7 Best Platforms for Crowdfunding Real Estate for Non-Accredited Investors
Crowdfunding real estate for non-accredited investors gives them access to real estate markets with small capital. This article reviews the best platforms that make this possible.
Key Takeaways
Real estate crowdfunding platforms offer non-accredited investors low minimum investment options, enhancing accessibility to the real estate market.
Diversification, passive income generation, and regulatory frameworks like Regulation A+ and Regulation Crowdfunding protect non-accredited investors while opening up new investment opportunities.
Investors should conduct thorough research on crowdfunding platforms, assess their risk tolerance, and start with smaller investments to build experience.
Top Real Estate Crowdfunding Platforms for Non Accredited Investors
The landscape of real estate crowdfunding platforms has expanded dramatically, providing non-accredited investors with a plethora of options to explore. These platforms offer a range of investment opportunities, from short-term debt investments to long-term equity stakes in commercial real estate assets.
Whether you’re new to real estate investment or a seasoned investor seeking alternative investments, numerous platforms cater to various needs. Here are some of the best options available today.
Fundrise
Fundrise stands out in the crowded field of real estate crowdfunding platforms due to its incredibly low minimum investment requirement of just $10. This makes it highly accessible for non-accredited investors looking to start small. Fundrise offers a variety of investment options, including non-traded eREITs, real estate funds, and single-asset offerings. The platform collects funds from investors to purchase land, develop structures, and operate them, providing a diversified portfolio that can potentially optimize returns.
However, Fundrise’s opportunities are highly illiquid, which may restrict easy access to your funds. The fee structure is also complex and can be challenging to understand.
Despite these drawbacks, Fundrise remains popular among new investors for its accessibility and diverse investment options. It also provides IRA accounts for those wishing to include real estate in their retirement savings.
Groundfloor
Groundfloor focuses on short-term real estate debt investments with a minimum investment requirement of just $10. This platform promises high returns, averaging between 7% and 12%, by securing investments with real assets like real estate property.
Groundfloor offers robust analysis tools to help investors filter and select the best opportunities, making it attractive for those investing with minimal capital.
Arrived Homes
Arrived Homes allows investors to start with a minimum investment of $100 and provides opportunities to purchase individual rental properties. Investors can generate income through rental income and home price appreciation, with dividends paid quarterly.
The platform includes property management services, ensuring professional management and a completely passive investment experience.
RealtyMogul
RealtyMogul provides two types of REITs for non-accredited investors. These include an Income REIT and a Growth REIT. The minimum investment for RealtyMogul is $5,000, which might be higher than some other platforms but comes with the potential for solid returns. The Income REIT targets annualized returns of 6%-8%, making it a compelling option for those looking for steady income.
Roofstock
Roofstock provides non-accredited investors access to single-family rental properties. Investors can finance their purchases, pay cash, invest outright, or buy shares in property portfolios. Many homes listed on Roofstock are already tenant-occupied, allowing investors to start collecting rent from day one.
With over $2 billion in transaction volume since its launch, Roofstock is a reliable and convenient option for real estate investors.
Streitwise
Streitwise offers commercial real estate investments through a private equity REIT, with a minimum investment starting at $5,000. The platform focuses on low-risk rental commercial real estate in steadily growing markets, providing a stable investment opportunity.
However, non-accredited investors can only invest up to 10% of their individual net worth or income, ensuring they do not overextend themselves financially.
DiversyFund
DiversyFund specializes in multifamily properties and allows non-accredited investors to participate with a minimum investment of $500. The platform focuses on value-add multifamily property investments, making it an appealing option for those looking to diversify their real estate portfolio.
Auor Capital
Auor Capital provides investment opportunities in commercial real estate specifically designed for individuals who typically face barriers to entry in the market. Supported by the Kaeding Group, Auor Capital aims to eliminate the traditional distinctions between accredited and non-accredited investors, facilitating access to commercial real estate returns for a broader audience.
The platform offers a streamlined process for initiating commercial real estate investments, accommodating investors of all experience levels.
Understanding Non-Accredited Investors
Non-accredited investors are individuals who do not meet specific income or net worth thresholds established by the SEC. These thresholds include an annual income below $200,000 or a net worth of less than $1 million, excluding their primary residence.
Despite these limitations, non-accredited investors now have access to a variety of real estate investment opportunities previously restricted to accredited investors.
Definition and Criteria
A non-accredited investor is defined as someone with an annual income below $200,000 or a net worth less than $1 million, excluding their primary residence. This classification determines eligibility for specific investment opportunities under SEC regulations.
Investment Restrictions
Non-accredited investors face investment restrictions to protect against potential financial loss. They can invest up to 5% of their annual income or net worth if below $107,000, or 10% if both are above that amount, not exceeding $107,000 across all offerings in a year.
These regulatory protections help ensure that non-accredited investors can participate in real estate crowdfunding without overextending their financial capabilities.
Key Benefits of Real Estate Crowdfunding for Non-Accredited Investors
Real estate crowdfunding opens up a world of opportunities for non-accredited investors, providing access to a diverse array of investment options with lower entry costs. These platforms allow investors to diversify their portfolios, generate passive income, and participate in real estate investments without needing large amounts of capital upfront.
Let’s dive deeper into the specific benefits.
Lower Minimum Investments
One of the most significant advantages of real estate crowdfunding is the lower minimum investment requirement. Unlike traditional real estate investments that demand substantial capital, crowdfunding platforms allow investors to start with as little as $10. This lowers the barrier to entry, making real estate investments accessible to a broader audience, including those with limited financial resources.
Diversification
Real estate crowdfunding enables investors to diversify their investments across various property types and locations, thereby minimizing risk. This diversification helps to mitigate the risks associated with concentrating investments in a single asset, providing a more stable real estate investing portfolio.
Passive Income
Crowdfunding platforms offer non-accredited investors the opportunity to earn passive income from real estate investments. By managing properties on behalf of investors, these platforms generate rental income without requiring active involvement from the investor.
This makes it an attractive option for those looking to generate steady cash flow with minimal effort.
How to Get Started with Real Estate Crowdfunding
Getting started with real estate crowdfunding requires careful consideration and planning. For non-accredited investors, the journey begins with understanding the different types of investments available, such as equity or debt investments.
Here are some steps to guide you through the process.
Research Platforms
Researching different crowdfunding platforms is crucial. Investors should evaluate fee structures, minimum investment amounts, and specific investment strategies offered by each platform. Selecting platforms with good reputations and strong due diligence practices can help minimize risks and ensure secure transactions.
Assess Risk Tolerance
Assessing your comfort with investment risk is vital for selecting suitable projects. Consulting a trusted financial advisor can guide you in making decisions aligned with your risk tolerance and financial goals.
Start Small
Starting with small investments enables non-accredited investors to familiarize themselves with the crowdfunding process and gain experience with minimal risk. This helps build confidence and understanding before committing larger sums.
Common Risks and Challenges
Investing in real estate crowdfunding comes with its own set of risks and challenges. Private market investments tend to be riskier and less liquid than public market investments, requiring investors to be more vigilant.
Understanding these risks is crucial for making informed investment decisions.
Illiquidity
Many real estate crowdfunding investments come with lock-up periods, limiting investors’ ability to access their funds. These implications affect your investment strategy and financial flexibility, so understanding them is crucial.
Market Volatility
Market fluctuations can significantly impact real estate values, altering the returns that investors receive. Navigating market fluctuations effectively requires understanding trends and movements to optimize your investment strategy.
Platform Reliability
Choosing a reputable platform is key to mitigating risks associated with platform failures. Fundrise, Groundfloor, and Arrived Homes have strong reputations for consistent performance and customer satisfaction.
Investors should diligently research platforms, comparing fees, investment options, and track records to ensure reliability.
Legal and Regulatory Considerations
The regulatory landscape for real estate crowdfunding has evolved significantly, providing non-accredited investors with more opportunities to participate. The JOBS Act played a pivotal role in opening up these investment avenues, allowing anyone, regardless of their accredited status, to invest through crowdfunding platforms.
This section will delve into the specific regulations that govern these investments.
Regulation A+
Regulation A+ is a key legislative framework that allows non-accredited investors to invest in private companies, including real estate funds, with certain requirements. This regulation consists of two tiers: Tier 1 allows raising up to $20 million, while Tier 2 allows raising up to $75 million, providing a structured way for companies to raise capital while ensuring increased investor protection.
Regulation Crowdfunding (Title III)
Regulation Crowdfunding (Title III) sets investment limits based on an individual’s annual income and net worth, aiming to protect non-accredited investors while giving them access to diverse crowdfunding opportunities.
For those with income or net worth below $124,000, the maximum investment is the greater of $2,200 or 5% of their income or net worth. For those above $124,000, the cap is set at 10%, not exceeding $124,000.
Summary
Real estate crowdfunding has democratized access to property investments, providing non-accredited investors with numerous opportunities to diversify their portfolios, generate passive income, and participate in the lucrative real estate market. By understanding the regulatory framework and starting small, investors can navigate the real estate crowdfunding landscape effectively.
