrowdStreet is an interesting option for prospective real estate investors. The company’s solid historical returns are enticing for investors who want to maximize their returns.
Additionally, CrowdStreet’s diversity of high-quality offerings on its marketplace — from individual commercial real estate properties to managed real estate funds — gives investors a lot of choice over what projects they choose to support.
But while there’s a lot to like about CrowdStreet, there are some disadvantages to the platform. You can only use CrowdStreet if you’re an accredited investor, and the company’s high investment minimums make it impractical for many people. There’s also no way to sell your CrowdStreet investment early, so your assets will be inaccessible for years on end.
If you’re a high-net-worth investor and you don’t anticipate needing to liquidate your assets within the next 5 to 10 years, CrowdStreet could be a worthwhile choice. However, remember that past success doesn’t guarantee future performance, so always take the time to thoroughly research any real estate projects on the platform before you invest.