Cap rates, The Internal Rate of Return (IRR) is the rate at which each invested dollar is projected to grow for each period it is invested. It differs from other metrics in that it accounts for the concept of the “time value of money”, or the fact that a dollar received and reinvested elsewhere today is worth more than a dollar expected... More, Leverage is the use of various financial instruments or borrowed capital to purchase and/or increase the potential return of investment. Assume a buyer puts 20% down on a $5M property. Essentially, they paid $1M to own something worth $5M. Assuming the property appreciates at 5% per year, the sponsor’s net worth would grow to $5,250,000 in a year. Had they... More ratios, and more—commercial real estate (CRE) investing comes with a substantial learning curve. Not to mention the time required to research individual properties and decide how best to diversify your holdings. This is why we’ve made it easier to invest in institutional-quality commercial properties.
This week, we’re proud to announce another innovation in CRE: the CrowdStreet Blended Portfolio. Getting started with CRE just got a whole lot easier because now you can invest in dozens of institutional-quality commercial properties in a single transaction.
With the introduction of online investing technology platforms like CrowdStreet, investors all over the country are now able to participate in this exciting asset class that comes with historically high returns. As real estate represents the third largest asset class in the U.S., after equities and bonds, and commercial real estate can be a passive investment vehicle, it’s long been a go-to choice for investors looking to round out their investment portfolios.
One-Stop Portfolio Investing
Our Blended Portfolio is a fast and easy way to get started with CRE investing. A single investment is all it takes to diversify your portfolio with 30 – 50 institutional-quality commercial properties from our CrowdStreet marketplace. With a minimum investment of just $25,000, you can now build wealth with a selection of properties that represent a wide range of asset types and U.S. markets that have been pre-screened by CrowdStreet’s in-house investment experts.
With our new Blended Portfolio offering, we have created a proprietary investing algorithm that makes investment selections from assets on the CrowdStreet marketplace. Our goal is to be as inclusive of our marketplace offerings as possible without over-concentrating the portfolio in a given asset type, risk profile, geography, or In commercial real estate, the sponsor is an individual or company in charge of finding, acquiring and managing the real estate property on behalf of the partnership. The sponsor is usually expected to invest anywhere from 5-20% of the total required equity capital. They are then responsible for raising the remaining funds and acquiring and managing the investment property’s day-to-day... More. With our rules-based approach backed by our expert screening process, you can feel comfortable that investing in our Blended Portfolio provides a low risk, low fee option to diversifying your portfolio with commercial real estate.
Our expert CRE investment team created the Blended Portfolio to leverage the middle-market strategy of the CrowdStreet marketplace. The CrowdStreet marketplace focuses on institutional-quality assets that are valued between $15 million and $50 million and have less competition from the largest institutional and offshore investors. These assets are typically located in up and coming locations and secondary markets that are well above national averages in terms of job and population growth. A combination of these factors often contribute to attractive risk-adjusted returns. Because the Blended Portfolio is built entirely from investment opportunities offered on the CrowdStreet marketplace, the strategic middle market focus of our marketplace transfers to the Blended Portfolio.
CrowdStreet Blended Portfolio by the Numbers:
|Targeted Investor IRR||16 – 18%|
|Targeted In commercial real estate, the equity multiple is defined as the total cash distributions received from an investment, divided by the total equity invested. Essentially, it’s how much money an investor could make on their initial investment. An equity multiple less than 1.0x means you are getting back less cash than you invested. An equity multiple greater than 1.0x means... More||2.5x|
|Targeted Average Cash-on-cash return calculates the cash income earned on the cash invested in a property. It’s sometimes also referred to as the cash yield. Cash-on-cash measures the return on the actual cash invested, whereas standard ROI take into account the total return on investment.... More||4 – 6%|
|Targeted Investment Period||5 – 10 Years|
|Portfolio Composition||30 – 50 CrowdStreet Marketplace offerings totaling $1 billion in Project Value|
|Legal Structure||Reg D 506(c)|
Comparing Costs and Fees
With an annual management fee of just one percent, CrowdStreet’s Blended Portfolio provides an investment with less volatility and lower fees compared to other options in commercial property. For example, traditional non-traded real estate investment trusts (REITs) offer access to similar properties but typically charge upfront for costs and commissions. These fees can be as high as 9 – 10 percent of the investment.
A Diversified Investment Approach
Financial headlines reveal another advantage to the new Blended Portfolio when compared to stocks and similar securities. The prices of publicly traded assets fluctuate day-to-day, influenced by the broader financial markets. The volatility in the stock market was witnessed just last week when the market dropped 831 points on October 10th, driving home that equity markets can be risky and beholden to many factors.
Investments in individual properties are subject to Valuation is the process of determining the current worth of an asset or a company.... More shifts based on occupancy rates, local economies and other factors mostly unrelated to stock market fluctuations. This distance, or non-correlation, from Wall Street’s volatility is one reason CRE has a place in so many successful investor portfolios.
To date, CrowdStreet has funded over 250 offerings spread across 100 metro areas in 40 states and 15 asset types raising almost $400MM. This diversity of investment options provides even more ways to manage risk, and our Blended Portfolio takes diversification a step further by curating a broad selection of these properties on our investors’ behalf.
Step Into a Thriving Market
We started CrowdStreet because successful investors lacked an efficient avenue to invest in an industry offering superior returns. Historically, we know that commercial property has outperformed both stocks and bonds over the long term.
The outlook for CRE remains strong, as evidenced by robust growth this year. According to Deloitte, CRE transaction volume in the U.S. grew 11 percent year-over-year to $122 billion in the first half of 2018. In a survey of 500 global investors, 97 percent planned to increase investment in CRE over the next 18 months. In the U.S., respondents planned to boost their capital commitments by 13 percent in that time.
With our new Blended Portfolio, investors can now build wealth by tapping into this thriving market with a pre-screened group of high-potential properties.
If you’d like to learn more, please don’t hesitate to reach out, or visit our Blended Portfolio offering page. We’re here to talk with you about the best ways to start investing in commercial property with this one-stop option.