Both Fundrise and CrowdStreet are the leading real estate crowdfunding platforms today. Both enable retail investors to invest in private real estate once available only to institutions and ultra-high net worth individuals.
I have met the people from both Fundrise and CrowdStreet multiple times before. And I have personally invested $810,000 in private real estate since 2016 through multiple funds and individual deals.
I have a love-hate relationship with owning physical rental properties. Owning physical rental properties is one of the best ways to build wealth. But dealing with tenants and maintenance issues can be a real headache, especially as you get older. As a result, all my new real estate investment capital is being reinvested in private real estate.
This post is an honest comparison between Fundrise versus CrowdStreet. Both are also affiliate partners of Financial Samurai because I believe in both companies. I have also vetted over 15 real estate crowdfunding platforms. Fundrise and CrowdStreet are the best of the bunch.
Financial Samurai was founded in 2009 and is one of the largest independently-owned personal finance sites today. Everything is written based off firsthand experience because money is too important to be left up to pontification.
Fundrise And CrowdStreet Were Born Due To The JOBS Act
Real estate crowdfunding began in 2012 after the passage of the JOBS Act. The JOBS Act allows retail investors to invest in startups in two ways.
First, it lets startups raise up to $1 million via crowdfunding, which is a form of investing by many small investors pooling their resources. This is different than crowdfunding websites such as Kickstarter, where people donate money and do not receive equity for their contributions.
Secondly, the JOBS Act greatly expands a category under a rule called “Regulation A” (or Reg A), which allows companies to offer stock without going through the process of registering with the SEC. Under the JOBS Act, the expanded Reg A, often called Reg A+, allows companies to offer up to $50 million in stock each year without needing to meet normal registration requirements. Retail investors can invest up to certain amounts using both of these methods, allowing them access to relatively risky venture-capital investments.
With the passage of the JOBS Act, Fundrise was born in 2012. Fundrise is, thereby, one of the oldest real estate crowdfunding platforms with the longest track record of performance. When it comes to investing in a real estate fund, the longer the performance track record, the better.
CrowdStreet was founded in 2013, a year after Fundrise. As a result, CrowdStreet also has one of the longest track records out of all the real estate crowdfunding platforms. The history of both Fundrise and CrowdStreet is one of the main reasons why they are the best.
Why You'd Invest In Fundrise Over CrowdStreet
The main reason why you'd invest in Fundrise over CrowdStreet is because you'd rather invest in a real estate fund versus invest in individual real estate investments.
All investors can invest in Fundrise, not just accredited investors who make over $250,000 individually or have a net worth of over $1 million, excluding their primary residence.
Fundrise is a vertically integrated real estate investing platform that invests mainly in the Sunbelt / Heartland. An investor simply creates an account, answers a few investment objectives, chooses a real estate goal, and Fundrise then invests the money appropriately.
As a vertically integrated real estate investing platform, Fundrise is responsible for sourcing the investment opportunities, managing a portfolio of properties, and selling such properties for maximum returns.
In other words, all an investor has to do is deposit funds with Fundrise, and Fundrise will do the rest. Investors can dollar-cost into Fundrise like investors do a stock or a stock fund. The Fundrise investment is 100% passive, which is highly appreciated by those who have busy schedules.
Diversifying my expensive San Francisco real estate portfolio with Fundrise has been a great way to reduce risk and simplify life. The below Fundrise returns show how Fundrise tends to outperform during bear markets.
Related: Fundrise Review
Why You'd Invest In CrowdStreet Over Fundrise
The main reason why you'd invest in CrowdStreet over Fundrise is because of CrowdStreet's individual real estate offerings. CrowdStreet carefully screens all its offerings before they land on its platform. If you are an accredited investor, you can then invest in select deals and build your own select private real estate investment portfolio.
If you have the capital, time, and interest, investing in CrowdStreet is a more surgical way to invest in private real estate. You can invest in various regions such as the West, Midwest, South, or East. CrowdStreet investors can also invest in various real estate asset classes, such as industrial, hospitality, multi-family, and commercial office.
CrowdStreet acts as an intermediary for raising capital. Once a CrowdStreet investor selects a deal on the CrowdStreet platform, the investor ends up investing directly with the “sponsor,” or originator of the deal on their platform.
Hence, it's important for investors to also do their due diligence on the sponsors as well. Based on my experience, CrowdStreet selects some of the oldest real estate sponsors with the best track records.
CrowdStreet does offer funds on occasion. But their predominant offerings are individual real estate deals.
See: CrowdStreet Review
Main Reason Why You May Prefer Investing With Fundrise
Before I had children, I had a lot more time to invest in individual deals. For example, here is a case study of a successful private real estate investment. I had the time to write long reports analyzing a deal before investing. Then I had the time to do a post-mortem investment analysis.
Today, with two young children under six, I have no time to do deep analysis on multiple individual real estate offerings. With deal minimums usually $20,000, to build a diversified portfolio would require at least $100,000 in capital.
One of the frustrations of investing with CrowdStreet sometimes is getting shut out from the hottest deals. If you are not paying attention to the latest offerings, you might miss out because the hottest deals can get fully allocated within days.
Always looking out for deals is not a problem if you are a real estate enthusiast. You'll almost always be able to participate if you pay attention. But if you're really busy with your career, kids, and other things, getting an allocation may be more difficult. You might only have time to check the latest deals once a week, which might be too late.
If you invest in a Fundrise fund or CrowdStreet fund, you will always get the opportunity to invest in the best deals according to the investment committees' views.
After all, the investment committees are what sources the deals in the first place. Then it's up to the investment committees to pick the “best of the best” or the most appropriate deals based on the objectives of the respective funds.
Investing Solution If You Want To Invest In Both Fundrise And CrowdStreet
The biggest upside of investing in an individual real estate deal is potentially more upside (and downside). With a fund, there are many properties, which makes higher returns more difficult.
Please understand the capital stack between equity and debt when it comes to private real estate investing. If you invest in equity real estate, you want to have the sponsor have as much skin in the game as possible. The more the sponsor invests in the deal, the better.
If you're optimizing for passivity, returns, and diversification, a good solution is to invest the majority of your private real estate capital in a Fundrise fund. Then you can invest the remainder of your private real estate capital into select CrowdStreet individual deals you think look promising.
$100,000 Capital Investment Allocation Example
- Invest $80,000 in a Fundrise fund that is focused on single-family and multi-family rentals in the heartland.
- Invest $20,000 in a CrowdStreet deal that invests in an industrial storage complex in New York.
Once you make the investments, they are 100% passive. With this example, you only have to track two investments. You're a believer in both heartland rental properties and the grow in industrial storage in the northeast.
$50,000 Capital Investment Allocation Example
Of course, if you have less than $20,000, then you probably can't invest in an individual CrowdStreet deal. If you have less than $60,000, investing in individual deals may be riskier if you don't have a diversified online or physical real estate portfolio already.
For example, let's say you have $50,000 to invest. Investing in two CrowdStreet real estate funds at $20,000 each and then $10,000 in Fundrise is probably not optimal. It's up to you to understand your risk tolerance and understand the risks involved.
If you have $60,000 in capital, you could probably invest in three CrowdStreet deals. Three is the minimum I'd go so you can have diversification. Although, it all depends on what other investments you have.
Fundrise Versus CrowdStreet Conclusion
Both Fundrise and CrowdStreet are excellent private real estate investing platforms. You can invest with both or you can invest with just one. Investing in either largely depends on your capital amount, your financial goals, and your capacity to analyze deals.
Personally, I'm optimizing for simplicity and returns. I retired in 2012 and have enough passive investment income to stay retired for the rest of my life. I don't need to take more risk for higher returns. Therefore, I'd rather invest in Fundrise. I've spoken to Ben Miller, the CEO multiple times and our real estate outlook is aligned.
He is a big believer in residential and industrial real estate in the heartland like I am. We believe there is a long-term positive demographic trend of people moving to lower-cost areas of the country thanks to technology and work-from-home. Ben is also more cautious and skeptical than average, which is what I want in a CEO and investment manager.
However, if you are more risk-loving and have the capital, investing in individual CrowdStreet deals may be more appropriate. The greater your returns, the more quickly you can accumulate capital and financial freedom. And nothing is better than financial freedom!
The great thing about both sites is that exploring them is free. I strongly believe in the long-term trending of private real estate investing. Below is my private real estate dashboard with $810,000 invested and $624,270 in returns to prove it.
For more personal finance content, join 55,000+ others and sign up for the free Financial Samurai newsletter and posts via e-mail. Financial Samurai is one of the largest independently-owned personal finance sites that started in 2009.