CrowdStreet Review[2024]: Pros, Cons, and How It Compares

Real estate investors who want to diversify their portfolios might consider looking into platforms like CrowdStreet. With this platform, investors can diversify their real estate holdings using smaller amounts of money than buying individual properties. CrowdStreet investors can select individual commercial real estate deals or invest money in a fund that targets specific sectors of the real estate market.

CrowdStreet is a good fit for accredited investors who want to invest in commercial real estate and can afford to invest $25,000 or more in an illiquid investment. If you’re not accredited or prefer more liquid investments, CrowdStreet won’t be a good fit.

This CrowdStreet review will explain what the company does, how you can invest, and how it is different from other real estate investing platforms.

Key takeaways

• CrowdStreet is a commercial real estate investing platform for accredited investors.
• It has various asset classes for real estate, including office, industrial, hospitality, senior housing, and retail.
• It’s best if you are comfortable with illiquid investments and don’t mind managing your investment using a computer. CrowdStreet doesn’t have a mobile app.
• CrowdStreet offers investments in individual deals as well as a REIT.

What is CrowdStreet?

CrowdStreet is a commercial real estate investing platform that allows investors to access a marketplace of commercial and multifamily real estate deals. The CrowdStreet platform offers investors the ability to invest in specific deals, diversified funds or vehicles, or have a tailored portfolio curated by an investment manager.

CrowdStreet was launched in 2014 in Portland, Oregon, by Tore Steen and Darren Powderly. They’ve since built a team of real estate professionals with more than 120 years of collective performance as well as a decent track record. Since its launch, CrowdStreet has facilitated more than $4 billion in investments by 329,000 investors across more than 750 projects. To date, there has been an average 18.1% internal rate of return.

	CrowdStreet
Minimum investment	Varies by project
Management fees	Each investment has its own fee structure and expenses
Asset classes	Commercial real estate (CRE)
Account types available	Individual deals; real estate funds and vehicles
Features	Can choose projects based on your risk tolerance, on the distribution strategy, on loan-to-cost ratios, and more
Distributions	Varies by project
Best for...	Accredited investors and people looking for specific real estate opportunities
	Visit CrowdStreet

How does CrowdStreet work?

CrowdStreet enables real estate investors to fund private real estate projects around the U.S. CrowdStreet is not a middleman, though, and investor money goes directly to the sponsors of the real estate project.

CrowdStreet vets each offer before it appears on the CrowdStreet website, conducts background checks, and reviews its business plan.

Investors have two investment options when it comes to investing in real estate deals through CrowdStreet’s marketplace:

• Individual deals
• Real estate funds and vehicles

The minimum required investment with CrowdStreet varies based on how you choose to invest. Individual deal minimums vary based on the project. At the time of publication, the minimum investment required for an individual deal was $25,000. Minimums for real estate funds and vehicles also vary by project and range from $25,000 to $100,000.

Who can invest in CrowdStreet?

Unlike other real estate crowdfunding platforms, only accredited investors may invest with CrowdStreet. Being an accredited individual investor means that you meet one of these criteria:

• Earned income of $200,000 (or $300,000 with a spouse) in each of the prior two years and similar expectations for the current year.
• Has a net worth over $1 million, either as an individual or with a spouse (excluding the value of your primary residence).
• Hold a Series 7, Series 65, or Series 82 license.

Additionally, trusts and business entities may qualify based on the relevant criteria below.

• A trust with total assets in excess of $5 million that was not specifically formed to buy the securities offered.
• Any entity in which all of the equity owners are accredited investors.

If you are interested in checking out CrowdStreet, you can sign up for a free account. During initial account creation, they will not verify if you are an accredited investor. This allows you to look at current property listings and get a better feel of how CrowdStreet works.

You will need to verify your accreditation before moving forward, which can be done by uploading your financial documents to their platform or providing a letter from your own licensed CPA, licensed attorney, or registered wealth advisor.

Federal securities laws specify that only accredited investors may participate in certain securities offerings. One of the reasons for this limitation is to ensure that all participating investors are financially sophisticated, are able to fend for themselves, and are able to sustain the risk of loss.

These investments are not required to register with the Securities and Exchange Commission (SEC). Therefore, they do not have the same disclosure requirements as publicly-traded investments, like mutual funds.

How much can you earn with CrowdStreet?

As with most investments, there are no guarantees you’ll make money when you invest with CrowdStreet. That said, each project provides a target investor internal rate of return. This is not a guaranteed return. Instead, the internal rate of return estimates how much investors may earn on a project or investment. In this case, the IRR projections include both the monthly profits and any profits when the property is sold.

When you review opportunities in the CrowdStreet marketplace, you'll see the targeted investor IRR highlighted on the overview or when you click into the details.

In most real estate deals, the funds look to invest in commercial real estate properties for a limited window of time, then sell for a profit. This sale is known as a capital event, and investors will participate in those proceeds. While the buildings are held, investors participate in the net cash from operations when the sponsors decide to distribute profits.

Every deal is different, and you'll need to review the current real estate offerings to find one that aligns best with your goals.

Distributions

When researching commercial real estate investment opportunities on CrowdStreet, look for a tab that says “Distribution Strategy." Some sponsors have agreed to make the information publicly available to help you understand the expected distribution payments.

For example, one real estate fund offers the following payment strategy:

• A 9% annualized return to investors. This amount accrues each year and is paid out first before the sponsors receive anything.
• Investors receive 80% of the additional proceeds until they achieve a 15% annualized return.
• Any remaining proceeds are split 70% to investors and 30% to the promoters.

Not all real estate investments are currently making money, therefore, they may not pay distributions until later in the hold period, if at all. Because all distributions are at the discretion of the sponsor, it is best to assume you will not receive any distributions until the property is sold.

The "Financials" tab also provides an example of what a hypothetical $50,000 investment would yield on an annual basis. In this example, the investor is forecast to receive money each year from the project's cash flow. These amounts may be paid monthly, quarterly, or accrue until the project sponsor approves the payout. Additionally, there is the potential of extra return from the sale of the real estate asset.

How to get the most out of Crowdstreet

As an investor, you want to maximize your returns while minimizing risk. Here are a few tips to help you maximize your earnings and develop an investment strategy with CrowdStreet:

• Choose individual deals. When you select individual real estate deals instead of funds or portfolios, you can choose those with the highest returns and targeted equity multiples.
• Select shorter investment periods. The sooner a project is sold, the quicker you have access to cash and potential profits from a sale.
• Reinvest disbursements. Whenever you receive cash distributions from an investment, reinvest that money to continue earning returns.
• Avoid high-expense investments. When researching investments in the CrowdStreet marketplace, look at the investment expenses. Avoid individual deals and funds whose expenses are higher than similar opportunities.
• Time is money. Consider whether it makes sense to do your own due diligence and pick individual projects or invest in a fund. You may be better off using a fund so you can focus on making more money using your expertise.

Is CrowdStreet a safe investment vehicle?

As of now, there are pending legal concerns around CrowdStreet and their mismanagement of $63 million properties, referred to as Nightingale Properties. Nightingale Properties are now bankrupt. With this information out, it would be wise for investors to see how CrowdStreet handles this — i.e. do they make it right for the investor or will it be counted as part of the risk?

There is always a risk when you invest your money. That said, here are a few best practices that can help you stay safe while investing:

• Diversify your portfolio. Diversification decreases the chances that your investment portfolio suffers a loss. If you have only enough money to make the minimum investment, consider opting to invest in a fund instead of picking an individual property. The blended portfolio that results from a fund comprised of many projects could help you minimize risk.
• Use filters to match your risk tolerance. The CrowdStreet marketplace allows you to set filters to focus on projects that match what you are looking for. Use these filters to avoid projects that do not meet your needs.
• Choose projects with a monthly distribution period. When the project returns money to you, that portion of your investment is no longer at risk. Choose investments that offer monthly or quarterly distributions.
• Select investments with higher preferred returns. Preferred returns are money paid to investors first before the sponsors receive payment from the project's cash flows.
• Focus on projects with lower loan-to-cost ratios. When a project has a lower loan amount, there is more equity in the project for investors like you when the project is sold. Additionally, lower loan amounts reduce the interest that a project has to pay, which results in more cash flow available for investors.
• Choose sponsors with experience. Experienced investors typically have a lower risk than sponsors or real estate developers who are just beginning their careers. This is because they have completed numerous projects and been through the ups and downs of the economy multiple times.

What to know before you start investing

Once your account is set up, how you start investing with CrowdStreet depends on the type of account you select — individual deals or real estate funds.

Before you can invest, you must complete a vetting process to confirm that you're an accredited investor. The CrowdStreet system walks you through the process and alerts you to the documents you need to submit to prove that you meet the qualifications.

For individual deals and real estate funds and vehicles, new deals are launched frequently. When new launches occur, investors receive an announcement email that contains information about the investment, date and time of a live webinar to discuss the details, and when you can submit an offer.

Once a deal is launched, participation is first-come, first-served. If you want to invest in a specific deal, set a calendar reminder for when the investment window opens for a limited time. When the investment window opens, you'll submit your offer through the CrowdStreet portal.

It should be noted that if you have a self-directed IRA, you may be able to invest in CrowdStreet projects. Most sponsors on the marketplace are able to handle these types of investments as long as the project timeline remaining is enough time to handle the required paperwork.

Alternatives real estate investment platforms

Although CrowdStreet offers many attractive features, the $25,000 minimum investment and accredited investor requirement may have you looking elsewhere if you’re learning how to invest in real estate.

Competing real estate investing platforms are available that have lower investment minimums for potential investors. Here is a comparison of the best investment apps for non-accredited investors to consider:

	CrowdStreet	Arrived	Fundrise	Roofstock	RealtyMogul
Investment types	Commercial real estate projects, including office space, retail space, and multifamily	Single-family rental homes	Residential, commercial, and mixed-use properties	Single-family rental homes	Residential, commercial, REITs
Minimum investment	$25,000	$100	$10	$500	$5,000
AUM fees	Varies	1.00%	0.85%	1.00%	Varies
Liquidity	Long-term hold	Long-term hold	Long-term hold, quarterly redemption options	Long-term hold	Limited liquidity
Accreditation requirements	Accredited investors only	None	None	None	Accredited investors for some investments
		Read our Arrived review	Read our Fundrise review	Read our Roofstock review	Read our RealtyMogul review

The closest alternative to CrowdStreet is Fundrise because both platforms allow you to invest in commercial property. Fundrise was founded in 2012, has more than 210,000 active investors, and has over $7 billion in investments. Investors can begin investing with as little as $10 and annual servicing and management fees are a total of 1% per year. You can compare Fundrise vs. CrowdStreet directly and see which platform better aligns with your investment goals.

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