Global trade wars, economic sanctions, and general geopolitical uncertainty can make stock market investors feel like they are on an out-of-control carnival ride. A big win can be wiped out by a major loss, sometimes in just a matter of hours.
Real estate investments, on the other hand, can be less volatile than the stock market. Instead of bearing the daily (or hourly, or even minute-by-minute) waves of volatility, the long-term holding period of real estate investments means investors can ride above the daily stock market fray.
CrowdStreet, which launched in 2014, is the leading player in the fast-growing field of online commercial real estate investing. The company's online Marketplace allows individual investors to reap the rewards of investing in the $6 trillion commercial real estate sector, investing in everything from multifamily apartment buildings to self-storage facilities and senior-living centers.
"Investors have been waiting for the opportunity to make the same kinds of investments as institutions. Historically, there just wasn't an easy and open way to get access to those deals. Now, thanks to the adoption of online syndication, the average investor can diversify their portfolio with commercial real estate," said Tore Steen, CrowdStreet's CEO.
Direct Access to Deals
CrowdStreet gives individual investors direct access to a world of private real estate deals that were once the sole province of the well-connected and uber-wealthy.
Real estate investment trusts (REITs) are currently the primary way average investors invest in commercial real estate. But while REITs are popular, they're based on the aggregate of office or apartment rents from dozens or even hundreds of buildings. You might not know exactly which properties are in the REIT, or you might gain exposure to only one kind of investment -- for instance, just offices, multifamily buildings or properties in a single market.
REITs can also be pricey. Publicly traded REITs are purchased through a broker, which means you have to pay brokerage fees.
But through online deal syndication, you can diversify your portfolio with direct investments in projects from across the country. Like choosing an individual stock, you choose exactly what real estate deal you're investing in.
CrowdStreet also offers a way for you to buy into a diversified vehicle if picking and choosing isn't your thing, with the included deals being pulled directly from the Marketplace.
Over the past five years, investors on CrowdStreet have contributed more than $600 million to both new and existing commercial real estate projects in 42 states from 300+ real estate firms across the United States.
The average return on the first 14 deals financed on CrowdStreet's platform -- those which have fully wrapped up, yielding final returns to investors -- is 31.7%, with a 1.6x equity multiple and a holding period of two years.*
The biggest return award to date goes to the investors who invested into a real estate fund run by Alpha Wave Investors, which focused on acquiring apartment buildings in Las Vegas. Those investors earned a 71% return on their investment in less than a year, nearly fourfold higher than the original projected return.
While such outcomes certainly aren't the norm, there's a good reason these deals target higher returns than what you might see in the stock market.
"These are illiquid investments," Steen said. "You can't cash out your investment whenever you want, so investors demand a premium in returns over liquid investments."
Hitting the Cycle While It's Hot
If you haven't put any money into commercial real estate yet, now may be the time to do it if you want to capture the full benefits of investing directly through online syndication.
Major market indicators are looking strong-apartment rents are surging across the country, and not just in the 24-hour "mega-metros," but also in the up and coming "18-hour" cities like Portland, Ore.; Nashville, Tenn.; and Columbus, Ohio; that have become CrowdStreet's sweet spot.
Office rents are also soaring thanks to high-occupancy rates and growing demand. And the profits being reaped by the investors.
And as the Federal Reserve prepares to potentially cut interest rates, that could slash the cost of borrowing for new projects and provide another boost to the real estate market.
"I don't think the market has peaked yet," Steen said. "There are still big opportunities, especially if you can zero in on the right markets, the right ideas and the right firms."
To review the current deals on the CrowdStreet Marketplace, create a free account at CrowdStreet.com today.* Results are based on realized transactions to date, based on information provided to CrowdStreet by the sponsors of the investment or other sources. Due to the fact that CrowdStreet was formed in 2014 and many investments have an expected holding period that is longer than the period during which CrowdStreet has been in existence, the information above may not be an accurate representation of overall performance of investments on the Marketplace. Furthermore, if a project is not performing well, realization may be delayed. Past performance is not indicative of future results. You should not invest unless you can sustain the risk of full loss of capital.