I've been an active investor all along and recently embarked on passive investing since my family needs are catching up. I looked at this site crowdstreet which has sponsors promoting Large multfamily/sing family funds and so forth. The deals seem long-term and returns more than 8% and irr greater than 14-15%. Anyone has experience with crowdstreet deals? The deals are quite opposite to what u see in pol. Pol has short term loans and sponsor has no immediate cash flow.
Suggest you check out http://www.therealestatecrowdfundingreview.com. I have had good success in RE crowdfunding, but it does require a substantial amount of research and due diligence to select the right investments.
Thanks @Ed Matson .
@Rao Mu , What you are talking about are equity deals, versus the debt deals that you see on POL. And there are actually many sites that have equity deals.
What I recommend is before drilling down into one particular site, get an overview of all the possible options that fit your portfolio needs. After that, then drill down into the site details of the top three or four sides in that area. If you have any specific questions, let me know.
You have to pull apart the deal from the platform. CrowdStreet (and the other platforms) does some due diligence up front, but they aren't the ones putting the deal together or managing it. It's sort of like asking if you should marry someone based on the fact that you found them on Match.com.
That being said, I do like CrowdStreet a lot. What stands out is their investor relations software. In my opinion it's the best out there and that's really where these platforms should be focusing.
These deals are very different than POL. There's a good chance you won't see any money for a while. IRR numbers are basically guesstimates and they can be manipulated... especially if you invest in a fund that doesn't put your money to work right away. Anyways, that's my 2 cents. Good luck.
Further to Ian's comment, you really need to do your own due diligence and read the fine print when looking at a specific deal offered by Crowdstreet or another platform. The crowd platforms vet the deals but the fact is, they can and do make mistakes at times when researching the sponsor background, explaining fee structure, etc etc. I've invested w/Crowdstreet and like them so far but I'm also aware that it's up to me to really drill down into the details and do some of my own homework before investing. If you can spare the time I've also found that watching/listening to the webinars that the sites usually produce on each deal is worthwhile in order to get a flavor for the sponsor in person (so to speak) and see how he/she fields questions from potential investors.
@Mark Robertson has made a few investments on the platform and may have good comments to add
I made a commitment to invest $10000 in their Impact Housing REIT in May 2018. After 8 months, they returned the capital to all the investors with nothing in return.
The simple claim that they couldn't meet the funding requirement.
This is a scam, not a business.
I could have invested my money with other crowdfunds and made a profit.
When I invest with Grounflorr, Fundrise, RealtyMogul, I get 12% interest from the very first day of commitment. No time wasted.
I don't know why would anyone even invest with CrowdStreet, and I'm surprised that they're popular and have positive reviews.
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@Adam Hazim - appreciate you had a bad experience with CS- but I wouldn't go so far as calling them a scam. The opportunity you mentioned is only one out of many many other offerings that have closed and performed- and you had the bad luck to choose it for your first investment with CS.
I have made several investments with them and on the whole am very happy and am in connection with 10's of other investors who have done the same.-
I concur completely with the advice of the experienced posters above- you still have to do your own DD. The match.com comparison by @Nathan W. is particularly apt. I love the deal flow that platforms such as this provide- prior to internet crowdfunding these kind of syndicated deals where hard to come by and often open only to a few networked investors.
@Adam Hazim , To talk further about what @Saul L. said... I have talked to thousands of real estate crowdfunding investors about their experiences, and is very rare to find someone say something bad about CrowdStreet.
In comparison, all 3 of the platforms that you mentioned have had quite a few investor complaints voiced. I agree that it is nice to get interest from the first day when possible, but I personally wouldn't consider that to be the end-all and be-all of evaluating a platform. For example, two of those platforms have been reported to have a history of extraordinarily high default rates in comparison to best-of-breed alternatives. If I'm not getting my principal back, personally I really don't care about whether they were theoretically accruing interest on day one or not.
No platform is perfect, and investors have to do their own due diligence on Crowd Street just like anywhere else. And as a conservative investor, their new diversified offering where they put you in every deal on the platform, is way too risky for me. But in my opinion, just the volume of deals that they have makes them a must visit platform.
With Groundfloor, AHP, Funrise, I earn interest from the first day of commitment.
With CrowdStreet, you earn nothing until the funding is totally complete which takes months!!!!!!
In my case, I waited 8 months ( May, June, July, August, Sep, October, November, December). In the end, CrowdStreet messaged me that they will refund my money in 30 days. So, I have to wait another month now!!!
They held my money for 9 months and gave me nothing.
I would not consider Groundfloor etc. as a direct competitor. These are equity deals not loans for cash flow. There are some cash flowing deals but most don’t pay until the property is sold. Most of my deals on CrowdStreet and RealCrowd I get nothing for 5-10 years.
Obviously not funding is a different deal (Impact REIT) but that is not CrowdStreet, that is the sponsor. They didn't raise enough. The good thing about CS is that you are investing directly with the sponsor.
I like CrowdStreet (and RealCrowd). It is like the kiddie pool of syndication. You still need to do your own research but they weed out the worst players. The big advantage is the low minimums (~25k) which for a small fish accredited investor like me let’s me participate in big time syndications I would never be able to do without it.
I also really enjoyed learning commercial real estate which I knew nothing about. It is fun to learn new things. My suggestion is to watch the webinar replays for the deals or attend them. Good to begin learning the lingo and such.
These are illiquid investments, as stated it is years to pay off. This is for long game passive (after you invest) real estate investments. They can be very lucrative but they require up front research and patience. CrowdStreet is just a bulletin board, you have to decide what to pull off it
@Adam Hazim you said "With CrowdStreet, you earn nothing until the funding is totally complete which takes months!!"
Afraid thats not completely true. It all depends on the particular deal and deal terms. Because CS is only a marketplace- no 2 deals are identical. Each one depends on the particular offering terms and sponsor behind it.
I recently funded in a deal for a purchase of an office building in Redbank NJ. The offering is fully funded, however the closing on the purchase has been unexpectedly pushed out to January- Never the less investors are earning the preferred 8% equity from day one of funding as per the deal terms.
@Adam Hazim I'm a relative newbie to crowdfunding (active for about a year), but I researched it for another year as well. I'll have to agree with @Saul L. that it all depends on the deal. CrowdStreet has deals right now that offer cash flow from day one (aka Hilton Home2), if that is an important factor for you, but I'll have to admit that CS is more known for their "pure" equity deals where you don't see any return for 3 years or more. That being said, I'm currently investing in 4 deals on CS, and 2 of them are cash flowing. Two more are in the works and they will be cash flowing within 3 months.
I'll also parrot what others have said that although the platforms can probably weed out the grossly bad sponsors with their due diligence, it is really up to the individual investor to do his own due diligence to weed out the bad DEALS. It is also important to perform due diligence on the platforms themselves, which is where @Ian Ippolito and The Real Estate Crowdfunding Review (and other similar sites) comes in. Ian's site is one of my go-to sources for ongoing information on the crowdfunding industry and has already alerted to me to platforms for which to steer clear. Thanks Ian!!
As for me, I have diversified my portfolio across different platforms, different deal types (equity, preferred equity, debt), and also types of properties (commercial, multifamily, residential, mixed-use, storage, etc). Some funds are targeted for cash flow and some for long term growth, but EVERY property I choose is vetted and EVERY property fits in my overall investment plan.
I've never done one of these myself as I prefer investing directly in the deals themselves, but I'd imagine the same diligence needs to be applied as a direct syndication. I worry a little that I can't get a sense of the team behind the deal when there are too many teams to do my diligence on.
I've heard good things about it from
other passive investors but from
active hands on investors like
myself I thought there were too many questions to be answered and the underlying debt on many of deals
was so risky it leaves only a cashout with appreciation as only exit strategy. I find this issue myself when I am
speaking with investors they see
large numbers on return but don't
really know what that means or how they are getting it. I
I've been looking at these platforms (and investments) as well.
When you do your diligence on the deals, are you getting information other than what they're putting into the platform? Anything you're specifically looking for that you feel makes an investment more or less worthwhile?
I think it really depends on where you are in life. If you are willing to relinquish a couple of points to be able to just lump your capital with others and go totally passive I get that. If you have the energy and the gusto to stoke out alone or with a small group then there is more money to be made by the individual. For me, I'd like to do it a few times to get the direct experience and then move into the purely passive space myself.
I put all my company-sponsored 401K into a self-directed 401K and have invested $350K+ of my retirement funds into CS deals. There is a full-spectrum of performance ranging from outstanding to subpar. I began investing in late 2017 and would say that the key is understanding the track records of the sponsor. Many deals look great on paper but can falter based on execution or unforeseen market dynamics. As has been said, CS is simply a platform. Do you analysis on each specific deal.
I have listed deals on crowdstreet and their due diligence is super deep. Took me 3 months of DD to get the last one listed. It was a pain, but props to them.
An investor considering offerings on Crowdstreet should read the offering documents very carefully. Including the lengthy and detailed PPM. A few of the PPMs I reviewed had excessively high fees, in one instance wiping out any potential appreciation on the future sale of a property as a fee collected upon sale. If one is not familiar with what to look for in a PPM or not willing to read them, it is very irresponsible and risky to invest in these offerings. Read every document, more than once and in their entirety. Also, if an investor does not know what customary sponsor fees are, they should not be investing through Crowdstreet or sites like it but instead seeking guidance from a professional. These are risky and complicated investments, not something you just order up online.
Essentially they are a marketing company, the sponsors pay to participate as listings. Most of the long time reputable sponsors in this space sell out their deals quickly through the long established broker dealer and RIA community without the need to be on a site. If an investor isn’t going to look at those offerings in comparison to what’s on Crowdstreet, how can they know what a good deal even looks like.
Yeah, the fee structure is not shown upfront. CS doesn’t charge any fees, but doesn’t disclose upfront the fees charged by the sponsor. The returns shown are not net of fees. 12-20% return may look good until the plethora of fees charged by the sponsor is revealed (acquisition fee, loan fee, development fee, management fee, etc).
Those who have had an account with CS for a while may want to share what the ‘actual’ returns have been?
@Ian Ippolito - In your review, why not emphasize the fee charged by the sponsors rather than saying CS doesn’t charge any fee and do your own due diligence?
@Brandon Burns - if you say on the CS platform that you will offer 20% IRR with 1.8x EM for a hold period of 2 years, are you offering investors 20% annualized return net of fees?
@Tushar Prasad I have investments that are performing at proforma and others that are missing the mark. This has less to do with CS than the sponsor. Due your due diligence with the sponsors. Steer clear of Bridgeton Holdings - that has been a train wreck for me! Several other projects of theirs are in the toilet.
I cannot tell you what the final IRR has been on any of my deals because not have been sold yet.
>>@Ian Ippolito - In your review, why not emphasize the fee charged by the sponsors rather than saying CS doesn’t charge any fee and do your own due diligence
Because there are platforms that will charge a fee *on top of the sponsor’s fee/promote* and others that don’t (like CrowdStreet). And then there is a third category where the platform actually is the sponsor, so the platform is not charging anything beyond the sponsor fees/promote, but obviously still collecting it.
In all of those cases, there is an underlying sponsor fee and/or promote.
If you are looking for a completely fee-free and promote free investment, you won’t find it. The sponsor does have to make ends meet
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