CrowdStreet vs REIT 2023
If you’re trying to add real estate investments to your investment portfolio, chances are, you’ve probably seen the term “REIT” before. Also known as a real estate investment trust, REITs offer an easy way for accredited and non-accredited investors to begin their real estate investing journey with a low investment minimum.
However, REITs aren’t always the most profitable types of real estate investments, so how would they stack up against a dedicated real estate crowdfunding platform? In this CrowdStreet vs REIT comparison, we aim to find out!
|CrowdStreet is Better for:||REIT is Better for:|
|Accredited investors||Non-accredited investors|
|Higher potential returns||Low minimum investments|
|Access to individual deals||Liquidity|
While browsing through the potential real estate opportunities, there are a couple of different factors you’ll want to consider. While a liquid investment like a publicly-traded REIT share has its advantages, so do the potentially higher returns of exclusive real estate investing.
You’ll want to compare the benefits—and drawbacks—of the various methods you’re considering using to build your diversified portfolio before you commit.
|Open to||Accredited investors||Accredited and non-accredited investors|
|Best Use||Taking advantage of exclusive real estate deals||Diversifying across multiple real estate properties|
|Modest Money Overall Rating|
Factor 1: Investor Requirements
Before you can even start looking at the investment options, you’ll first need to make sure that you meet the requirements for individual investors. Of course, there are the minimum investments to consider, but you’ll first need to determine your investor status.
Retail investors are split into two categories: accredited and non-accredited investors. By default, investors are considered non-accredited. There are a few ways to become an accredited investor. Meeting one or more of the requirements listed below will give you more exclusive investment options that you can add to your portfolio.
The requirements are as follows:
- A net worth exceeding $1M (excluding your primary residence)
- An annual individual income of $200,000 or more
- A joint income—with your spouse—of $300,000 or more
- An anticipated income meeting or exceeding the requirements above
If you meet one or more of these requirements, you’re considered an accredited investor. If not, you’re a non-accredited investor.
REITs Are Less Exclusive
- REITs are open to all investors
- CrowdStreet only accepts accredited investors
- CrowdStreet requires a minimum investment of $25k
This platform offers exclusive real estate deals on individual properties and real estate projects. As such, it requires a minimum investment of $25,000 and doesn’t accept non-accredited investors. However, CrowdStreet does allow non-accredited investors to view its current offerings and past performance.
REITs are essentially mutual funds for real estate investments. Like mutual funds, there are many different REITs, with each one offering different investment opportunities and having different minimum investment requirements.
However, as long as you can afford at least one share of your chosen real estate fund, you’ll be able to start investing. You can often purchase shares using an online stock market broker-dealer service (like Robinhood).
With many REITs costing less than $200 per share, this instantly makes REITs more appealing to the average real estate investor (as opposed to the high minimums often found on a real estate crowdfunding platform).
Factor 2: Investment Opportunities
Now that we’ve reviewed the basic requirements for each investment type, let’s go over the opportunities each option offers.
CrowdStreet Has a Higher Potential Return
- Crowdstreet has an IRR of 18.8%
- REITs cover a wider portion of the real estate market
- CrowdStreet focuses on commercial property
This real estate crowdfunding platform has a number of investment opportunities posted in its marketplace at any given time. Its portfolio of properties covers many different types of properties, including multifamily properties, rental properties, retail, land, and office properties.
Depending on how much you’d like to invest, you can choose to invest in a single property or multiple properties. Each investing opportunity has been heavily vetted by the CrowdStreet team. Additionally, information about the property—such as the projected performance—is included in the listing.
As mentioned before, there are many different types of REITs. Similarly, the properties included (such as multifamily properties or office buildings) vary by REIT, as do the projected annual return rates.
REITs are professionally managed by real estate companies. Once you make your investment, there’s nothing left to do but sit back and see how your investment performs. In this regard (a lack of input required by you), REITs are similar to crowdfunded real estate investing platforms.
Factor 3: Liquidity
Real estate investments are generally considered long-term investments. Generally speaking, to get the highest rate of return possible, you’ll have to hold on to your investments. While some investment options are liquid, many individual deals aren’t.
With an illiquid investment, you won’t be able to sell or trade your investment. You’ll need to hold throughout the entire investment period before you get your original investment back. However, you will likely benefit from dividend yields and other forms of passive income during this period.
REITs Are a Generally a Liquid Investment
- Publicly-traded REITs can be sold at any time
- CrowdStreet only offers illiquid investments
- Not all REITs will be liquid
As long as you can meet the minimum investments, you’ll be able to take advantage of the passive income investment offerings offered by CrowdStreet (and many similar real estate investment platforms).
Once your initial investment is made, it becomes an illiquid investment. The downside of this is that you won’t be able to access your entire investment until the project is over. However, CrowdStreet gives investors access to dividends and other passive income perks, which offer ample returns until your original investment term has ended (when capital appreciation comes into play).
Unlike with most real estate investing platforms, REITs don’t lock away your initial investment. As long as your choice of REIT is a publicly-traded one, you’ll be able to sell multiple shares of a single investment—or single shares of multiple investments—at any time.
These diversified funds are better for those who haven’t completely locked in their investment goals, as these types of investments can be sold at any time. However, the returns you’ll see from a REIT are generally lower than the returns from a dedicated platform like CrowdStreet.
CrowdStreet vs REIT: Accreditation is Key
Which option is better for you ultimately depends on your investor status and the amount of money you’re willing to invest. If you’re a non-accredited investor, REITs are your only option. However, accredited investors can choose between either.
Although $25,000 is a significant amount of change to invest, the lack of liquidity may pay off with superior returns. That said, each CrowdStreet offering is unique, so we strongly recommend doing your own research before making an investment.
If you’re ready to take your real estate investing to the next level, click here to browse CrowdStreet’s current offerings!