CrowdStreet Platform for Real Estate Investing

BySheeba Manish

There are many points to consider before investing in real estate crowdfunding. The first is the choice of projects. Is the project open only to accredited investors or non-investors as well? Crowdstreet for instance caters to accredited investors who would like to crowdfund portfolio options, funds and single assets.

Next, investors must research the deal flow the crowdfunding platforms have undertaken. A higher deal flow means greater number of opportunities to invest and better diversification. Funds and single assets are better suited to investors with specific investing criteria.

Investors must seek out platforms that do so across different asset classes and locations in order to mitigate risk. For example, during Covid, investors with hospitality heavy funds would have taken a hit. An investor with interests spread across rental properties, warehouses, retail stores and pharmacies would have better investing outcomes.

CrowdStreet invests across several real estate categories. Office, industrial, medical offices, warehouses, senior-housing, storage, flex, R&D, bank note, student housing, co-living, garage and veterinary are some of the spaces they invest in. This is a wide array of choices offered to the investors to reduce risk and maximise returns.

CrowdStreet is highly transparent when it comes to the information it provides investors before they make a choice. Their high deal flow (530+) means more realistic averages. They encourage investors to compare their plan fundamentals with outside sources. A lot of information is available publicly on their platform. Sponsor ranking system, information on returns on individually realized offerings, aggregate marketplace performance and total distributions are available to the public on CrowdStreet.

CrowdStreet also offers the criteria they use to list a project. Investors often have their own criteria to invest but being aware of the platform's criteria for listing builds trust and confidence. Published deal review process and selection standards help in attracting better quality investors.

The review team at CrowdStreet includes industry experts which is approved by an investment committee. Committee members are usually experts with experience that is more extensive. Their review process examines the managing firm's track record. Assets, quality of materials and deal assumptions are closely reviewed. They also review all the relevant legal documents and communicate the same to investors.

CrowdStreet encourages investors to check the quality of deal managers and sponsors and the relation between them. Sponsors are responsible for execution of the business plan that includes costs, management and future sale.

The sponsor's experience, competency and assets under management give a good picture. Larger sponsors with good connections offer investors access to projects they may otherwise have found no inroads to.

Investors should look at the total capitalization of projects funded on the platform, $21 billion in the case of CrowdStreet.

This parameter is indicative of the quality of deals and types of sponsors the platform is able to bring on board. Investors would do well to educate themselves beforehand about the platform's guidelines and processes for communication. CrowdStreet also provides market information to give investors context and investment opportunities.

To conclude, crowdfunding is democratising the financial sector and the way business is done. It helps close fund gaps and attracts new investors. It also helps incorporate the customer's voice in a far more meaningful way. Each investor has the potential to be a collaborator, idea soundboard and a robust checker of processes.

Crowdfunding is rapidly becoming a new way in which customers are exploring markets and investing in them. We hope this primer has helped in your understanding of crowdfunding as a viable financial investment tool.

Checkout CrowdStreet, a real estate investing platform that gives investors direct access to individual commercial real estate investment opportunities.