Real estate crowdfunding is one of my favorite ways to generate passive income. Real estate is also my favorite asset class to build wealth for the average person. Real estate is a tangible asset that is less volatile, provides shelter, generates income, and is tangible. As a result, I’ve spend hundreds of hours creating the real estate crowdfunding learning center for all potential investors.
I’ve currently invested $810,000 since 2016 in real estate crowdfunding to help me generate more passive income. My favorite real estate crowdfunding platform is Fundrise due to its diversified eREITs. My second favorite platform is CrowdStreet if you’re interested in investing in individual real estate deals. Both free to sign up and explore.
Real Estate Is A Great Asset Class
In my 20s and early 30s, I accumulated three properties in San Francisco and one property in Lake Tahoe. It was a great ride that earned me a small fortune. But after I turned 40 and became a father, I no longer wanted to spend time dealing with tenants. Maintenance issues and property taxes were also a bear. As a result, I sold one rental property to simplify life.
With the ~$1,800,000 in proceeds, I re-invested $550,000 in real estate crowdfunding. My goal was to earn passive income from lower valued heartland real estate with much higher net rental yields.
Due to the remote work trend, especially after over a year of lockdowns, I strongly believe there will be a long-term demographic shift towards lower cost areas of the country.
Steady Rate Of Return
Since 2016, I’ve earned an internal rate of return of roughly 11% a year from my 18 real estate crowdfunding equity investments around the country. The real estate crowdfunding investments have provided for a solid way to diversify my real estate portfolio.
What’s better, I’ve spent ZERO time having to deal with the properties after my investments were made. What a blessing! In fact, real estate crowdfunding makes up roughly $80,000 out of my estimated $300,000 in annual passive income for 2021.
By crowdfunding capital, investors can now easily own a portion of multi-million dollar commercial real estate projects in promising cities with lower valuations, strong job growth, and higher net rental yields that were once unavailable.
Real Estate Opportunities Today
Now that the stock market has aggressively rebounded since its March 2020 low, I think the best investment opportunity is in real estate. People are feeling more confident due to the aggressive vaccine rollouts. Stock investors are certainly feeling richer as well. Real estate performance generally lags stock performance, hence the opportunity.
One of the keys is to invest with the best real estate platform that has the best team and is the most well-capitalized. I think Fundrise is today’s best platform for the average non-accredited investor. Fundrise was founded in 2012 and is the pioneer of the private eREIT. eREITs are private real estate funds that are diversified. For most people, investing in a real estate fund provides the most appropriate risk-adjust exposure.
For accredited investors, those who earn more than $200,000 or have a net worth of over $1,000,000, consider exploring CrowdStreet as well. I met their team before the lockdown and like their focus on investing in 18-hour, secondary cities.
CrowdStreet has a direct-to-sponsor model, which allows for more efficiency and greater transparency. CrowdStreet is also focused on emerging 18-hour cities, which is where I believe there is the most opportunity. They were founded in 2014 and are based in Portland, Oregon.
Below is an example of a commercial real estate investment on the CrowdStreet platform. Interest in self-storage and data centers is very strong now thanks to remote work. To find out more, you can click on the image.
Real Estate Crowdfunding Learning Center
Below are some detailed articles I’ve put together for those of you interested in real estate crowdfunding. Once you’ve read all the articles, you’ll have more confidence making better real estate investment decisions.
The key to investing properly is to understand what you are investing in, determine your risk exposure, and invest according to your risk exposure. There is no guaranteed returns with any investment. Therefore, you must do your due diligence.
After buying another home during the pandemic, I have roughly 40% of my net worth in real estate and real estate crowdfunding. I plan to stay long real estate for at least the next decade as the millennial generation is firmly in its prime home buying years.
The real estate crowdfunding learning center is here to answer all your real estate-related questions.
Why Real Estate Crowdfunding
Real Estate Crowdfunding Fundamentals
Real Estate Crowdfunding Investing
Real Estate Crowdfunding Trends
The Best Cities To Buy Real Estate Today (based on demographics)
The Best States To Buy Real Estate Today (valuations and tax rates)
Top Real Estate Crowdfunding Platform Reviews
It’s important to stick with the top real estate crowdfunding platforms. Here are my more detailed reviews after meeting and speaking with them both.
The largest real estate crowdfunding platforms will garner the most amount of funding. They will also attract the best deals and have the strongest underwriting. As we saw with RealtyShares closing its doors, there is platform risk. However, all deals are their own LLCs that will operate regardless of the platform once the deal closes.
Most real estate crowdfunding companies investing in equity and preferred equity set up LLCs and operating companies for the specific purpose of managing our investments. Therefore, investments continue to perform regardless of what happens to the platform.
As with any investment, only invest what you can afford to lose. Real estate crowdfunding is an illiquid investment compared to stocks, and carries risks like all investments.
Utilize each platform to thoroughly analyze each deal. Diversify your holdings so that you have at least five investments if you are investing in individual deals. Building wealth is about investing for the long-term, and I believe real estate crowdfunding is here to stay.
With a very supportive Federal Reserve and Federal government and the shift in capital towards more stable assets, demand for real estate should continue to remain strong.
The Best Real Estate Crowdfunding Platforms
Fundrise is my favorite platform because they are the creator of the eREIT. For most people, investing in a diversified real estate fund is the most appropriate way to gain real estate exposure. Fundrise has been around since 2012 and is the oldest and largest real estate crowdfunding platform with over 150,000 investors and over $1 billion in assets under management. Accredited and unccredited investors can invest as little as $500 on the Fundrise platform. Returns have been very steady over the years, even during down years in the stock market
CrowdStreet is unique in that investors on its platform invest directly with its vetted sponsors. I like how CrowdStreet is focused on 18-hour cities. 18-hour cities are secondary markets where valuations are lower and growth rates are potentially higher. If you have a lot more capital, you can create your own select real estate fund with CrowdStreet.
These two are the two best platforms on the market today. They have the strongest balance sheets and the most stringent vetting process. Both are free to sign up and explore.
To get rich, you must identify long-term trends and invest. Thanks to technology, real estate crowdfunding, and the rise of 1099 freelance work, I believe investing in the heartland is going to be a multi-decade trend that is going to make investors money.
Please bookmark this real estate crowdfunding learning center. It should come in handy as you come across new platforms and new investments to analyze.
About the Author
Sam bought his first property in San Francisco on his 26th birthday in 2003. He liked real estate investing so much that he bought three more properties in San Francisco. Real estate and real estate crowdfunding now makes up roughly 40% of Sam’s net worth. The rest is in stocks, bonds, private equity, and his business.
In 2012, Sam was able leave Corporate America at the age of 34 largely due to his investments that now generate roughly $300,000 a year in passive income. He spends time playing tennis, taking care of his baby boy, and writing online to help others achieve financial freedom.
FinancialSamurai.com was started in 2009. It is one of the most trusted personal finance sites today with over 1.2 million organic pageviews a month. Financial Samurai has been featured in top publications such as the LA Times, The Chicago Tribune, Bloomberg and The Wall Street Journal.