Passive Income Resource Guide
Real Estate Crowdfunding
165 articles9 sections
Getting started and platforms
- What Is Real Estate Crowdfunding?Start here Real estate crowdfunding pools money from many investors online to buy property or fund property loans. You own a security, and most offerings tie up cash for years.
- Accredited vs Non-Accredited Real Estate Crowdfunding Options Accredited investors earn over $200,000 ($300,000 joint) or have over $1 million net worth excluding home. Others can buy Reg A and Reg CF offerings, within caps.
- Fundrise Review: Is It Worth It for Real Estate Investors? Fundrise suits non-accredited investors who want pooled private real estate from $10 and can wait to sell. Its interval funds cost about 1.9% to 2.3% a year.
- Top Real Estate Crowdfunding Platforms Compared Fundrise, Arrived, and Groundfloor take anyone from $10 to $100. Crowd Street and EquityMultiple are accredited-only from $5,000. Fees and exit terms compared.
Returns, fees, and taxes
- Can You Do a 1031 Exchange with Crowdfunding Investments? Usually not. LLC, LP, REIT, and fund interests are not real property under Section 1031. Only Delaware statutory trust and tenancy-in-common interests can qualify.
- Real Estate Crowdfunding Returns: What to Realistically Expect Fundrise's Income Real Estate Fund returned about 8% a year and its equity-focused fund about 4%, with equity swinging -12% to +29% in single years.
- Real Estate Crowdfunding Platform Fees Explained Expect a platform fee, such as Fundrise's 0.15% plus 0.85% a year, plus deal fees. RealtyMogul's allow up to 3% at purchase, 2% at sale, and a profit share.
- Tax Implications of Real Estate Crowdfunding Investments Equity deals send a Schedule K-1 that can come as late as September, REITs send Form 1099-DIV, and loans Form 1099-INT. K-1 losses are passive, and IRAs can owe UBTI.
Risk, liquidity, and allocation
- Diversifying Across Real Estate Crowdfunding Deals Cap illiquid crowdfunding near 10% of liquid net worth, keep any one deal near 10% of that, and spread by sponsor and year. Splits for $5,000 to $250,000.
- Real Estate Crowdfunding Hold Periods and Liquidity Expect 6 to 18 months for short-term loans, 5 to 7 years or more for property equity, and no end date for funds that cap quarterly redemptions.
- Real Estate Crowdfunding Risks and Downsides Crowdfunding investors lose money through sponsor fraud, platform failure, floating-rate debt, capital calls, redemption limits, and thin reporting.
Deals and due diligence
- Due Diligence on Real Estate Crowdfunding Deals A four-step check for one crowdfunding deal: the sponsor's realized results, its record on BrokerCheck, SEC, and EDGAR, a stress test of the pro forma, and the PPM.
- Real Estate Syndication Through Crowdfunding Platforms A syndication is an LLC that owns one property: you put in cash, the sponsor runs it and takes a promote after your preferred return. What a platform changes.
- Equity vs Debt Real Estate Crowdfunding Investments Debt investors lend at a stated rate and are repaid first; equity investors own the property, are paid last, and keep the upside. Capital stack, example, and taxes.
Crowdfunding vs other options
- Real Estate Crowdfunding vs Owning Physical Property A $230,000 rental takes about $74,000 and landlord work but gives you control, depreciation, and 1031 exchanges. Crowdfunding gives you less control.
- Real Estate Crowdfunding vs REITs: Which Is Better? Listed REITs can be sold any trading day, and an index fund costs 0.13% a year. Crowdfunding locks money up, costs more, and often requires accredited status.
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