Best Real Estate Crowdfunding Investment Platforms

Real estate crowdfunding involves pooling investors' money to fund a real estate project or investment. Often this is done by investing in a private REIT, but some of these platforms also give investors access to private real estate development projects.

While buy-in can be relatively low and the risks are in some cases similar to investing in individual stocks, it's important to note that real estate crowdfunding platforms are new to the investment sphere. How these nascent companies hold up during and after severe market downturns is yet to be seen. Keep in mind that no investment is without risk, and investments that aim for higher returns often carry more risk.

Many of the real estate investments offered in these crowdfunding platforms can be illiquid, or take longer to convert into cash, and are likely better suited to investors who can afford to be patient. If you're looking for an investment that you can sell out of in a pinch to generate cash, traditional investment accounts invested in mutual funds, ETFs, stocks and bonds may be a better fit for you.

Through some online real estate investment platforms, investors can start for as little as $10, though higher minimums are much more common. Some platforms also require investors be accredited, which sets income or net worth minimums.

Accredited investors are allowed to participate in investments not registered with the U.S. Securities and Exchange Commission. The designation is meant to ensure only those investors with the appropriate experience, funds and understanding of risk can take part in certain investments. Accredited investors must have income of more than $200,000 in each of the last two years (or $300,000 together with a spouse), or have a net worth of more than $1 million, excluding a primary residence.

You may also be an accredited investor if you're considered a "knowledgeable employee" of a private fund or a financial professional who holds certain licenses.

Some of the biggest advantages of REITs include consistently high dividends (making them a popular choice among investors looking for fixed income), historically high returns and often less volatility than other asset classes. However, publicly traded REITs that can be purchased through a traditional brokerage account are generally considered safer than private REITs offered by real estate crowdfunding platforms.

Public REITs are traded on an exchange just like stocks and exchange-traded funds, and are available through most brokerage accounts. Private REITs aren’t listed on public exchanges, nor are they typically registered with the SEC.

With fewer disclosure requirements, it can be very difficult to evaluate the performance of private REITs. Public non-traded REITs — a third category — are registered with the SEC, but aren’t available on an exchange. Learn more about the risks associated with private and public non-traded REITs.