crowdfunding is it good or bad?

Question

I am a new RE investor and I am constantly traveling with the military. I was wondering what people here think about investing in fundrise or other crowdfunding platforms like it? Thanks for the help.

Ian Ippolito · Answer

Thanks Randy.

I suspect you've already done this, in case not: before looking at any platforms I recommend taking a step back and figuring out how much of your portfolio should be allocated to real estate. Then after that, figure out how much of that real estate allocation should be allocated to the different real estate strategies and asset types (commercial versus residential, debt versus equity, retail, office, multifamily, self storage, etc). An investor who doesn't do this instead just randomly picks deals they happen to run across, will most likely end up with a very skewed portfolio. And they will most likely take on much more risk than they would have, had they planned out everything in advance.

I personally would start the platforms with the most volume and the least negative investor feedback. That would be Crowd Street and Real Crowd which are by far the largest over all the others. If you are looking for 1031 exchanges out of existing properties, then I personally would start with 1031 crowdfunding. I would also visit some of the more boutique sites such with lower volume but also little negative investor feedback like Arbor Crowd and Share States.

On the debt side, Peer Street used to be talked about very highly but now opinion seems to be very split, based on which notes the person ended up investing in (and if they are defaulting are not). Fund That Flip has much lower volume but much more positive feedback. Personally I don't actually use debt platforms anymore because I find more conservative LTVs and selection criteria (nonjudicial state only, etc.) in hard money loan funds, plus there is the extra benefit of instant diversification and not having to do constant due diligence on new loans to turn the portfolio over every several months. But, for more aggressive investor, the debt platforms may be a good fit.

Ian Ippolito · Answer

There actually are about 20 or so offerings that are targeted to nonaccredited investors, using regulation A+. The downside is that this is a more expensive way for the sponsor to organize, so typically the expenses for the investor are higher.  Skin in the game is usually much lower than accredited offerings. And many of the most experienced sponsors are not doing nonaccredited offerings.

Having said that, you may still find something that's of interest to you, depending on what you're look for.

If I were nonaccredited, I would personally start with the largest, and most popular fund which is Blackstone Real Estate Investment Trust. This is a core plus fund with about 60% leverage, and one of the most experienced sponsors in the industry. I probably would also consider Broadstone Real Estate Access as a way to get access to numerous real estate funds that normally have minimums that are way too high for nonaccredited investor ($500,000-$1 million and above), as well as access to direct real estate with a best in class low fee structure. Then perhaps stREITwise which does office (can be a good investment but also can be more volatile in the downturn). After that, if I were a more aggressive investor I would put smaller amounts into some of the riskier nonaccredited investments out there such as Realty Mogul etc. If you want more info, PM me.

Taylor L. · Answer

@Dimitri Paspalaris unfortunately non-accredited investors can't invest in crowdfunding deals. Non-accredited investors have to go meet sponsors and build relationships, and get on their investor lists. Totally worthwhile, in my opinion, but it just takes a little extra work.

I think it's important to vet and build a relationship with your sponsors anyway. I only invest in deals where I've known the sponsor for some time, and most of the investors in my deals I've known for some time. If it's worth doing, it's worth doing well!

Dimitri Paspalaris · Answer

@Ian Ippolito currently not accredited but would like to eventually make it to that level. Thanks.

Randy Bloch · Answer

@Ian Ippolito

Hi Ian, I am interested in what you think the best crowdfunding sites are for an accredited investor.   I have read several of your posts on crowdfunding and you have wealth of knowledge on the topic.

Ian Ippolito · Answer

In my opinion, crowdfunding platforms are like syndications. There are a couple of very good ones, some pretty bad ones and a lot of them are just mediocre/average. I personally feel that Fundrise might be a good choice if you are an aggressive, nonaccredited investor. I'm a conservative investor, so I personally am not comfortable pulling the trigger on their funds for my own portfolio. And I am also accredited so there are a lot better options with competitors that have much lower fees, more skin in the game and more sponsor experience.

But, you might be coming from a different place and be looking for something completely different than I am.

As far as other platforms: there are literally hundreds of other choices. I can tell you the top 3-4 based on investor feedback, first need to know if you are accredited or nonaccredited.

crowdfunding is it good or bad?

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