Online Commercial Real Estate (CRE) investing is hotter than ever, with new crowdfunding sites continually popping up giving the investor an array of options and making selecting a platform difficult. So, how do you choose the best crowdfunding marketplace? At CrowdStreet, we believe it comes down to the following 4 “must-haves.”
1 – Deal Flow
Volume
As a commercial real estate investor, you need access to deals. Thus, a high deal flow on an online CRE investment platform is critical.
Strong deal flow equates to a diversity of offerings for a balanced portfolio over time and helps you to achieve flexibility in risk vs. reward. Look for:
- A variety of asset types, including office, multi-family, and others
- A variety of deal types and risk options, from coreCore commercial real estate investments are the least risky offering. They are often fully leased to quality tenets, have stabilized returns and require little to no major renovations. These properties are often in highly desirable locations in major markets and have long term leases in place with high credit tenants. These buildings are well-kept and require little to no improvements... More to value-addedProperties are considered value-add when they have management or operational problems, require some physical improvements and/or suffer from capital constraints. By making physical improvements to the asset that will allow it to command higher rents – remodeling the kitchens in multi-family, installing more energy efficient heating systems in a medical office, etc. – improve the quality of tenants and increase... More to opportunisticOpportunistic real estate investments are the most high risk/high reward investment opportunities, requiring major development work. Opportunistic properties tend to need significant rehabilitation or are being built from the ground up. They have the chance to reach the highest rate of return for investors, but they little to no in-place cash flow at the time of acquisition and have the... More, ground-up developments
- Offerings across a range of geographic areas
- A range of options in hold periods
Bonus: Once you’ve evaluated your first few dozen offerings on a tier-one platform, you’ll learn to assess strengths and opportunities more effectively.
Quality
It’s not just about volume or breadth. A deal that’s golden on paper can spiral downward in the wrong hands.
Choose a platform with transparency into the SponsorIn 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 vetting process, and look for a partner that is rigorous in their vetting standards. Gain insight into their methodologies and track records and make sure you have the opportunity to ask questions.
2 – Full-spectrum Expertise
When identifying a platform for online CRE crowdfunding, consider both sides of the equation:
- The level of CRE expertise the management team brings to the table
- The technical expertise inside the company to bring the platform to life
On lower-tier platforms, you’ll often find the company’s background is heavier on one side than the other. Your resources are too valuable to squander on someone else’s learning curve. Go with a vendor that hits on all cylinders and has the expertise to give you confidence.
3 – User Experience
A platform should be intuitive, informative, and move you smoothly from evaluation to investment, then beyond. It should provide:
- Education about both the industry and specific assets
- Automation to invest with just a few clicks
- In-platform reporting, analysis, and access to project documents and details
- Firewall protection for transmission and storage of your sensitive data
If you click the “invest” button inside an online platform only to receive a call or email asking for more information, that platform has missed the mark. CrowdStreet, for example, provides online investor rooms, multi-deal portfolio management, and other features for a turnkey online investing process.
4 – Maturity
Does the platform you’re evaluating have tenure? While online CRE crowdfunding is still a young industry, look for companies that have been around the block and risen to the top.
Additionally, consider a company that’s received Venture Capital (VC) funding from experienced and well-known organizations.
Why? A company needs stable leadership and a winning business model to gain backing. It’s jumped through the hoops and answered the tough questions. VC firms also require vigilant oversight, reporting, and an upward growth curve.
Transparency Is Key
With a plethora of CRE crowdfunding sites out there, it is important that you do your research. At CrowdStreet, we are committed to transparency so you can make the most informed decision when it comes to your investments. You can email our investor relations team or call us at (888) 432-7693.
Need more insight? You may also be interested in these articles/videos:
10 Reasons to Invest with Real Estate Crowdfunding
Online Real Estate Marketplaces: Direct-to-Investor vs. SPV Platforms
How We Select and Designate Our SponsorsIn 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
