Founded in 2013, Portland-based CrowdStreet was an early entrant in the real estate investment crowdfunding ecosystem, launching their first deal in 2014. CrowdStreet functions primarily as a marketplace, where commercial real estate sponsors can post their projects for prospective investors.
Types of investments CrowdStreet offers
CrowdStreet offers a wide range of commercial real estate investments across the capital stack, from debt through preferred equity up to standard equity deals. As of this writing, the majority of active offerings are Equity offerings. CrowdStreet’s offerings also span multiple commercial real estate sectors, including multifamily, industrial, hospitality, and self-storage.
In addition to indvidual offerings posted on the CrowdStreet Marketplace, CrowdStreet also offers a variety of invesmtent funds that span multiple properties over time, and for investors with at least $250K to invest, CrowdStreet will also assemble a tailored portfolio assembled from the various funds and offerings in their marketplace.
CrowdStreet is only open to accredited investors, and the the minimum investment is typically at least $25,000.
What do you get when investing with CrowdStreet?
When you invest through CrowdStreet, as with many real estate crowdfunding investment platforms, what you actually receive is a membership interest in what’s known as a special purpse entity, typically an LLC created specifically for the investment. The LLC in turn is what actually holds the equity, preferred equity, or debt interest in the property. For each investment you make with CrowdStreet Capital, you’ll receive a separate K1 at tax time to report your share of the income received by the LLC.
How does CrowdStreet make money?
Investment sponsors (ie, Real Estate developers) pay CrowdStreet a posting fee to promote offers on their site, as well as an annual fee for continued use of the platform, document collection, reporting, etc. There are no fees charged directly to investors by CrowdStreet, but investors should note that each offering on CrowdStreet has various fees specific to that offering.
Potential returns and cashflow
Returns on CrowdStreet vary by investment type, but as of this writing, the available offerings show target IRRs in the 15-10% range. Those IRRs typically include projected appreciation from the eventual sale of the property, so annual cash yields (payments from rent received from the properties) are typically lower, in the 6-10% range.
Cashflow details also vary by investment, but most of the projects listed on CrowdStreet pay annual distributions to investors.
Breadth of offerings on CrowdStreet
As of this writing, there are 12 active offerings in the CrowdStreet marketplace – 6 of which are individual deals for specific properties, and the other 6 are funds. One fantastic feature CrowdStreet offers that we’d love to see other platforms adopt is the ability to download an Excel spreadsheet with key details from both current and prior offerings.
CrowdStreet has listed more than 450 projects since 2015.
Regulatory framework and due diligence expectations
As for deal review and due diligence, CrowdStreet publishes a detailed look at their deal review process. It includes information about how they classify the sponsors (for example “Emerging” vs. “Seasoned”), as well as how they analyze the project itself.