Real estate crowdfunding platforms are growing in popularity because they offer excellent returns and diverse options. Whether you are a developer or investor, choosing which real estate crowdfunding platform to choose carefully is essential. That is where we can help. This guide is a start, and feel free to contact us if we can help connect you to the perfect real estate crowdfunding platform.
Real Estate Crowdfunding Platforms: Commercial
The first and perhaps most popular form of real estate crowdfunding platforms are those that lend to investors buying commercial property. These are often very short-term loans that enable the investor to make the purchase. Often, the investor plans to refinance out of the peer loan within a short period, and the payback can come within a couple of years. Other times, the investor uses the money they are making on rents and leases to pay things back. And finally, sometimes the developer will flip the investment for a profit, which is how they will afford to pay something back.
Unlike real estate crowdfunding, where the investor buys a stake in a project and gets a percentage of either resale or a stake in the lease or rental income, this type of lending usually has a fixed payback at a specified rate. This transaction may have less risk on both sides since the investor cannot collect even more money than expected, and the developer does not have to worry about giving away too much equity. However, these loans usually have a much shorter term, which can be suitable for the investor but challenging for the developer.
Real Estate Crowdfunding Platforms: Fix and Flip 
Perhaps the next most popular real estate crowdfunding platform form is the “fix and flip” (or sometimes fix and hold) type. This type of transaction occurs when a developer or contractor buys properties that s/he feels will be worth much more than their purchase price plus the renovation cost. These loans are usually given to offset either or both of those costs, and then the developer either sells or refinances the property after the work is done to pay off the loan. In these cases, unlike crowdfunding, a set amount of interest is paid back (with crowdfunding, the investors may get a percentage of the resulting value after a property sale).
Fix and flip real estate peer-to-peer lending carries the risk that the renovation will not be done on time, that the costs will be significantly more than predicted, leading the developer to walk away and default on the loan, or that the resulting home does not sell and is not worth enough to be refinanced.
Investors can mitigate their risk by choosing loans where the developer has personally secured the loan with other assets, making sure that they understand what cost overruns might occur, choosing a developer who has done this multiple times and has paid things back each time, and researching the geography to be sure that the projected value makes sense. Of course, the investor will also need to be sure they use a reputable real estate crowdfunding platform that requires an independent appraisal and verifies financial information provided by the developer.
Real Estate Crowdfunding Platforms: Multifamily, Shopping Centers, and Apartment Complexes
A prevalent real estate crowdfunding platform type involves multifamily units and apartment buildings. These are a cross between commercial and mortgage lending in that the payback relates to the income generated by the property, although in many cases, the payback is just like a mortgage. In the former case, only accredited investors can invest, but investing may be open to everyone in the latter.
Remember that most multifamily and apartment real estate crowdfunding platforms involve much more significant amounts than mortgage lending for a single property. It would be best to do your homework to ensure the buyer/developer can pay things back. You must carefully assess their history of paying back these investments, their regular credit history, and the challenges in making the new investment successful.
Real Estate Crowdsourcing Summary
We can summarize this section by asking why each group involved might want to pursue this form of crowdfunding:
Why real estate crowdsourcing: Developers
If you are a developer, can pay off a mortgage loan quickly, plan to do a traditional refinance after fixing a place up, will get significant immediate revenue from the property, or cannot qualify for a more conventional loan than peer mortgage lending may be a good thing for you as an applicant.
On the other hand, if you need longer to pay things off, are unsure whether you could meet investor demands as far as returns based on revenue, are not sure if a refi after a fix-up will be prudent, or find better rates from banks, then a traditional loan may be better than peer to peer real estate lending.
Why real estate crowdsourcing: Investors
If you are an investor and want to round out your portfolio by investing in loans that have a specific piece of collateral, are guaranteed by a developer who has fixed and flipped successfully before, or believe that one particular real estate project will generate revenue, then peer to peer real crowdfunding may be for you.
On the other hand, if you want a less risky option, want your investment to be immediately liquid, or cannot find a developer who seems almost to guarantee a substantial payback, other means of investing may be better.
Largest Real Estate Crowdfunding Platforms
The following are the most prominent crowdfunding sites for real estate. There are many platforms in this category, so you should do your homework to find the best sit, whether one of these three or another:
- RealityMogul service provides an opportunity to invest in real estate for a reasonable minimum of $5,000. They offer both debt and equity real estate investing. They vet specific investment properties, hoping you will invest and share in the ongoing profits.
- Fundrise site is based in Washington, DC, and while relatively new, it has gained a lot of members quite quickly. Fundrise gives both accredited and non-accredited investors the chance to invest. With a total value of the properties available of $2.6 billion, they are certainly one of the biggest.
- RealtyShares services has received much positive press and is now one of the largest crowdfunding sites in the real estate sphere. Their platform is easy to use, but as with the others, you must ensure you do your homework, including understanding the risks and benefits.
Our Services
There are other possibilities beyond the above three as well. While an argument could be made that the most prominent crowdfunding sites will have the most opportunities for investors and will attract the most investors, there are niche sites that may be a fit for your project or investment interest. There are also white-label opportunities for you to create your site independently.
Please feel free to contact us whether you are a developer or an investor if we can help connect you with the best real estate crowdfunding site. For developers, we can help you craft your pitch and negotiate the best terms with the platform, and for investors, we’d be happy to provide information that may lead you to the best site to meet your goals.
