I was excited about it. I wrote about these platforms all the time on our blog. Fundrise, Arrived, Streetwise, Groundfloor, Concreit… I wanted first-hand experience so I could share what really worked.
Seven years later, I have largely distanced myself from crowdfunding platforms. Not because the concept is bad, but because the results are disappointing. Let me tell you what happened.
The appeal of these platforms is obvious. Low minimums (sometimes as low as $10 or $100), no accreditation requirements, easy sign-up, and real estate exposure without becoming a landlord. For people who want to delve into real estate investing, crowdfunding seems to be the perfect stepping stone.
And for a while things went pretty well. The returns were reasonable. The platforms grew. I have recommended some of them to the readers.
Then 2022 happened. Interest rates rose, the real estate market changed, and many of these platforms started to show cracks.
1. Fundraising: 3.4% annualized return
Fundrise was probably the most popular real estate crowdfunding platform for years. Smooth marketing, simple interface, low minimums. I have invested in several of their funds starting around 2018.
My annualized return was 3.4%.
That’s not a typo. During approximately seven years of investing with Fundrise, my net annualized return was 3.4%. That’s hardly better than a savings account. It is significantly underperforming the stock market. And it dramatically underperforms the passive real estate investments I’ve made through other channels.
Fundrise was heavily invested in assets that came under pressure as interest rates rose. They ended up with distressed properties that they had to sell at a loss. Through the Co-Investing Club, we actually invested in deals where the operator bought distressed assets from Fundrise because they needed to offload them.
If the platform that’s supposed to manage your money sells assets to operators I invest with separately… that’s not a good sign.
2. Home arrivals: 3.8% across 17 properties
Arrivald lets you buy fractional shares of single-family homes for as little as $100. The idea is that you get exposure to rental income and appreciation without buying an entire home.
I have invested in 17 properties on their platform. That’s not a small sample size. My annual return on all these projects? 3.8%. And 99.5% of that came from rental cash flow, not appreciation.
The core problem with Arrivald is their business model. They buy new or almost new homes that photograph well for their website. Polished marketing, beautiful listings. But that’s not how you earn money with rental property.
I have been a landlord myself. The way you actually generate strong returns is by buying distressed off-market properties, fixing them up and renting them out at full market value. You create equity through the renovation, not by paying retail for a nice house.
Arrived is optimized for marketing, not returns. The properties look great on the website, but they are not being purchased at prices that allow for meaningful investor returns.
3. Streetwise: down 31%
This one hurts. Streetwise concentrated on office buildings and my portfolio fell by 31%. Do not underperform. Actually, I lost almost a third of my investment.
Office real estate has been brutal since the pandemic. Remote working has eroded demand in many markets. Streetwise was caught with assets that were declining in value.
Fundrise and Arrivald at least delivered positive (albeit disappointing) returns. Streetwise immediately lost me money.
Not every crowdfunding platform has disappointed. A few have achieved reasonable results.
1. Ground floor was my favorite of the bunch. They provide short-term hard money loans to house flippers and BRRRR investors, secured by the properties. You can invest from €10. My return averages between 8 and 10%, which is comparable to the long-term return on the stock market.
The downside is that some of these loans take much longer than expected. They should be loans with a term of six months. Some in my portfolio have been open for years because the borrower did not complete the project on time. Groundfloor will eventually foreclose, but your money could be locked up indefinitely. That’s frustrating.
2. Concrete has also remained stable. They pay a return that fluctuates between 5.5% and 7% (currently around 6.65%). It is a large diversified pool of notes and some stock investments. The nice thing about Concreit is its liquidity. After a two-month lock-up, you can withdraw your money and usually get it back within a week. They charge early withdrawal fees (2% in the first year, 1% in the second year, nothing after that), but that flexibility is worth something.
Neither will make you rich. But they’ve been consistent, which is more than I can say for Fundrise, Arrivald, or Streetwise.
#stopped #real #estate #crowdfunding #platforms