In 2020, the crowdfunding industry as a whole showed a ton of promise.
Real Estate Crowdfunding (REC), also known as real estate syndication, was no exception.
In this article, I’m going to take you through some of the key statistics pertaining to Real Estate Crowdfunding to give you some insights into the health of this emerging industry.
Let’s get into it!
What is Real Estate Crowdfunding?
Real Estate Crowdfunding allows individuals to pool their financial and intellectual resources to invest in properties that are larger than investors could individually afford or manage on their own.
This form of crowdfunding exploded following the 2012 JOBS Act, empowering individual investors to access a real estate market that was previously accessible only to ultra high net worth people.
Real Estate Crowdfunding makes real estate syndication possible for everyone.
A sponsor sources, develops, and manages a real estate property on behalf of a group of investors. The sponsor takes on the sweat equity, while investors provide the financial equity.
If you need some more conceptualizing as to how this process works, check out my book on the subject or this Youtube video for a more in-depth description of the ins-and-outs of Real Estate Crowdfunding.
Industry Statistics for Real Estate Crowdfunding in 2020
Now that we’ve worked to define Real Estate Crowdfunding and understand how it makes the real estate investing market more equitable, let’s get into some of the stats produced by the industry in 2020.
Here’s what we saw in 2020:
- 60,000 investors participated in real estate syndications.
- Average size of real estate offering was $2.3 million.
- Passive investors accounted for 80-95% of total initial capital investment, while sponsors contributed 5-20% of initial capital investment.
- Investors received a preferred return ranging from 5-10%, with an average preferred return of 8%.
- Sponsors netted an average acquisition fee of 1%, along with a property management fee between 2-9%
The global crowdfunding real estate market is on the rise.
The industry’s estimated market value reached $8.3 billion in 2020, with the United States and Canada serving as the leading players.
Residential properties are the primary source of real estate crowdfunding investments. These properties currently account for more than 50% of all crowdfunded real estate investments.
Experts predict, however, that the growing commercial sector is likely to play a larger role in years to come. This could mean lucrative future gains for investors ready to support this particular high risk, high reward play.
Statistics for Prominent Real Estate Crowdfunding Players
In this article, we’re going to focus on three of the major REC players:
- Realty Mogul
These three companies serve as the leading brokers between sponsors and investors in the Real Estate Crowdfunding Market.
Let’s dig in.
Fundrise requires a minimum investment of $500 from investors, and charges a 1% account fee per year.
Average annual returns for investors using Fundrise have consistently stayed above 8% over the past eight years, peaking in 2015 with an average 12.42% ROI—pretty impressive.
Fundrise also claims over 130,000 active investors and $4.9 billion in total asset transaction value. Of that total value, $79 million has been passed off to investors in the form of net dividends earned.
You can check out the 200+ properties available for investment in Fundrise’s catalogue here.
Clearly, this company has demonstrated consistent growth over the years, and doesn’t appear to be slowing down anytime soon.
Portland-based Crowdstreet specializes in connecting accredited investors with a broad range of debt and equity commercial real estate investments, with a particular focus on ‘secondary cities’ with lower valuations, higher net rental yields, and potentially higher growth.
The platform also offers three unique ways to invest:
- Funds & Vehicles
- Individual Deals
- Tailored Portfolios
CrowdStreet has a super high initial investment of $25,000, but does not charge account fees.
Since the company’s launch in 2014, it’s published almost 500 commercial real estatement investment offerings, 39 of which have been fully realized today.
With $1.46 billion in capital raised through the CrowdStreet marketplace and $170 million distributed to investors, business is certainly booming on the platform.
Realty Mogul charges a $5,000 minimum investment and assesses a 1-1.25% per year asset management fee.
The platform boasts access to private market offerings that have led 200,000 investors to join RealtyMogul, pumping in over $550 million in investments to date.
RealtyMogual has distributed in excess of $172 million to investors over the years.
The company also boasts the opportunity for long-term wealth appreciation, with annualized returns expected to reach 14.32% over 10 years.
Clearly, Real Estate Crowdfunding (REC) is here to stay.
Just looking at the numbers, you can tell that there is a ton of potential for this sector of the crowdfunding industry to go further.
REC allows for the average person to invest in real estate opportunities; not just the super rich. If you’re looking to diversify your financial portfolio, statistics show that Real Estate Crowdfunding is a pretty good bet going forward.
Three companies are leading the way:
Between these three companies, they’ve pumped over $421 million back into investors pockets. Not too shabby—and you could be getting a cut of the pie.
Looking to do some more research about the benefits of Real Estate Crowdfunding?
Check out my book, Real Estate Crowdfunding Explained, and subscribe to my Youtube Channel where I’m always chugging out tons of helpful content about all things crowdfunding.
I hope these statistics have been informative and helpful for you as you make financial decisions going forward.
Good luck with your future investments!
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