Investing directly in real estate traditionally required an investor to have a large amount of capital available. Real estate investment trusts (REITs) helped to open up real estate to more investors by combining resources via a pooled fund. More recently, crowdfunding has emerged as another way for everyday investors to add real estate to their portfolios. We’ll walk you through how to compare your options, cover your alternatives, and answer your most pressing questions. With an understanding of how to open a real estate crowdfunding account, you can choose the right investments that meet your goals and start investing. 


What You Need to Open a Real Estate Crowdfunding Account

Similar to opening any online investing account, obtaining a real estate crowdfunding account requires that you first provide a combination of personal and financial information.

Personal Information

Some platforms allow you to create an account with just an email address and password, but an actual investing account will usually require your basic personal information: 

  • Email
  • Legal name
  • Physical address
  • Phone number
  • Birth date

Financial Information

Most platforms will ask you outright whether you are an accredited investor or not, but even the platforms open to non-accredited investors will require the following information: 

  • Social Security number (or a tax identification number if using a company structure)
  • Your income and net worth for a know your client (KYC) survey

Accredited investors may have to verify their claim with one or more of the following:

  • Investment account statements 
  • Tax returns
  • Third-party confirmation from a financial professional like an accountant
  • Proof of financial license
  • A signed affidavit  

How to Open a Real Estate Crowdfunding Account

Opening a real estate crowdfunding account is relatively straightforward. That said, it is important to take a few steps back in the process before signing up with the first platform that pops up in your search.

Understand the Real Estate Crowdfunding Market

Real estate can be a great alternative asset for investors, but it is important to know your financial situation and risk tolerance before jumping in. Accreditation is a key difference in the real estate crowdfunding market. Accredited investors will see a wider range of direct investment opportunities in real estate. Non-accredited investors may be limited in the types of deals they can access or the type of investments (REITs and funds only, for example). 

If you have earned more than $200,000 per year in the last two years ($300,000 for couples) or have a net worth of $1 million not including your primary residence, Evaluating your risk tolerance is a trickier task. Many real estate crowdfunding sites trumpet high “targeted” returns in the double digits, but the flipside of that is that equity investments can also fail. In addition, even debt investments can end up going insolvent, placing the investor's initial investment at risk along with any owed proceeds. While direct real estate investments do provide diversification from the stock market, they come with many of the same sensitivities that affect the general economy. As with any higher-risk investment, real estate crowdfunding is best done with risk capital rather than making up a majority of your financial portfolio. 

Research the Different Platforms

Thorough research of a potential crowdfunding platform is a must, as this is still a relatively new industry where many companies have witnessed very few, if any, recessionary cycles. Some platforms are only open to accredited investors or have high minimum investment requirements that put them practically out of reach for non-accredited investors. Some platforms also charge fees to either the sponsor or the investors, so it is important to be aware of how the company you’re considering makes money. Beyond whether you can afford to invest on the platform or not, the process a platform goes through prior to listing an investment is key. You will want to know how the platform conducts due diligence, what it is analyzing, and how it structures the deals to protect investors. 

Create an Account

The account setup varies by platform. Some just require an email and a password to get into the platform and view investments, allowing you to finish setting up and funding an account when something catches your eye. Other platforms take you through a longer onboarding process that may include confirming accreditation status and linking a bank account prior to getting inside.

Fund the Account

While procedures can vary across platforms, most will accept transfers from a linked bank account, similar to traditional brokerage accounts. However, in some cases, large amounts of money may have to be moved via a different process such as a wire transfer directly to the sponsor or a corporate entity like an LLC.  

Start Investing

While you can start investing as soon as you have a funded account, it is important to do some of your own research on top of the due diligence done by the platform. If you don’t understand the key metrics in the research, like loan-to-value ratio or free cash flow, then start there before you invest. Cross-check the research provided on the platform with other sources, and even consider calling real estate professionals in that area for a second opinion. 

Choosing a Real Estate Crowdfunding Platform

Real estate crowdfunding platforms facilitate investments in private real estate deals. This is important to remember as the terms "fund," "shares," or "REIT" mirror the publicly traded assets. Still, these are in fact illiquid private investments where any resale market may be limited to the platform listing them.1 That is why it is critical to choose a platform that is putting in the work to qualify good investments and filter out bad ones. 

  • Eligibility requirements: Many platforms are still exclusively for accredited investors and most that allow non-accredited investors limit the investments to funds and REITs. Residency status can also matter, as many real estate crowdfunding platforms are only open to U.S. residents and U.S.-based entities.
  • Minimum investments: Minimum investment levels range wildly from platform to platform. The range goes from $10 all the way to $200,000, so you’ll need to see if you have the capital on hand to even access a given platform. There may also be restrictions in the form of investment caps preventing more than a given percentage of net worth on the platform. 
  • Fees and penalties: Fees for real estate crowdfunding can be a bit confusing. Some platforms put all the fees on the sponsors, while others charge platform fees and/or management fees on their fund investments. Check any fees as well as the lock-up period rules for any set penalties around early redemptions or exits. 
  • Transparency: You’ll want to see a clear explanation of how a platform vets sponsor deals and what steps it takes to support investors in the event of a default. Does the platform clearly explain how deals are structured? Is there a set process for unexpected events like additional capital calls on a project? If you can’t easily find this information, it is likely a bad sign.
  • Investment selection: The investment selection will interest accredited investors more than non-accredited ones. In many cases, non-accredited investors are limited to the private REITs or funds offered through the platform. For accredited investors, a wide selection of commercial real estate and multi-family units is a base-level offering. Some platforms spread the net more widely to include industrial real estate, marine investments, storage, and so on.