Any experience to share about crowdstreet??

35 Replies

@Marco Rodriguez - thanks for the feedback. 

@Ian Ippolito - I'm trying to compare the publicly traded REITs with these crowdfunding options. So rather than how to do due diligence, my approach is to first check if the target return (net of fees) even justifies the effort needed for due diligence. It may be possible to get the same or higher return with zero effort via publicly traded REITs. Just like in stocks, where index funds with zero effort always beat any managed funds (over long intervals).

Originally posted by @Tushar Prasad :

@Marco Rodriguez - thanks for the feedback. 

@Ian Ippolito - I'm trying to compare the publicly traded REITs with these crowdfunding options. So rather than how to do due diligence, my approach is to first check if the target return (net of fees) even justifies the effort needed for due diligence. It may be possible to get the same or higher return with zero effort via publicly traded REITs. Just like in stocks, where index funds with zero effort always beat any managed funds (over long intervals).

Tushar, I own both publicly traded REITs and crowdfunding/syndications in my portfolio and both have very different advantages and disadvantages. In my opinion, making any investment choice completely based on net return (or targeted net return) rather than taking into account factors such as risk, will most likely skew your portfolio into taking a lot more risk than you are probably realizing.

Having said that, if you really want to compare just on net returns then many times the crowdfunding/syndications are a lot higher than an equivalent publicly traded REIT. You have to pay a lot for the privilege of the REIT's daily liquidity option, and if you are able to handle illiquidity, then you can pocket the difference for yourself and get a higher return.

Also, real estate is a completely different asset class than stocks, so you should not expect to be able to take everything that applies to one and assume that it will apply to the other. There is no such thing as a zero managed real estate investment.

Updated 8 months ago

Meant to say, "There is no such thing as a zero FEE managed real estate investment."

Originally posted by @Tushar Prasad :

@Nathan W. @Chris Falk @John Nachtigall @Saul L. @Marco Rodriguez  - any feedback on what the actual returns are in comparison to targeted, given the “zero fee” by CS emphasized in many reviews?

@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?

I think there may be a misunderstanding here on fees. CS does not charge a fee to investors because you invest directly with the syndicator. They are just a e-bulletin board that lightly vets the deals. Other sites, like RealtyMogul, use a different structure, they aggregate the investments into an LLC and charge an additional fee on top of the syndication. So when they say "zero fees" they are talking about compared to other sites, not zero fees overall

Along with that they very clearly show the fees for the syndication, they are a specific tab on the deals. I showed 1 below for a current deal. They also show how the fees reduce the overall return. Also shown in a picture below. For this deal it lowers the return from 25.6 IRR to 23.8 IRR. And 23.8 is the "advertised" return so no funny business there. The pro-forma return to investors is projected at 23. Of course this is all pro-forma. Each deal does better or worse depending on if the pro-forma works out. But that has nothing to do with CS, it has to do with the sponsors and the deals.

I like CS because I am investing directly with the sponsors.   I am unaware of any syndication that does not have at least some fees, that is certainly something to examine on every deal.   But I don't see how CS is anything but up-front about those fees and how they affect the deal.   The "no fees" statement applies to the fact they don't add any additional fees on top of the sponsor fees.

@John Nachtigall - thanks for the info. Have you gone through a full cycle for any investment? I'm trying to see where they mention the (steady) distributions until sale/refinance - the info under "Distribution Strategy" is not clear (see below). All I need to know is what interest rate they will pay (monthly or quarterly) until the sale/refinance, so that I can understand what the return would be if they are unsuccessful in adding value (i.e. unable to sell at lower cap rate or higher noi compared to acquisition).

@Tushar Prasad Crowdstreet has a team of guys that can answer light questions, and connect you with the sponsor for in depth questions. I know they have had full cyles, but again, CS is a really good connector to sponsors but they have no say in the deals and every single deal is different.

My wife and I are attempting to complete our first transaction with CS.  How long does it take after funds are wired for your portal to show "Investment Completed."  

It's been a week since funds were wired and we are getting mixed signals as to our participation status.  Investor relations expert in email says one thing (funding wired) and the investor portal says the exact opposite (awaiting funding).  Is this unusual?

@Ed Matson

It would be nice if Crowdstreet gave a stat sheet of their own deal offerings performances such as

Since inception Crowdstreet has offered 547 deal of which x have completed and y are pending.

Performance then is broken down by each sponsor

By number of deals done

a% better or worse than the estimations given

I know they have a rating system for tenured sponsors, etc..

But it would be nice to have some real stats attached.

Originally posted by @David R. :

@Ed Matson

It would be nice if Crowdstreet gave a stat sheet of their own deal offerings performances such as

Since inception Crowdstreet has offered 547 deal of which x have completed and y are pending.

Performance then is broken down by each sponsor

By number of deals done

a% better or worse than the estimations given

I know they have a rating system for tenured sponsors, etc..

But it would be nice to have some real stats attached.

 It is under ‘resources:marketplace performance ‘ on the website

https://www.crowdstreet.com/ma...

Hope that is what you were looking for

Originally posted by @Marco Rodriguez :

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.


Marco Rodriguez
WeBuyinNorthGeorgia.com

I guess you are able to do that because you can claim to be self-employed? Is the company sponsored 401k (that you transferred into solo 401k) from a current or previous employer? 

Originally posted by @Marco Rodriguez :

You don’t need to be self-employed to have a self-directed 401(k). I had to set up when I was still a W-2 employee.

While theoretically one could have a self-directed 401k (e.g. a 401k plan which allowed the person to invest in real estate, etc.) if the person's employer offered such a plan, but virtually no employers will do so (for various reasons but one of the primary is the compliance risk).  As such, practically speaking you would need to be self-employed to set up a Solo 401k as there are many Solo 401k providers who offer IRS-approved plans which allow for investing in real estate.

 

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