Crowdfunding for Real Estate – To get started with real estate investing in the simplest way possible, perhaps you are wondering what your best options are. Your initial investment in a Fundrise real estate portfolio can be as little as $10. The First Step Is To:
A small but growing number of crowdfunding platforms are making real estate investing accessible to nearly anyone, when previously only accredited investors had several real estate crowdfunding options to choose from. If you’re not an accredited investor but are interested in learning more about real estate crowdfunding, you should keep reading.
Definition of Crowdfunding for Real Estate Investment
Crowdfunding is a mechanism that real estate investors and developers can utilize to acquire or develop a property. When several people join in a real estate venture, they form a “pool” of capital. Either the investors will receive a percentage of the company’s equity or they will make a loan in exchange for interest.
These days, investing in real estate online is as easy as signing up for the correct crowdfunding platform, funding your account, and selecting the items you want to participate in.
There are rules in place to protect investors in real estate crowdfunding campaigns because these campaigns do not require the issuer to register with the SEC. Regulation of offerings determines the scope of potential investors in crowdfunded ventures.
The Top Crowdfunding Platforms for Real Estate Investment Ignoring Accredited Investors
Below is a list of our recommended real estate crowdfunding platforms for non-accredited investors if you are seeking for real estate investing opportunities.
Those interested in real estate can use the Arrived Homes platform to buy fractional interests in individual rental homes. With this organization, you may buy rental property for as low as $100. Because Arrived Homes takes care of all property management, investors can sit back and relax.
If you’re an investor who doesn’t want to fork over the cash for a down payment on a rental property, but still wants to get into the real estate game, you may get started with as little as $100 and build a sizable portfolio over time.
Fundrise caters to non-accredited investors by offering a variety of real estate investment opportunities with low entry barriers (as little as $10). To increase profits and reduce exposure to potential losses, the platform will automatically distribute your capital over several different projects.
On Groundfloor, both accredited and non-accredited investors can participate in crowdfunding by making short-term loans to real estate investors and builders. To get started, investors can put in as little as $10, making them the only crowdfunding option with such a low entry price.
Short-term mortgage loans are available from Groundfloor, and the company sells limited recourse obligations to investors (LRO). Investors can peruse the list of available loans and put down as little as $10 on any of them. The average loan period on the marketplace is 6 months, and the interest rate ranges from 7% to 12%.
A Groundfloor account allows investors to automatically invest based on predetermined criteria and to set up regular deposits.
At Streitwise, both accredited and non-accredited investors can participate in a private REIT with a minimum investment of roughly $5,000. The company’s primary strategy is to invest in commercial real estate for rent that carries a low risk profile in order to generate stable, high yields for its investors. The group prioritizes markets with steady growth and low risk for investment. Although they are still in their early stages of development, the company’s foundation has been laid on the founders’ extensive knowledge in the field and their optimistic outlook on the future of finance. Streitwise is an option worth looking into if you want to diversify your present financial portfolio but thought buying real estate was beyond of reach.
Commercial real estate fractional investing platform LEX Markets enables both accredited and non-accredited investors to participate in large-scale developments without shouldering the financial burden of doing so alone. Shares in these initiatives are available for purchase for a starting price of $250, making them well within reach of most investors.
Similar to the security protocols employed by the world’s leading securities markets, the platform makes use of its own patented technologies. Investors can feel secure in the knowledge that their money is safe in commercial real estate. Property owners also have a say in how their buildings are managed because they maintain operational control.
Difference Between Accredited and Non-Accredited Investors
According to the Securities and Exchange Commission’s standards, only accredited investors are allowed to participate in some real estate crowdfunding offerings.
A person who meets the criteria of an accredited investor can take part in any crowdfunding campaign. An individual must fulfill one of the following criteria in order to be considered an accredited investor:
- have consistently earned over $200,000 each year ($300,000 if married) for the past two years, and intend to do so again this year.
- Someone with a net worth of at least $1 million, not counting their primary residence.
- Participant must be a current holder of a Series 7, 65, or 82 license.
Accredited investors include both individuals and companies/trusts. An accredited institution will have fulfilled at least one of the following criteria:
- Over $5 million in total assets and directed by an accredited investor is considered a “self-directed” trust.
- Institution that has invested at least $5 million in total and was not organized for the purpose of acquiring the aforesaid securities as a direct investment
- Institutional investor-only company.
For offerings under Rule 506(c) of Regulation D, only accredited investors are permitted to take part. Accredited investors have no investment cap under Rule 506(c).
Any potential investor who does not match the criteria to be considered an accredited investor is considered a non-accredited investor. These regulations were established to shield non-accredited investors from financial ruin, as crowdsourcing is often seen as a riskier venture than investing in equities or bonds on public exchanges.
Can Regular People Put Money Into Crowdfunding Projects?
A growing number of real estate crowdfunding platforms now have offerings open to non-accredited investors, despite the fact that non-accredited investors still have fewer opportunities to participate in crowdfunded real estate deals overall.
Regulation A+ Crowdfunding
Mini initial public offerings (IPOs) are another name for Regulation A+ offerings. The SEC must approve the offering before a business may participate in this sort of crowdfunding. Whether the offering is a Tier 1 or Tier 2 Regulation A+ determines whether or not there are additional reporting and disclosure obligations.
Due to the increased SEC involvement compared to a Regulation D offering, both accredited and non-accredited investors can participate. A non-accredited investor may invest up to 10% of their annual income or net worth in a Tier 2 offering, but this is the only restriction.
Crowdfunding Rules and Regulations (CF)
Non-accredited investors can now participate in crowdfunding through Regulation CF. Since there is a cap on how much a company can raise through this method, it has not caught on with real estate investors just yet.
In the past, companies could only raise up to $1.070,000 annually through Regulation CF. But due to recent regulatory changes, that cap has been increased to $5,000,000. It is still challenging for companies to raise enough money to offer passive investors opportunities that are attractive even at the increased amount.