Real estate crowdfunding is on a tear. The amount of money invested via crowdfunding platforms was $2.5 billion in 2015, and it’s growing like crazy. The 2012 Jobs Act was passed which legalized crowd-sourced funding online. It also permitted non-accredited investors the ability to play in the real estate game. Right now over 100 real estate crowdfunding companies clutter the Internet. And it seems new ones pop up every day. No wonder, in 2016, the industry saw $2.6 billion in capital invested on these platforms. It’s estimated that this will grow to an amazing $300 billion in 2025.
It’s only a matter of time until this wild expansion stops and industry consolidation begins. As in most young, fast-growing industries, the weak will start to fall away, either through insolvency or because a bigger fish came along and gobbled them up.
Until that happens, here are 10 real estate crowdfunding companies to keep an eye on.
Realty Mogul is one of the most recognized real estate crowdfunding companies online today. Founded in 2013, it has raised over $10 million since its launch.
Like many other platforms, Realty Mogul provides investors with a large menu of property types to pick from including retail, hospitality properties, multi-family units, medical/dental and office buildings.
Currently, Realty Mogul has over 15,000 users who have invested over $70 million in 240 properties.
This startup has raised over $10 million too. RealtyShare’s CEO Nav Athwal says their objective is to provide a platform where accredited investors can find, analyze and invest in quality real estate projects.
He noted that the typical ROI on these investments ranges from 8% to 20%.
As with the other real estate crowdfunding startups, RealtyShares provides a wide array of investment properties – retail, commercial, residential, mixed-use, etc. – that the real estate investor can choose from.
Located in Portland, Oregon, CrowdStreet offers commercial real estate developers a platform to attract and manage accredited investors through a single online interface. Investors can benefit from institutional-quality investments with as little as a $10,000.
CrowdStreet helps developers and operators become less dependent on traditional capital markets. Instead, they can gain access to capital from a wider spectrum of investors and spread the risk across a larger pool of investors.
Many sponsors are increasing the amount of money they are looking to raise from $1 to $2 million, up now to $3 and $4 million range. These equity raises are usually supplements of money already provided by the initial group of investors. CrowdStreet is on track to reach $192 million in equity funding this year.
Rodrigo Nino founded Prodigy Network in 2003 to provide a place where Manhattan real estate developers and entrepreneurs could connect with investors. Before investors get to look at these projects, Prodigy Network takes them through a 6-point vetting process to weed out the lemons and those which appear unsound for whatever reason. They also run all investments through a third-party bank to protect investors and to provide equity partners with favorable lending terms.
They only partner with developers who have a solid track record, sound financials and whose project will improve a neighborhood, which, over time, will increase the property’s value.
PeerStreet is a platform that provides access to high-quality real estate loan investments instead of offering investors an opportunity to acquire equity in a real estate project.
Debt is one of the safer investment types because it is senior to equity if things go south. In other words, stockholders get what’s left after the PeerStreet investors are made whole (assuming that happens).
Big data analytics gives PeerStreet a competitive advantage when it comes to identifying innovative ways for investors to access real estate loans. PeerStreet has passed the $500 million mark in loans funded since their founding two years ago. To date, they have funded over 1,200 real estate loans.
Ben and Dan Miller founded Fundrise in 2012. Their mission is to provide a platform for people of modest means to invest in big-time estate projects that, up until then, were available only to corporations or wealthy accredited investors.
Investors can put in as little as $5,000, not the typical $50,000 to $100,000 required of accredited investors who utilize the more traditional means investing in real estate.
Every week Fundrise gets over 250 real estate proposals. However, only 5% make it through their rigorous vetting process. The platform pre-funds all real estate deals up-front so investors immediately start receiving interest once the project is launched.
Lending Home straddles the mortgage and real estate crowdfunding categories. And they are doing it very successfully.
Lending Home recently announced that they raised an additional $57 million in investment capital which brings their total to $166 million. They noted that they are now achieving monthly loan volume of $100 million.
For borrowers, Lending Home offers an easy, online way to secure a mortgage and finance the purchase of a home. For investors, both institutional and individual, they provide high-yield real estate assets which, on average, have an ROI of 8%. Given that Treasury Bills are paying around 1% in returns, that’s a pretty good deal.
This platform works with real estate developers to syndicate deals completely online. They have an offering platform that allows sponsors to create their own branded platform.
Furthermore, developers can create their own investor materials, post them and manage the entire process from receiving investment offers to executing closing documents.
Repeat business from investors is high because are able to manage their investment activities simply, and directly with the sponsor.
RealCrowd provides accredited investors an online portal that spans the full spectrum of commercial real estate risk/return. These include multi-family, retail and office buildings.
RealCrowd also removes many of the barriers for investors who want to participate in deals that, in the past, could be accessed only by institutional investors.
They do not charge investors a fee. Sponsors and developers who use the platform pay Real Crowd a licensing and advertising fee. To date, RealCrowd has raised $1.6 million in outside investment capital.
As their name implies, this platform specializes in residential real estate loans.
They have raised over $2 million in VC capital to date. Fund That Flip claims debtors can get approval in as little as five minutes after going through a short, four-step application process. This will finance the rehabilitation of single-family homes that will be “flipped” and resold. Given the acute shortage of housing inventory, Fund That Flip will be really busy for the foreseeable future.
Fund That Flip investors earn income with an average annual return of 10% with a minimum investment amount of $5,000.
What would be interesting is if Fund That Flip could tie themselves into one of the DIY home flipping cable TV shows. Perhaps they could be the QVC of home flipping finance.