Peer to Peer Real Estate Investing for Accredited and Non-Accredited Investors
At some point in your life you’ve probably heard that real estate is a good investment. The problem is that the average individual is unlikely to have the capital required to purchase multiple properties on their own. But what if you could partner with dozens or hundreds of other investors to buy a portfolio of real estate projects and share the profits?
That’s the basic idea behind peer to peer real estate investing. Today there are several platforms that allow both accredited and non-accredited investors an easy way to put their money into real estate. Before we look at specific P2P platforms for real estate, let’s take a look at the benefits of peer to peer investing on the whole.
How Does Peer to Peer Real Estate Investing Work?
Peer to peer real estate investing or crowdfunding real estate allows individuals to put their money into a variety of properties without spending a fortune. Instead, investors can put their cash into a portfolio of properties and earn a portion of the profits generated. While various platforms may employ slightly different models, the underlying ideas are fairly similar.
Benefits of peer to peer real estate investing
There are several reasons why the concept of crowdfunding real estate investments has taken off in recent years. For one, in many cases, the minimum amounts you’ll need to put in upfront are far lower than they would be if you were a part of a private real estate group or buying properties yourself. Moreover the portfolios that many of these platforms offer provide you with diversification, which helps reduce risk. So while seasoned real estate investors may prefer a more hands-on experience, those looking for an introduction to the medium may prefer to start their journey here.
A real estate investment trust or “REIT” is not a new concept nor are they exclusive to online platforms. In fact there are several publically traded REITs investors may consider. However many peer to peer platforms do utilize their own versions of REITs, these can differ from the traditional versions in that they are not publically traded and remain proprietary to their respective sites.
Accredited investors vs. non-accredited investors
One major thing to consider when looking at peer to peer real estate investment platforms is whether or not they accept non-accredited investors. To become an accredited investor, you’ll need to either have an income of more than $200,000 for at least the past two years or have a net worth of more than $1 million, excluding the value of your primary residence. In other words, you must prove you have the means to invest large amounts.
While several real estate investor platforms are limited to accredited investors, there are a few that are open to smaller investors. Let’s take a look at platforms in both categories:
Real Estate Platforms Open to Non-Accredited Investors
Launched in 2012, Fundrise is among the most well-known crowdfunding real estate investment platforms. Perhaps that’s because the site allows both accredited and non-accredited investors to participate. In fact the company allows investors to get started with as little as $500.
Fundrise offers three main core plans based on your investment goals: Supplemental Income, Long-Term Growth, and Balanced Investing, with the lattermost being the most popular of the trio. Each of these plans balances dividends and appreciation to offer projected annual returns varying from 8.3% to 10.6%. Additionally their Starter Plan offers a 90 day satisfaction period and allows you to upgrade to a core plan once you’ve invested at least $1,000 on the platform.
As mentioned, Fundrise allows users to invest via what they call eREITs as well as eFunds. They explain, “eREITs and eFunds are the limited liability companies that hold the real estate projects in your Fundrise portfolio. When you invest, you are actually buying shares of these companies, allowing you to diversify into many properties efficiently and at a low cost.” Each Core Plan holds a different mix of eREITs. For example the Long-Term Growth (Fundrise’s second most-popular Core Plan) breaks down like this:
- East Coast eREIT: 10.00%
- Heartland eREIT: 10.00%
- West Coast eREIT: 10.00%
- Growth eREIT 2019: 50.00%
- Growth eREIT: 20.00%
Another popular platform is Realty Mogul. Like Fundrise, the platform utilizes its own REITs — called “MogulREITs” in this case — for non-accredited investors. Currently there are two MogulREITs open to investors: MogulREIT I and MogulREIT II. Each has a minimum investment of $5,000 (with the option to invest additional increments of $1,000) although their features vary. Most notably, the former offers monthly distributions while the latter’s are quarterly.
For each MogulREIT, investors can view a list of past and current properties that make up the portfolio. These properties span the United States and can include different types of real estate. The case of MogulREIT I, these property types include:
- Multi-family apartment buildings
- Office spaces
- Retail locations
- Mixed-use facilities
Notably Realty Mogul does also offer private placements via their platform. However this aspect of the site is only available to accredited investors.
Despite the presence of the word “rich” in the name, Rich Uncles may actually be the most accessible real estate investment platform on this list. That’s because the site has a minimum of just $5 to get started. As you may have guessed, this platform also utilizes REITs comprised of various properties.
Currently Rich Uncles has two REITs open to new investors: BRIX REIT and NNN REIT. However while the BRIX REIT is open to those in all 50 states, the NN REIT is only open to residents of CA, CO, CT, FL, GA, HI, ID, IL, IN, KY, LA, MT, MO, NH, NV, NY, SC, SD, TX, UT, VA, VT, WI, and WY. Rich Uncles not only lists the properties that make up each REIT but also details what about each investment they found attractive. The BRIX REIT currently contains five properties:
- A 24 Hour Fitness in Fort Worth, TX
- Villas on 26th student housing property in Austin, TX
- 212 East student housing property in Champaign, IL
- Stadium View Suites student housing property in Ames, IA
- Prado Student Living student housing property in San Antonio, TX
Platforms For Accredited Investors Only
Patch of Land
Of all the platforms on this list, Patch of Land perhaps best fits the “peer to peer” title — although they actually describe their service as Peer-to-Real-Estate or P2RE. Like marketplace lending platforms such as Lending Club, Patch of Land matches investors with borrowers funding specific projects. These projects are pre-vetted by Patch of Land before being listed for investments.
According to their site, investors must put at least $5,000 toward each loan they choose. They also note that loans have short terms of 30 days to 36 months, after which investors can withdraw their funds or find new projects to roll their money into. In terms of returns, Patch of Land says investors can earn “up to 12% in as little as 12 months.”
PeerStreet is somewhat similar to Patch of Land, allowing individuals the opportunity to invest in real estate-backed loans. However their minimum per loan is lower at just $1,000. Plus, as of earlier this year, users can automatically reinvest as little as $100 (down from $1,000).
One area where PeerStreet tries to stand out is in the quality of investments they list. On their site they note that their “team of finance and real estate experts underwrites each loan using advanced algorithms, big data analytics and manual processes” to ensure this. The majority of loans on PeerStreet have terms between six and 24 months. On their site, they note example returns of 6 % to 9% over 12 months.
Billing itself as “America’s Largest Fix-and-Flip Lender” on their website, you can probably guess where LendingHome’s focus is. The platform reports returns ranging from 5% to 10% and allows investors to put as little as $5,000 toward a single note if they’re investing manually or just $1,000 if they use LendingHome’s AutoInvest accounts. Like others in this class, the platform’s loans are backed by real estate and each investment is vetted by institutional investors.
Whether you want to explore the possibilities of real estate investing, diversify your portfolio, or just try something new, peer to peer real estate investment platforms may be a good option. Although some of these sites are limited to accredited investors, there are still ways that non-accredited investors can dip their toes into the world of real estate. Regardless of which you platform you ultimately choose, just be sure to do your due diligence, choose your investments carefully, and of course only invest money you can afford to lose.