Crowdsourced Investing Platforms for Building Wealth In 2020
New and innovative methods of investing in real estate are quickly emerging in 2020, providing a variety of opportunities for individuals to begin building wealth based on the real estate asset class — all without having to buy a property.
Prior to the introduction of tech-enabled property investing, the nature of real estate was more exclusive with high minimums and a strict criteria to qualify as an accredited investor — setting limits on who could become a real estate investor.
However, this is rapidly changing in 2020. Many financial technology companies are now offering individuals the opportunities to become a real estate investor with low minimums and that provide access without the scrutiny that investors were subjected to in the past.
These companies host investing platforms with various options for how an individual can place a stake as well as how they can earn returns.
In the past, investors had very limited options in terms of how they could invest in real property. Residential real estate was almost exclusively available through property ownership while commercial real estate involved buying into real estate investment trusts also known as “REITs” that pay investors dividends on a quarterly basis similar to the stock market.
While REITs hold the appeal of paying an average of 90% of earned income to investors, the minimum investment ranges from $1,000 to $2,500 which can potentially cause sticker shock to a newbie investor.
Investing in Real Estate with Tellus and CrowdStreet
The Tellus superapp and Crowdstreet are investment platforms that offer alternatives to how people can invest in residential property as well as commercial projects but with very different approaches, featuring both short term or long term commitments.
However, both platforms offer shares of fractionalized assets with Tellus offering a minimum buy-in at $200 and Crowdstreet setting the bar at $500. Of course, investors can choose to commit larger sums to any particular opportunity and collect larger returns.
Residential Real Estate Investing with Tellus
The Tellus residential real estate investing platform provides both home equity loans as well as investment opportunities. Homeowners can easily apply for loans with applications that are entirely digital and lack the intense scrutiny that are typically imposed by banks.
Once a loan application is approved, Tellus sets the interest rate based on the loan-to-value ratio of the existing mortgage. Investors then fund the equity loan by placing their stake with a rate of returns based on the established interest rate.
Tellus rates of returns range from 3% to 12% annually. In addition, Tellus pays out returns to investors daily and shares can be sold at any time without restriction or penalty.
Commercial Real Estate Investing with CrowdStreet
Crowdstreet offers a different type of investment within the commercial real estate market. Similar to a real estate investment trust REIT, Crowdstreet allows a potential real estate investor to select a specific project to finance.
Investors can start with as little as $500 to finance a “fix-and-flip,” most commonly associated with single family homes or with as much as $100,000 to fund a major project.
Depending on the types of property that an individual selects, Crowdstreet provides access to commercial, residential or “bended portfolios” which are diversified funds that consist of several investment properties.
Hold Periods: Long Term and Short Term
The duration of investments made with Tellus range between one and five years on average. However, Tellus investments are completely liquid and investors are permitted to cash out at any time.
The lifespan of Crowdstreet investments range between six months to ten years and are not liquid. An investor’s funds are locked up until the project is completed.
What Type of Investment Portfolios Do They Offer?
With Tellus, a real estate investor is limited in building an extensive investment only by the amount of funds they are willing to commit. With a minimum investment requirement of $200, it’s fairly simple for an investor to quickly build up an investment portfolio consisting of numerous properties.
It’s not impossible to build up an extensive investment portfolio with Crowdstreet. However, most investment opportunities require a financial commitment that can become very costly.
For investors who would like to take a very hands-off approach can opt in to the portfolio vehicle offered through Crowdstreet. This option has a minimum investment of $25,000.
What Risks are Involved with The Real Estate Asset Class?
Investing in real estate always comes with some level of risk. Tellus provides every real estate investor with the collateral of a portion of the property equal to the amount they’ve staked.
Tellus investors have the option to have their name placed on the title of the home that further ensures that their investment is covered in the case of borrower default.
Crowdstreet, on the other hand, doesn’t directly manage the real estate projects listed on the platform. Because of this, Crowdstreet relies exclusively on their in-house management team to perform due diligence on all types of property investment opportunities.
However, due diligence alone doesn’t provide any guarantees. In the case that Crowdstreet goes out of business, the property investment would remain secure while leaving the investor in the dark until completion.
What Fees are Charged When Investing in Real Estate?
Fees charged by Tellus are very straight forward. An investor can choose to opt into a 1% principal protection fee that guarantees the return of the principal.
Fees charged by CrowdStreet vary depending on the type of investment option that’s been selected. Investors who have selected to invest in a blended portfolio are charged 0.25% quarterly to manage the portfolio.
Crowdstreet also offers property investment options in what are referred to as an “opportunity zone,” and comes with a 1.5% annual fee. Opportunity zones geographic locations that have been identified by the U.S. Census Bureau as being low-income with a high rate of poverty.
Final Thoughts on Tellus and CrowdStreet Property Investments
If you’re ready to invest in real estate, there’s no shortage of options and platforms to choose from. Whether you’re aim is to invest in residential or commercial real estate there are investment companies that provide users access to both asset classes.
Tellus provides users with one of the most efficient avenues to invest in residential properties with a minimum of $200 with attractive rates of returns that are secured by the collateral of real property.
The Tellus platform also creates the opportunity for a real estate investor to quickly build up an extensive portfolio and allows investors to sell at any time. Tellus allows people to invest in prime real estate without the need of buying a property.
CrowdStreet specializes in commercial real estate investing with higher minimums and returns that are proportionate to the amount invested. The downside to CrowdStreet is that the lockup period is typical with real estate investing in that CrowdStreet investments are illiquid and take up to ten years to complete.
