Real estate can be an exciting opportunity for investors. We at 40PlusFinance.com are huge proponents of it as a core part of our own financial freedom plan. While we focus much of our own effort effort on buying Turnkey Rental Properties for a source of passive income, we do recognize that, particularly for the beginner and non-accredited investor how much it costs and how dangerous , it can be scary.
Crowdfunding platforms have made it easy for investors to make money from real estate with little effort or risk. Crowdfunding removes many of the barriers and risks associated with traditional real estate purchases. You can partner with other investors on real estate deals instead of buying properties outright.
Although these real estate crowdfunding sites can offer great opportunities, many of them require the participant to be an accredited investor. You must earn $200,000 per year or have a net worth of $1 million to qualify.
Even if you’re not an accredited investor, there are some real estate crowdfunding platforms that will let you get in on the action.
With that, this article will get into different real estate crowdfunding options for the non-accredited investor.
Accredited Vs. Non-Accredited: What’s The Difference?
Make sure to research which investment platforms you are eligible for before making any commitments.
If you’re like most people, you’re a non-accredited investor. So, you can’t join in with some crowdfunding platforms that are only available to people who have been officially recognized as investors (like CrowdStreet, for example).
If you are not familiar with the difference between an accredited investor and a non-accredited investor, here is a brief overview.
According to the SEC, accredited investors are individuals who earn at least $200,000 a year or couples who earn at least $300,000 a year.
If the individual or couple has a net worth of $1 million or more, they are considered to be accredited.
People who don’t have accreditation typically earn less than the amounts mentioned above and have a net worth of less than $1 million.
A small number of investors who meet certain criteria are accredited. Here are some of the best crowdfunding sites for non-accredited investors to check out in 2022.
Best Real Estate Crowdfunding Sites For Non-Accredited Investors
Investing in real estate doesn’t have to be difficult. Instead of having to do a lot of research to find a property, manage it, and keep it in good condition, there are some easier options.
Best for non-accredited investors: Fundrise
What makes it unique: Fundrise allows you to invest in real estate with as little as $10, and the app offers eREITs and electronic real estate funds. For a minimum investment of just $10, you can gain access to the company’s Starter Portfolio, which would invest your money in a diverse range of US real estate projects.
The next step up is the Basic account level. This account requires a minimum of $1000 and comes with all of the Starter account level’s perks as well as goal-based investing and IRA investing.
Fundrise also offers a higher account level called Core portfolios which has even more features. If you can afford to invest at least $5,000, you’ll be able to choose between additional investment strategies and account perks. There are three investment plans offered by Core portfolios — Supplemental Income, Balanced Investing, and Long-term growth. The various plans offered have different mixes of investments that are designed to meet growth and income-focused savings goals.
If you have an investment of at least $10,000 to $100,000, you can use Fundrise’s advanced and premium account levels. The add-ons to the Core plan give you the ability to use more sophisticated real estate strategies and investments.
There are different levels of accounts that offer different features, like auto-investing and goal planning. However, the higher account levels give you access to more exclusive features, such as IPO access and direct investments into open funds.
Some things to keep in mind when considering a real estate investment are that they are illiquid, meaning you can’t convert them to cash as easily as you could with a stock. Fundrise realizes this. The investment has a minimum term requirement of five years.
If you’re looking to invest your money for the long term, Fundrise may not be the best option for you if you can’t afford to let your money sit for at least five years.
Best for non-accredited investors runner-up: DiversyFund
What makes this stand out is the low $500 account minimum. The company also manages real estate investments and offers its services to both non-accredited and accredited investors. This investment app does not charge any management fees. This means you’ll pay 0% for your investments.
DiversyFund only offers an investment in its Growth REIT, which invests in multifamily properties with more than 100 units. This means that the robo-advisor will be responsible for owning and managing all of the real estate assets you plan to invest in.
The goal of the company’s REIT investment strategy is to generate growth over a five-year period. The company’s targeted returns for each property within the REIT range from 10% to 20%.
To avoid any penalties, make sure you cash out your investments only after the minimum five-year investment term has ended. DiversyFund reinvests dividends and earnings until the real estate asset is sold.
While DiversyFund offers a variety of benefits, you should keep in mind that it only invests in REITs. You will not be able to invest your money in any other investment options or account types.
Best for real estate and alternative investments: Yieldstreet
This company stands out because it offers real estate and other alternative investments to accredited investors who have at least $500 to invest. At Yieldstreet, you can invest in a variety of alternative assets, including real estate, legal finance, marine finance, crypto, commercial and consumer finance, and art finance.
But don’t worry if you aren’t an accredited investor. You can still invest in the Yieldstreet Prism fund. This fund requires a minimum investment of $500 and allows you to invest in multiple alternative asset types. The company requires a $500 minimum investment for its short-term notes, and most of its other investments have a $10,000 minimum.
This app is more lenient than some of the others when it comes to investment terms. You can invest for a minimum of six months or up to five years.
When looking to save for retirement, be aware that IRAs will cost $299 or $399 per year. For account balances that are $0 to $100,000, you will pay $299 per year. For account balances that are $100,001 and above, you will pay $399 per year.
Yieldstreet is not available to people who do not have a net worth of at least $1 million. If you’re not an accredited investor, you can still invest with Yieldstreet, but you’ll only be able to invest in their Prism fund.
Other Apps We Considered:
Streitwise is a crowdfunding platform that allows investors to purchase shares of federally registered real estate offerings.
Streitwise is an asset class that isn’t traded on Wall Street. Therefore, it’s not subject to stock market volatility.
At this moment in time, the lowest amount of money you can invest in Streitwise is $1,021, which will give you around 100 shares of 1st Streit Office, its only current offering.
RealtyMogul is a popular crowdfunding site that provides opportunities for both accredited and non-accredited investors to invest in commercial real estate.
There’s a $5,000 minimum investment required to start. Unfortunately, that’s going to be a deal-breaker for some.
After you enroll, you will be able to share your investing goals and see which investments you are eligible for. Accredited investors can invest in any of RealtyMogul’s funds. However, non-accredited investors are only able to invest in the company’s two in-house real estate investment trusts (REITs), which are MogulREIT I and MogulREIT II. Essentially, these are managed real estate portfolios.
The company provides an automatic investing feature for REIT investors.
3. Modiv (formerly Rich Uncles)
Modiv used to be called Rich Uncles, and it’s a platform owned entirely by investors.
The Modiv name allows non-accredited investors to purchase shares in revenue-generating commercial real estate assets.
This company is responsible for managing over $400 million worth of real estate assets. It is also the largest crowdfunded equity REIT in the United States. Check out Modiv’s full portfolio here.
The minimum starting investment for Modiv is $1,000, which is a mid-range amount compared to other investment options.
Instead of platforms that focus on crowdfunding equity, PeerStreet focuses on private real estate debt. While the investment app requires a minimum of $1,000 to invest, it only allows accredited investors to do so. These investors must have a net worth of at least $1 million.
This wealthtech platform offers fractional investments in real estate debt through notes and SEC-qualified Limited Recourse Obligations (LROs). To get started, you’ll only need $10, and you can take advantage of shorter investment terms, which range from six to 18 months. Both accredited and non-accredited investors can use the self-directed and automatic investing features. When looking for an investment firm, be aware that if you are new to investing, the options may be confusing. Even if you’re not the one taking out the loan, if the borrower defaults, your investment could take a hit.
You can invest in commercial real estate through RealCrowd in many different ways, including retail, multifamily, office, industrial, development, and fund opportunities. You will need a net worth of at least $1 million to get started. Patch of land is an app that connects people who want to invest in real estate with people who need loans for real estate projects. The website has information on how to get started, whether you are a lender or borrower. You’ll need to be an accredited investor to begin.
Ark7 lets you invest in fractional shares of rental properties without having to worry about the daily maintenance of the properties you hold stake in. You can also rest assured that your investment is diversified, as your fractional shares will be spread out across multiple properties. The platform also allows you to invest through IRAs, but it’s only available to those who have a minimum net worth of $1 million or $200,000 salary ($300,000 for couples).
Tips for Real Estate Crowdfunding
We have compiled a list of our best tips for real estate crowdfunding below.
Make sure you’re comfortable using the platform.
Different crowdfunding providers offer different levels of user experience. Some are better than others. It’s important to explore all your options to make sure you’re comfortable with the app you choose.
Look for trustworthy companies with websites or apps that are easy to access and use. The app should make you feel good and in control of the experience. If the service is not good, do not use it.
Look for transparency.
The crowdfunding platform you work with should offer complete transparency into the properties in its portfolio, including an extensive amount of data. It’s important that you have access to expert opinions when making decisions about your investments.
Beware of platforms that try to restrict what you can access. When you are crowdfunding, it is better to have more information at your disposal.
Consider buying direct property, too.
Don’t forget about other types of real estate investment options just because you’re interested in real estate crowdfunding. While crowdfunding can be a great way to invest in real estate, it’s not the only way.
The traditional approach involves buying properties directly and either renting them out or flipping them for a profit. This approach is much more hands-on. You could potentially make a lot of money from renting or flipping a property.
If you have enough money for a down payment and to go through the real estate closing process, you might want to consider looking at some properties and hiring a real estate agent.
It is ideal to have a mix of crowdfunded REITs and physical properties in your real estate portfolio so that you receive dividends and cash payments every month.
Make sure you’re in a position to invest.
As you age and more of your friends get into real estate investing, the temptation to join in will be hard to resist.
The key to real estate is managing your debt and using it to make gains. While debt can provide opportunities, it can also be a burden that damages your financial situation.
Keep an eye on your overall portfolio.
As you move forward with your real estate investments, don’t forget about your other investments.
Most young investors should strive to maintain a balanced portfolio including stocks, bonds, index funds, and mutual funds.
Going all-in on real estate can be very risky. To achieve the best results, you should have a diverse range of investments for long-term success and stability.
Kurt has gone from the financial lows of the ’08 financial crisis to personal financial success. He is a professional real estate investor owning properties in multiple states.
One of his passions is financial education and the pursuit of financial freedom.
You can learn more about Kurt here.