Real estate crowdfunding emerged from the JOBS Act and more general digitalization of investment activity. In this model, individuals invest passively, fractionally, and through an app into the types of real estate that were previously difficult to access. There have been challenges in this young industry and, like any investment, real estate crowdfunding investments entail risk. However, in the decade plus since real estate crowdfunding emerged, the model has proven to be a reliable way for individuals to diversify beyond stocks and bonds.
Contribution minimums are relatively low, which opens the door for both accredited and non-accredited investors to buy in and introduce real estate to their portfolio. Real estate crowdfunding has become synonymous with digitized, fractional, passive real estate investing; a means of accessing private-market real estate for individual investors.
What is real estate crowdfunding, how does it work, and might it be a good fit for your portfolio? Read on…
Update for 2025
The real estate crowdfunding space has evolved to fit the needs of individual investors. The concept is now broadly accepted as a means of accessing private real estate as a driver of portfolio diversification. While not technically “real estate crowdfunding” in a legal sense, EquityMultiple’s model is functionally similar — lowering barriers to entry for individual investors. The leading platforms in the space now boast thousands of investors nationwide, and typically hundreds of millions of dollars of AUM.
In the period from mid-2022 until late 2024, when the Federal Reserve embarked on a campaign of interest rate hikes, the real estate sector became more volatile. Transaction volume dropped alongside valuations, and some asset operators struggled amid higher cost of capital and fewer refinancing options. This trend adversely impacted several real estate crowdfunding platforms. EquityMultiple’s operating model is intended to be more durable through cycles and provide more protections to investors.
In September of 2024, the Fed opted to drop its benchmark interest rate for the first time this cycle. The economy is exhibiting broad strength, suggesting we may see the “soft landing” come to pass while real estate valuations and transaction volume rebound. This would be a welcome trend for real estate crowdfunding platforms. Meanwhile, wage growth has created a nearly 50% increase in the accredited investor population since 2019. This means that forward-looking real estate crowdfunding platforms should be planning for a younger, perhaps less-experienced cohort of new investors.
Given what we have learned so far in the 10+ years of the real estate crowdfunding industry, EquityMultiple is poised to offer investments that fit both this moment of the market cycle and the evolving population of accredited investors.
Fundamentally, real estate crowdfunding allows individual investors to participate in larger, more complex real estate investments passively and fractionally.
Real estate crowdfunding allows for passive investment by individual investors.
How Real Estate Crowdfunding Works
Although each crowdfunding platform has different entry requirements, most cater to the average investor seeking a low-maintenance form of passive real estate investing. Here is what you can expect from a typical real estate crowdfunding experience:
- Create an account with a verified real estate crowdfunding platform. If multiple plans are offered, choose a strategy that works best for your investment goals.
- Research the available real estate offerings and review disclosures regarding the property owners, use of proceeds, financial statements, and more.
- Choose a property to invest in from a private curated list of real estate. You’ll receive a detailed list of considerations for each investment opportunity. You can hand-pick your selections or work with a representative to diversify your portfolio.
- Passively monitor your investments. Many crowdfunding platforms will charge a fee to manage and maintain your investments so that you can focus on generating cash flow and investing in new ventures.
- Collect regular dividend payouts and continue to acquire more properties. Depending on the platform, you can potentially receive dividends every month or quarter.
Real estate crowdfunding is a newer investment strategy that comes with some risks. Especially considering that many of these investments haven’t experienced the economic turmoil that older investments have endured, so reactions and recoveries can be difficult to predict.
With EquityMultiple, you’ll have access to a team of experienced real estate professionals working behind the scenes to keep your investment portfolio healthy and answer any of your questions.
Types of Real Estate Crowdfunding Investments
Real estate crowdfunding strategies can be broken down into two basic investment categories: equity and debt. Both types require a relatively low initial investment.
Equity Investments
This type of crowdfunding provides investors with equity ownership for their initial investment, which typically pays in quarterly returns. As a shareholder, investors can earn more money based on the property’s performance through rental income.
This is a valuable funding option for property owners who aren’t profitable yet or who have enough of a reputation to entice prospective investors.
There are a number of benefits to equity investments, including:
- Cap-free returns for large earning potential
- Depreciation tax benefits for property owners and investors
- Generally no monthly asset management fees
Before you go all in on equity, know that these carry more risk than debt investments. The investment isn’t secured, so if the property doesn’t perform as projected, investors may see lower returns or even a loss on their contribution.
Equity investments are also less liquid than other investments with a hold time generally between three and 10 years, so it’s important to consider the whole of your portfolio to determine if this is the right fit.
Depending on the business plan of the “sponsor” you invest alongside and the real estate crowdfunding platform, an equity investment may carry the potential of cash flow from rents at the property. These returns are generally not guaranteed, however, so if you are counting on cash flow from your investment, it is important to carefully consider the sponsor’s business plan.
A panel interview with industry leaders (including EquityMultiple CEO Charles Clinton) celebrating the 10 year anniversary of the JOBS Act, which enabled real estate crowdfunding.
Preferred Equity Investments
Preferred equity is a hybrid product, offering a share of upside and payment priority over common equity positions. Preferred equity typically includes a flat annual rate of return and an “equity kicker” – an additional entitlement to profits in the event that the project performs well. In the event of non-payment, investors are typically entitled to force sale of property.
Given its position in the capital stack, preferred equity is generally considered to be less risky than common equity, but riskier than debt investments.
Debt Investments
Investors also have the opportunity to participate in a real estate loan with a fixed rate of return. Earning potential is tied to the investment amount and the loan’s interest rate rather than the property’s earnings, so there’s less risk for loss.
Because debt investors have payment priority, the equity acts as a cushion and debt investors are more insulated from risk.
The most valuable benefits to debt investing are:
- Short hold time between six months and two years
- Less risk because the property secures the loan
- Payment priority over equity and preferred equity positions
- Predictable payouts on a monthly or quarterly basis
While payments are more consistent, your overall earning potential is capped based on your investment. Debt investments may also require upfront or recurring fees that can affect your returns.
Here at EquityMultiple, we do not exclusively deal with equity, preferred equity, or debt investments — we do all three, as well as portfolios that may offer even more diversification. Consider us your all-in-one commercial crowdfunding solution.
Private Funds
Some real estate crowdfunding investors prefer an even more hands-off approach, and more built-in diversification. Many platforms (including EquityMultiple) offer private fund structures that still satisfy the “private, alternative” benefit of this type of real estate investing, while offering relatively high liquidity and a way to tap into multiple assets with a single investment. These funds may be structured as private REITs, or leverage a different fund structure.
EquityMultiple’s Ascent Income Fund, for example, prioritizes cashflow and offers redemption options.
Short-Term Note Investments
Short term note investments are a recent addition to broader real estate crowdfunding universe. EquityMultiple is one of just a few platforms to offer a short-term note option — the Alpine Note. In a real estate crowdfunding context, short-term notes operate somewhat like a corporate bond, providing capital for the platform and (at least partially) guaranteed by the company. In EquityMultiple’s case, Alpine Notes are backed by the real estate in EquityMultiple’s general flow of investments, and capital from Alpine Notes serve a treasury function, allowing EquityMultiple to offer rapid surety of funding to operators who raise capital on EquityMultiple’s platform (the sponsors with whom we originate investments). On the other side of the coin, individual investors in Alpine Notes earn a healthy APY for a short-term investment: 3, 6, or 9 months.
Crowdfunding Rules and Regulations
Crowdfunding was expanded by the Jumpstart Our Business Startups (JOBS) Act in 2012, which was revised in 2016 and 2021 to increase investment caps and permit non-accredited investors.
Current SEC regulations for crowdfunding securities require:
- A registered intermediary
- A crowdfunding cap of $5 million in 12 months
- A limit of non-accredited investors over 12 months’ time
- Full disclosure of filing information for investors, intermediaries, and the SEC
Prior to the JOBS Act, only accredited investors, who had significant incomes and capital to weather high-risk investments, were permitted to invest in securities through crowdfunding. The act opened investment opportunities to non-accredited investors to help support small businesses and expand economic opportunity for individuals.
Despite the technical definition, “real estate crowdfunding” has become synonymous with the general model of offering individual investors fractional investments in private-market real estate. This includes platforms, like EquityMultiple, that focus on offering investments to accredited individual investors.
It’s easier than ever for non-accredited investors to get into real estate crowdfunding, but there are still regulations outlined in Title III of the JOBS Act limiting investment opportunities by net worth and income.
- If either your income or net worth is less than $107,000, then your limit is the greatest total between:
- $2,200
- 5% of your income or net worth (whichever is least)
- If your income and net worth are both greater than $107,000, then your limit is:
- 10% of your income or net worth (whichever is least), and
- May not exceed $107,000 within a 12-month period
Spouses can calculate their net worth and income jointly to determine their investment limits. Investment limit examples are available below.
| Non-Accredited Investor Limits | |||
|---|---|---|---|
| Income | Net Worth | Permitted Investments | Investment Limit |
| $40,000 | $100,000 | $2,200 or 5% of income ($2,000) | $2,200 |
| $90,000 | $85,000 | $2,200 or 5% of net worth ($4,250) | $4,250 |
| $115,000 | $150,000 | 10% of income up to cap ($11,500) | $11,500 |
| $1.5 million | $1.1 million | 10% of net worth up to cap ($110,000) | $107,000 |
The SEC’s intent is to extend investment opportunities to experienced investors and those with a naturally higher risk tolerance based on their wealth, while limiting total investments to protect investors from significant losses.
Advantages of Crowdfunding Platforms
Crowdfunding opens opportunities for investors to diversify their portfolio and get into real estate investing with a relatively small sum upfront. Plus, digital platforms make it easy for users to identify great properties and manage their investments from home.
Check out the pros and cons of crowdfunding platforms at a glance, and dig into the specifics below.
| Pros | Cons |
| Diverse investment options | Platform fees |
| Passive investments | Illiquid assets |
| Positive user experience | Lower ROI with small investments |
| Regular payouts | Relatively new investing strategy |
| Flexible investment options | Tax implications to be mindful of |
Diverse Investment Options
Since crowdfunding expands the pool of total investors, non-accredited investors can get involved with a lower initial investment while the property owner still receives needed funds. This allows individuals to invest in more properties and enter real estate without a huge sum of cash to buy a property outright.
Crowdfunding properties also allows investors to diversify where they invest in real estate. Since everything is done online, there’s plenty of unique listings to explore and investors aren’t limited to their local real estate market.
Passive Real Estate Investing
Real estate has long been a go-to for generating passive income. Many third-party crowdfunding platforms provide the added benefit of managing your investments for a small fee. This means you don’t have to worry about manually maintaining the investment while still receiving regular dividends. Learn more about how to make passive income from real estate investing.
Easy-to-Navigate User Experience
Crowdfunding platforms are designed with accessibility and navigation in mind. Users have 24/7 access to their account and investment details, and some platforms even offer mobile apps.
Investors always have a direct point of contact, and platforms can provide additional insights, like comparing debt and equity investments, to help users manage their investments wisely and expand their investments once they receive payouts.
Regular Dividend Payouts
Real estate crowdfunding provides regular payouts regardless of your investment type, paying dividends quarterly or monthly.
While platforms may charge some fees, your upfront costs are minimal and fees can vary depending on your investment. For example, equity investments only charge annual fees, while monthly costs are more common with debt dividends.
Flexible by Design
Investment opportunities are flexible with the choice of equity or debt investments. The option that’s right for you depends on your portfolio goals, and you can choose both types among a few different property investments.
Equity investments:
- Offer higher opportunities for returns
- Are typically long-term holds
- Have fewer fees
- Hold more risk
Debt investments:
- Offer a set return based on your investment
- Are typically short-term holds
- Hold less risk with property-backed securities
- May have more fees
Investors who don’t feel strongly about either of these investment types may also consider short-term notes. These function similarly to corporate bonds and help pre-fund real estate investments, offering monthly interest payments to investors in exchange.
Real Estate Crowdfunding Considerations
Real estate crowdfunding isn’t without its risks. Interested investors should consider these key facts before investing a significant amount in real estate ventures.
Platform Fees
Many crowdfunding platforms charge fees to keep their business running. These typically run around 1%-3% of a paid asset’s value. However, this can vary between 0% and 8% among different platforms and investment types.
Fees do more than keep the site’s lights on — covering the costs for maintaining and managing investments for you to alleviate the stress of manual maintenance. Still, it’s important to consider when comparing investment opportunities, and you should always read the fine print before investing.
At EquityMultiple, we have structured our fees to align our interests with the interests of yourself and other investors.
Illiquid Asset Class
Crowdfunding investments are illiquid assets, so you won’t make the big bucks immediately. Investors can expect regular dividends four to 12 times a year, but their initial investment may be tied up for years until the property sells.
The length of your hold depends on your investment type. Equity investments may be tied up for five to 10 years, while debt investments may hold up to two years. If you’re interested in short-term notes, these have a much shorter maturity time and may return your principal within a year.
Newer Investment Strategy
Crowdfunding securities is a relatively new investment strategy that launched in 2012 with the JOBS Act. With only a decade of market experience, there are still a lot of unknowns about how these investments will fare through economic events or long-term projects.
Tax Implications
Investors are responsible for paying taxes on dividend checks, and each return may be subject to different taxation. For example, project sponsors may provide investors with a K-1 tax form, which passes some of the income tax liability to the investors who benefit from the project’s earnings.
While investors still have to pay taxes on their returns, equity investors may also take advantage of depreciation tax benefits.
Real estate has always been a strong opportunity to diversify your portfolio, and crowdfunding makes it easier to safeguard your investments with multiple assets and passive management.
Individual, self-directed investors are thinking more and more about how these types of investments can serve their portfolios in the long term. Learn more about how these investments can help you prepare for retirement.
The Future of the Real Estate Crowdfunding Space
The real estate crowdfunding industry has experienced significant growth over recent years and is projected to continue expanding rapidly. In 2023, the global market was valued around $12.17 billion, with projections reaching up to $349.26 billion by 2032, at a compound annual growth rate (CAGR) of approximately 45.2%.
This growth is driven by the accessibility of crowdfunding platforms, which allow both individual and institutional investors to participate in real estate projects with relatively low capital requirements.
Several key trends are shaping the future of real estate crowdfunding. One of the major trends is the adoption of technology, including blockchain and tokenization, which facilitates secure and transparent transactions, enabling fractional ownership of real estate assets. This is especially appealing to a younger demographic interested in sustainable investments and platforms that align with Environmental, Social, and Governance (ESG) principles. Additionally, regulatory changes in countries like the United States have made it easier for both accredited and non-accredited investors to access these investments, broadening the investor base significantly.
Meanwhile, the accredited investor population has grown significantly in recent years. This growth is concentrated to relatively young, relatively less experienced investors. This means that the real estate crowdfunding industry should move toward products that are even lower barrier to entry, and generally shorter in duration and cashflow-focused.
As for major considerations going forward, the industry faces a few challenges and opportunities:
- Economic Volatility: Real estate values can be sensitive to economic downturns, which may impact property performance and, consequently, investor returns. Platforms are responding by diversifying into various property types and focusing on sectors that are less affected by market fluctuations.
. - Competition and Platform Differentiation: The crowdfunding landscape is competitive, with platforms like Fundrise, CrowdStreet, and RealtyMogul leading the market. To attract investors, platforms must differentiate themselves through transparent processes, technology-driven insights, and diverse investment options.
. - Focus on Sustainability: A growing segment of investors is prioritizing projects that support sustainability. Real estate crowdfunding platforms are increasingly highlighting eco-friendly developments, appealing to investors who value both financial returns and environmental impact.
. - Global Expansion: The market is becoming more globally oriented, with significant growth projected in the Asia-Pacific region due to urbanization and rising interest in digital investment options. As regulations standardize across regions, investors can access a broader array of international projects, diversifying their portfolios beyond domestic markets.
Overall, the real estate crowdfunding industry appears poised for substantial growth, bolstered by technological innovations, favorable regulatory trends, and an expanding investor base. As the market matures, platforms are likely to focus on offering more targeted, specialized investment opportunities while adapting to the demands of an increasingly sophisticated investor community.
Real Estate Crowdfunding FAQs
Is EquityMultiple a real estate crowdfunding platform?
Yes and no. EquityMultiple is often referred to alongside other real estate investing platforms that, collectively, are now referred to as the “real estate crowdfunding industry.” However, from a strict legal standpoint, EquityMultiple and some other accredited-only platforms technically do not offer real estate crowdfunding investments but rather structure securities per the Reg D of SEC law.
Is real estate crowdfunding risky for investors?
Like all risks, real estate crowdfunding investments entail risk. In fact, this form of investment carries risks on top of and distinct from investing in stocks, bonds, and other highly liquid public assets. Please be sure to assess risks and determine whether each investment is suitable for you.
What returns are possible on real estate crowdfunding platforms?
While no returns are guaranteed and past performance does not indicate future results, real estate investments (including real estate crowdfunding) may carry the potential for income and upside; return profiles that are not achievable via the stock market alone. You can log in to the EquityMultiple platform to access our track record at any time.
