Online real estate investing has exploded in popularity since the JOBS Act passed in 2012. With literally over two hundred of online real estate investing platforms, it's often hard to figure out which ones to invest on.
This article evaluates the top online real estate platforms so you can make a more informed decision. It is a complement to my real estate crowdfunding learning center resource page, which has taken years to create.
I've personally invested $810,000 in real estate online since 2016. Therefore, I have a lot of experience and skin in the game. The $810,000 is spread across 18 deals, mostly in the heartland of America, where I'm most bullish.
In addition to investing on online real estate investing platforms, I also own three physical properties in San Francisco since 2005. Real estate accounts for roughly 40% of my net worth. It is also my favorite asset class to build long-term wealth.
How To Evaluate Online Real Estate Investing Platforms
There’s no one-size-fits-all approach to real estate investing. Each individual has their own needs, goals, and preferences when building their portfolio. And when it comes to selecting an online platform to build that portfolio, investors need the whole picture.
Different crowdfunding platforms have different strengths. And what fits the needs of one investor may not work for another. So a head-to-head ranking of every online real estate investing platform ends up comparing apples and oranges. This isn’t always the most useful for investors trying to choose which one is right for their individual situation.
Let's evaluate online real estate investing platforms on six key topics: choice, diversification, transparency, quality control, deal sponsor/developer quality, and market insights.
I've selected the top 11 different online real estate platforms. These to platforms will be used to illustrate what investors should consider within each of those topics. Further, we'll understand how to decide which aspects are most important.
The evaluation and comparison of the various real estate platforms is in collaboration with CrowdStreet, one of the top online real estate investing platforms today. I've personally met a dozen of their employees when they visited Palo Alto, California.
Top Online Real Estate Investing Platforms
Below is a snapshot of the top 11 online real estate investing platforms categorized by Accredited Investors and Non-accredited Investors.
In other words, if you are non-accredited, you may not be able to invest with the platforms in the Accredited Investors category. However, if you are an accredited investor, you can invest with the online real estate investing platforms in both categories.
The definition of accredited investor is $200K+ income per individual or $300K+ join income. Or a net worth greater than $1 million, excluding primary residence. Verifying whether one is accredited or not is more based on an honor system.
If you are a non-accredited investor, you can consider Fundrise. It is one of the oldest real estate crowdfunding platforms. Fundrise specializes in diversified eREITs. eREITs are an easy way to gain passive real estate exposure.
Choice: How Many Ways To Invest Does Each Real Estate Investing Platform Offer?
How you invest matters just as much as what types of projects you invest in. Investors’ portfolio size, budget, and level of hands- on involvement will dictate which types of investing vehicles work best for their financial goals.
First and foremost, an accredited investor has access to certain types of real estate investments that a non-accredited investor does not.
While these direct investments often come with higher investment minimums, this investor has the chance to hand-pick the projects they want in their portfolio.
A non- accredited investor has more limited access to real estate investments, usually via pre-packaged investment portfolios like REITs. The investment minimums are often much lower. However, the investor has no control over which properties their money is spread across.
Deal Flow Is Important
Not every platform offers the ability for investors to hand-pick the deals they invest in. However, for the sites that do, the quantity of deals available for investment is important.
The number of deals that flow through each platform provides insight into how often an investor has the chance to participate in a deal they like.
Higher deal flow means more chances to invest, which offers better opportunities for diversification. More deals, either single-asset or funds, the better for fitting an investors investing criteria.
Diversification: How Broad Is The Range Of Options For Investors On Each Platform?
Investors that put all their proverbial eggs in one basket might end up with too much concentration risk. Spreading out risk with investments made across a wide variety of asset classes, risk profiles, locations, and other deal particulars can mitigate the effects of big upheaval in one location or industry.
An investor with a portfolio heavy on hospitality assets, for example, might have had a really tough time during COVID. Whereas someone with a mix of rental homes, medical offices, warehouses, and grocery stores across the country would have had some level of protection from volatility.
Choosing a platform that offers a broad range of deals means investors can build a well-diversified real estate portfolio in one place. It also adds flexibility to respond to market changes. A platform with a wider variety of asset classes has options for investors to pivot to new asset types if one industry experiences a major disruption.
CrowdStreet specializes in individual real estate opportunities in 18-hour cities. Valuations are usually lower and growth rates tend to be higher in 18-hour cities.
If you have a good amount of capital, you can create your own select real estate portfolio with CrowdStreet. Notice how CrowdStreet has the largest number of asset types on its platform.
Transparency: How Much Info Does The Platform Provide?
The more transparent the real estate investing platform, the better. As an investor, you want to know as much as possible about fees, operations, value-added activities, problems, and so forth. Few investments go 100% right all the time. Therefore, having transparency is key.
Investors need information to make the right decisions for their portfolios. That means information on the individual
deals they’re considering, the sponsors and developers leading those deals, and on the platform itself.
When a little bit of knowledge can mean the difference between long-term wealth creation and losing money, readily available information on all of those factors is paramount.
The platform’s performance metrics— dollars invested, distribution amounts, average IRR, and so on—can help investors get a feel for the size of the platform as well as historic returns. The number of realized deals gives additional context to those metrics—if only a few deals have been realized, it’s easier for an outlier to swing the numbers.
A higher number of realized deals also indicates a level of experience and knowledge that the platform’s investment team can draw from when screening future opportunities.
Quality, in-depth information on the investments themselves is also a major factor to consider. Is it easy to find the business plan and information on the asset, market, and deal sponsor? Do the underlying fundamentals of the plan line up with data from outside sources?
The more information the platform shares publicly, the easier it is for investors to evaluate an investment. Every investor has different needs and goals.
Quality Control: How Does The Platform Review And Elect The Offerings They List?
Below is a list of the top online real estate investing platforms and whether they publish their deal review process. For platforms that offer individual real estate investment opportunities vs. funds, publishing deal reviews is important.
No matter which platform an investor uses, they still need to do their own due diligence on the deals they consider. However, understanding how a deal gets listed on a given platform gives investors a baseline to work from when researching deals.
Clear standards and a published deal review process can take away some of the stress of worrying about pay-to-play listings. It may even attract higher-quality deals.
For example, top industry sponsors might not want to list their best deals alongside a first-timer’s residential flip. Therefore, having a firm “floor” on the types of investments the platform lists can also raise the “ceiling” on the most attractive deals they can offer.
The screening process should include a review by a large team of industry experts followed by final approval from a dedicated investment committee with even more extensive experience.
The real estate review process should examine:
- The managing firm, including background checks, track record, and experience level
- The asset(s), including quality of materials, deal assumptions, and alignment with the platform’s investor base
- Relevant documents to ensure the legal materials match all parties’ understanding of the deal
Quality: Do The Deal Managers And Sponsors Have A Great Track Record?
Who lists and manages their offerings on the platform and what kind of relationship do they have with investors?
Regardless of how strong a deal’s fundamentals and strategy are, someone still has to execute the business plan.
The developer or sponsor behind the investment opportunity is the one running the business plan, start to finish.
They are responsible for making decisions around costs, improvements, leasing and management, and ultimately for navigating any future sale. And of course, the types of sponsors the platform attracts influences the types of deals available to investors.
Investors should look into past sponsors on the platforms they’re considering. Pay special attention to their years of experience, core competencies, and total assets under management.
Larger, more connected sponsors are more likely to be able to offer deals to match. These include institutional-quality investments that individual investors generally couldn’t otherwise access, such as premier properties in Manhattan.
Total capitalization of projects funded on the platform is another good metric to help determine the types of sponsors a platform partners with and the quality of deals those sponsors provide. Higher capitalization often means a platform has access to some of the largest, more attractive deals. This usually means well-connected sponsors with the history and expertise to take those projects on.
Investors should also be aware of what expectations the platform sets in place for sponsors and how they’re held accountable. Knowing the platform’s guidelines and processes for communication with investors, distributions, and performance tracking can help investors avoid unpleasant surprises.
Market Insights: Are The Platforms Thought Leaders?
What sort of market expertise does the platform use to select deals and educate investors? This question is very important when evaluating online real estate platforms.
The team of industry professionals behind each platform’s deal selection and investor education makes a big difference in what kinds of deals will make it to the marketplace. Their experience also gives extra context to help investors select deals with strong potential.
There are many paths to success in real estate investing. Each platform will have its own philosophy on what kinds of deals are suited to their model. Getting an idea of that team’s background, process, general market outlook, and investment thesis can help investors decide if their own investing strategy aligns with the platform’s.
As for market insights, many platforms publish educational materials for their investors. For new real estate investors, finding a platform with great market insights is ideal. Market insights can be in the form of weekly video updates, blog posts, conference calls, and events.
Experienced individual investors should be on the lookout for more in-depth insights and thought leadership from their platform of choice. This will help them hone their investing strategy and expand into more niche asset classes.
The Top Online Real Estate Investing Platforms
After evaluating the top 11 online real estate investing platforms based on six key criteria, I believe CrowdStreet and Fundrise are the best of the best. I wouldn't bother presenting this analysis and investing my money if I didn't believe otherwise.
CrowdStreet and Fundrise have the longest tenure, the most amount of capital, and the largest number of investors. When investing on an online real estate platform, size and experience matters.
CrowdStreet offers accredited investors the ability to invest in individual real estate opportunities in 18-hour cities. 18-hour cities are secondary cities with lower valuations and higher rental yields. Growth rates are usually higher as well due to positive demographic trends.
If you have a good amount of capital, you can build your own select real estate portfolio with CrowdStreet. CrowdStreet deals often have minimums of between $10,000 – $25,000. However, CrowdStreet also occasionally offers specialized funds to take advantage of asset classes it finds most interesting. For example, CrowdStreet launched an intriguing Build-To-Rent fund.
Fundrise is a great online real estate investing platform for unaccredited and accredited investors alike. They were founded in 2012 and manage over $1 billion of capital for 150,000+ investors. Fundrise focuses on diversified eREIT portfolios so investors can gain exposure to real estate in a passive way.
For those who don't have time to select individual deals, Fundrise is a great choice. The investment minimum at Fundrise is now only $10. You can always start small and build your way up with Fundrise.
Both platforms are free to sign up and explore.
About The Author
How To Evaluate Online Real Estate Investing Platforms is a FS original post. Financial Samurai began in 2009. It is one of the largest personal finance sites with over 1.2 million page views a month. I worked in finance for 13 years, got my MBA, and retired early in 2012. I've invested $810,000 in various online real estate deals since 2016. I plan to invest $500,000 more in the next two years.
What’s your thoughts on Cadre. They seem to be focused on quality rather than quantity which I find attractive.