RealCrowd Review - Commercial Real Estate Crowdfunding

Thinking of investing with RealCrowd? Read this first.

75

RealCrowd

3.8 / 5 stars

Summary

RealCrowd has excellent deal flow and diverse investments, including funds. Due diligence is thorough and transparent. While it lacks deals for non-accredited investors, it is a good choice for higher net worth investors.

3.8 / 5 stars

Highlights
    • Diverse Deal Flow
    • Excellent Investor Resources
    • Transparent Due Diligence

Due Diligence 10/ 15

Fees & Commissions 12/ 15

Investor Access 3/ 10

Deal Transparency 10/ 10

Investor resources 10/ 10

Fund diversification 7/ 10

Bankruptcy / Financial Protections 6/ 8

Additional Considerations (X-factors) 3/ 5

Deal Flow 7/ 7

Fully Realized Offerings 3/ 5

Platform Financials 4/ 5

Total 75 / 100

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Summary

RealCrowd is one of the most popular real estate crowdfunding platforms out there. And for good reason: It regularly has a dozen or more real estate deals accepting investments.

While it’s only open to accredited investors, RealCrowd regularly has offerings with $25,000 minimum investments. That's half the minimum of many other platforms.

RealCrowd’s fee structure is also attractive. In short, it doesn’t charge fees to investors directly, instead charging sponsors to feature deals on its platform and to facilitate investments between investors and sponsors. The platform generally stays out of the way beyond that.

RealCrowd is best for accredited investors who are willing and able to do their own due diligence. The company still does extensive background work on sponsors and each deal but doesn’t invest in any of them. It also disallows employees from participating.

Moreover, you might argue that the way RealCrowd makes money is a conflict of interest. The platform earns a fee for putting deals on its marketplace and a fee for each investment people make. At the very least, it creates some tension between deal volume and turning sponsors away.

What is RealCrowd?

RealCrowd is a real estate crowdfunding platform that primarily acts as a marketplace to connect commercial real estate developers and potential investors. While most of its peers also act as asset managers, fund managers, and often investors, RealCrowd doesn’t do any of those things.

The advantages for investors are twofold. The first is platform fees -- RealCrowd charges nothing to investors.

Second, RealCrowd plays a limited role in the interactions between investors and sponsors once you’ve made an investment. If the platform were to fail, it would have minimal impact on you as an investor, especially compared to other platforms that play a bigger role in asset or project management.

How does investing on RealCrowd work?

RealCrowd has a simple investing process. Investors create an account, confirm they meet necessary requirements as an accredited investor, and start reviewing available deals.

This is where RealCrowd’s platform shines. It has one of the best deal page structures we've seen -- it's easy to find key information about each deal under clearly labeled tabs. All platforms offer some degree of this ease of use, but RealCrowd’s deal pages are the most in-depth while still being easy to navigate. Moreover, this real estate crowdfunding platform makes it easy to connect with sponsors for additional information.

RealCrowd conducts in-depth background checks on deal sponsors. That includes verifying that principals have appropriate operating experience for deals they plan to promote on the platform. However, the company pointed out to Millionacres that it doesn’t try to be "...an expert in every product class [around] the country," so its deal-level vetting process may not be as stringent as others.

Moreover, its monetization model incentivizes RealCrowd to feature and fund as many deals as possible without exposure to the deals themselves. Most of its competitors tie compensation to returns, incentivizing them to more thoroughly vet each real estate project.

What are RealCrowd’s fees?

RealCrowd doesn’t handle any of the asset management aspects of the real estate projects featured on its platform. It doesn’t provide the diversified funds it manages, either. That means RealCrowd doesn’t charge fees directly to investors.

Instead, the platform charges sponsors a listing fee to feature approved deals on its platform. Sponsors also pay a "per-investor processing fee" (ranging from $525–$3,500, depending on the minimum investment amount) when deals are funded.

That doesn’t mean investing on RealCrowd is entirely without fees. Real estate development and management cost money, and investors pay sponsors numerous fees to develop, construct, run, and sell a property. RealCrowd makes it easy to identify these fees under the "Fees" tab on the "Financials" section of each deal page. Relevant legal documents can also be downloaded from the deal page.

Who can invest on RealCrowd?

At present, RealCrowd is only open to accredited investors. However, it regularly features deals with a minimum investment of $25,000. It has had a limited number of deals with a $10,000 minimum in the past, too. This is a lower threshold than other platforms with similar deals, which can require minimum investments of $50,000 or more.

If you’re an accredited investor who’s working with less capital or prefers to make smaller investments, Realcrowd might be right for you.

How can you use RealCrowd?

In addition to its marketplace and deal pages, RealCrowd’s investor dashboard is an important resource. It's where you’ll find the latest information about each deal you invest in, including updates from the sponsor, performance metrics, tax documents, and other relevant information and communications.

RealCrowd also features an extensive collection of resources for investors, with educational materials that include

  • a simple course on real estate investing,
  • a podcast with more than 60 episodes at the time of this writing, and
  • a dedicated customer service team that’s available by phone and email.

RealCrowd also says they support self-directed IRA and solo 401(k) accounts, but that’s not a guarantee that you'll be able to use those funds. Each sponsor decides whether or not they'll accept capital from those sources on a per-deal basis.

Lastly, this real estate crowdfunding platform is primarily a marketplace for individual deals. It doesn't offer diversified funds, though some of the sponsors RealCrowd works with list funds on its marketplace. The diversification of these funds varies greatly, putting the onus on you to determine if it’s a suitable mix based on your objectives.

What makes RealCrowd unique?

Most of RealCrowd’s peers play some role in the management of the projects and charge investors fees -- typically on each investment they make, plus annual management fees. RealCrowd touts that it doesn’t charge investors any fees directly.

However, this means investors need to understand the fees that sponsors will charge in each deal they invest in. Just because RealCrowd doesn’t charge fees doesn’t mean there aren’t any.

RealCrowd’s deal page is also a standout part of what it offers, making it really easy to identify the fee structure of each deal.

How safe is RealCrowd?

Once you’ve picked a well-funded real estate project with a top-notch sponsor, the last thing you want is to have your investment tied up in a bankruptcy if the platform were to fail. In the case of RealCrowd, that’s not something you need to worry about. You invest directly with the sponsor while RealCrowd facilitates the funding.

Since Realcrowd doesn’t play any role in managing the project or selling the property, its failure wouldn’t have a major impact on the management of a deal, distributions to investors, or other aspects of running or completing a deal.

With that said, RealCrowd has quite a strong financial profile. While it's privately held and only provided us with limited information, the company’s balance sheet is extremely strong and its business generates strong cash flows to help it stay that way.

Lastly, the deals RealCrowd has featured on its platform, so far, have performed well. It doesn’t publicly release individual deal performance, but we have independently verified that the platform's fully realized deals have generated acceptable rates of return, and more often than not have exceeded their target IRR.

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