The best real estate crowdfunding sites have been growing rapidly in recent years, as investors look to add a major tangible investment class to their portfolios. It represents an opportunity to add real estate to a portfolio otherwise composed entirely of stocks and bonds.
Real estate crowdfunding platforms give investors an opportunity to invest in either individual properties or diversified funds.
Though there are dozens of real estate crowdfunding platforms available, two of the most popular are CrowdStreet and Fundrise. But even though both are real estate crowdfunding platforms, they operate in different ways, and will satisfy the investment needs of different types of investors.
Let’s start our comparison of CrowdStreet vs. Fundrise with an overview of the basic features each provides.
CrowdStreet vs. Fundrise: What Every Real Estate Investor Should Know
The table below presents the basic features offered by both CrowdStreet and Fundrise.
|Platform / Feature||CrowdStreet||Fundrise|
|Best For||High net worth investors looking for individual property deals||New investors and those who favor an income/growth balance|
|Minimum Investment||$25,000 or more||Starter: $10+|
|Accredited Investor Requirement||Yes||No|
|Fees||See Below||1% annual fee on funds and real estate investment trusts (REITs) + 1% redemption fee within the first 5 years|
|Investment Types||Individual deals, proprietary funds, blended (tailored) portfolios||Proprietary funds and REITs|
|IRA Availability*||Yes||Yes, traditional and Roth ($1,000 minimum)|
|Liquidity||Limited/Low||Quarterly redemption option (not guaranteed)|
|Average Annual Return||17.3% (on fully realized deals, not guaranteed)||8.81% – 16.11% (actual – net of fees, not guaranteed)|
|Investment Holding Period||2.4 years average||5+ years|
|Potential to Lose Money||Yes||Yes|
|Availability||All 50 states||All 50 states|
|Mobile App||No||iOS and Android|
|Customer Service||Email only, Monday thru Friday, 8:30 AM to 5:00 PM, Pacific Time||Email only (1–2 day response, Monday thru Friday, 9:00 AM to 5:00 PM, Eastern Time|
*Though both CrowdStreet and Fundrise are available for IRA accounts, they must be held through a special type of account, known as a self-directed IRA (SDIRA). These are specialized custodians that specifically handle nontraditional investments, like real estate crowdfunding. The custodians are not household names in the investments industry and are generally considered to be riskier than common brokerage firms. Because they are nontraditional investments, real estate crowdfunding investments are not held in accounts with popular investment firms, like Charles Schwab, Fidelity, or E*TRADE.
CrowdStreet Fee Structure
CrowdStreet doesn’t have a general fee. Instead, fees are based on the specific investment you participate in.
The two primary investments are individual deals and funds. Each has its own fee structure, which is presented in the table below:
CrowdStreet Individual Deal Fees
|Fee Type||Fee Amount|
|Design Fee||3% of hard costs|
|Construction Management Fee||5% of hard costs|
|Asset Management Fee||Varies by deal|
|Property Management Fee||2% of effective gross income (EGI)|
|Financing Fee||1% of loan proceeds|
Note that since CrowdStreet offers participation in individual property deals, the exact fee structure offered will be unique for each deal. It’s important for investors to carefully review all documents applying to any individual deal, and to consider engaging the services of an attorney to review the documents, not only for fees but for any other provisions pertaining to the investments that may affect the investor’s position.
CrowdStreet Fund Fees
|Fee Type||Fee Amount|
|Offering Management Fee||1.5% per year (paid monthly)|
|Acquisition Fee||2% of gross purchase price|
|Refinance Fee||0.50% – 1.00% of new loan amount|
|Disposition Fee||2% of sale amount|
|Development Fee||5% on new construction|
|Affiliate Fee||Varies by investment|
CrowdStreet: Pros and Cons
- 17%+ average annual return on fully realized deals (but not guaranteed).
- Invest in individual properties, as well as funds.
- Blended portfolio option available.
- Invest in specific real estate classes, like hotels, storage facilities, senior citizens housing or mixed-use properties.
- Investments are highly vetted, with only five out of 100 typically accepted on the platform.
- Requires accredited investor status.
- Minimum investment is $25,000 but may be higher on private placements.
- Cannot accommodate single family property investments.
- Complicated fee structure that’s not easily projected when an investment is made. Fee structure will also vary based on each individual property deal, as well as the specific activities undertaken in connection with the investment.
- Customer service available by email only.
- No mobile app availability.
Ready for more? Check out our full CrowdStreet Review.
RELATED: CrowdStreet Returns & Investment Performance
Fundrise: Pros and Cons
- Invest for income, growth, or a mix of both.
- Accommodates investing in single family properties (through funds) as well as commercial projects.
- Low minimum investment of $10 for the Starter Portfolio.
- Offers five different plan levels, from Starter and Basic to Advanced and Premium, enabling you to choose investment goals, strategies, and benefits.
- Low, transparent fee structure compared with other real estate crowdfunding platforms (though it’s high compared with other services, like robo advisors, investment brokerages and REITs) .
- Provides quarterly redemption option, subject to an early redemption fee.
- Dividend reinvestment plan available.
- 90-day satisfaction guarantee if you’re not pleased with the investment.
- No ability to participate in individual property deals.
- Real estate investment trusts (REITs) offered are not publicly traded, and therefore lack liquidity.
- Minimum five-year time horizon to maximize investment gains.
- Dividends are subject to ordinary income taxes since they’re not considered to be capital gains but a distribution of net profits.
- Quarterly redemption option may not be available at all times and should not be relied upon. Availability will be more restricted during market downturns when there are more redemptions than purchases.
- Customer contact available only by email, with one- to two-day response time.
Ready for more? Check out our full Fundrise Review.
Can I Lose Money With CrowdStreet or Fundrise?
The short answer is yes. Investments held with both CrowdStreet and Fundrise are secured by real estate. The potential exists to lose money, either through negative cash flow (operating expenses exceed rents) or loss on sale of a property (capital loss).
Regarding risk, real estate investments should be considered similar to stocks. Income generated from the investment can rise and fall, as can the value of the underlying property. The primary difference between the two is that a real estate investment is secured by the underlying property and is less likely to result in a dramatic or total loss.
That said, the risk of loss is lessened when you either invest in a fund or a REIT (because each is invested in multiple properties), or when you invest in multiple individual deals. A loss is possible on any individual property but diversifying across several will minimize the negative impact of any one investment that goes sour.
Since real estate is also a long-term investment, it’s possible you can lose money by liquidating your position before a deal is fully realized.
CrowdStreet also advises investors they may be subject to capital calls on individual deals. A capital call provision gives a sponsor of the deal the right to request additional capital investment from investors in a deal. A capital call can be the result of planned capital improvements to the property, shortfalls in operating cash and reserves, funds for debt payments, and other needs.
Depending on the wording in legal documents associated with the deal, you may or may not be given the option to participate in a capital call. But if you choose not to, you should seek legal counsel to be sure you’re within your rights to do so.
Is CrowdStreet or Fundrise a Good Investment?
Though no investment is guaranteed, holding an allocation of real estate in your portfolio — especially commercial real estate — is an excellent way to diversify away from stocks and bonds.
That’s important because real estate isn’t directly correlated with the performance of stocks and bonds. Though the performance of real estate tends to be consistent over the long-term, it doesn’t necessarily decline in either income or value during times when financial assets are depressed.
Either CrowdStreet or Fundrise can fill that niche in your portfolio by giving you exposure to investment real estate. This is especially true of commercial real estate, like apartment buildings, office buildings, and retail space, which has traditionally been favored investments for the wealthy.
With a relatively small amount of money, you’ll be able to invest in major projects. By using funds or investing in multiple individual deals, you’ll be able to spread your investment across many different properties. This will give you an opportunity to diversify your real estate position across different classes (commercial or residential) and geographically, through properties located in diverse regions of the country.
Finally, some investors may want to consider publicly traded REITs. Publicly traded REITs do have certain advantages. For example, since they trade on public exchanges, they’re completely liquid. They can also fit neatly within a portfolio of stocks and bonds, since they are available through large brokerage services.
But if real estate crowdfunding investments aren’t right for some investors, then REITs probably aren’t either. First, REITs are more correlated with stocks and bonds than real estate crowdfunding, which makes them less effective as a diversification tool. Second, you’ll purchase a portfolio of properties, without any control over the actual deals you’ll invest in. And third, returns on REITs tend to be lower than what they are on real estate crowdfunding investments.
Looking for the best? These are the best real estate crowdfunding sites.
Summary: Is CrowdStreet or Fundrise Better?
If return on investment is considered the primary measure of the value of either platform, CrowdStreet is the clear winner. While Fundrise investments have provided an annual average return of between 8.81% and 16.11% (depending on the funds selected), CrowdStreet has realized a return of 17.3% as an across-the-board annual average.
But return on investment shouldn’t be the primary criteria. CrowdStreet and Fundrise are designed to serve different investors.
Fundrise specifically targets new and intermediate level investors, typically those with smaller portfolios. Their low investment minimums, ranging between $10 and $10,000, will be a better fit for smaller investors. The platform also doesn’t have the accredited investor requirement that CrowdStreet does, meaning the typical Fundrise investor won’t be able to invest on that platform anyway.
Fundrise also represents a portfolio-type investment. You can invest in either funds or REITs better designed for income, growth, or a combination of both. That will be better suited to investors looking to diversify with a smaller investment.
CrowdStreet is designed for accredited investors, who are high net worth or high-income investors, or both. Like Fundrise, they offer an opportunity to invest in real estate funds, and even a portfolio of funds. But investors will also have the option to invest in individual property deals.
This can include either slices of individual deals, or taking a primary investment position in one. Though the potential return on this kind of investment is higher than with diversified funds, the risks are also greater.
This is the reason for the accredited investor requirement. The type of investments offered by CrowdStreet are high risk/high reward, which are best used by investors who have the financial wherewithal to deal with the risks.
In short, we don’t have a favorite between these two standout real estate crowdfunding platforms. Fundrise is the better choice for new and small investors, while CrowdStreet is better suited to large, experienced investors, who have the knowledge and financial strength to accept the higher risk involved in pursuing the higher rewards it offers.
Want to learn more? Check out CrowdStreet and Fundrise today.