How to Invest in Real Estate Crowdfunding

With the rise of real estate crowdfunding, everyday investors now have a way to tap into property markets once far beyond reach. Learning how to invest in real estate crowdfunding is an increasingly practical move, whether you're looking to diversify your investment portfolio or dip your toes into real assets without buying a building outright.

The worldwide real estate crowdfunding market was approximately at $16.24 billion in 2024 and could reach over $2.05 trillion in 2037. As with any deal, however, it's not entirely risk-free. With this guide, we’ll walk it all through so that you can make informedly strategic moves in this rapidly changing space.

Table of Contents

What Exactly is Real Estate Crowdfunding?

How Crowdfunding Works: Models & Mechanics

Diving Deeper: Types of Real Estate Crowdfunding Investments

Why Invest? Benefits of Real Estate Crowdfunding for Beginners

The Pitfalls: Risks to Consider Before Investing

How to Select a Real Estate Crowdfunding Platform

How To Invest In Real Estate Crowdfunding: Step-by-Step Guide

Real Estate Crowdfunding vs. Traditional Real Estate Investing

Tips for Successful Crowdfunding

Conclusion: A New Era for Real Estate Investment

What Exactly is Real Estate Crowdfunding?

At its core, real estate crowdfunding is a way for multiple investors to pool their money to fund property deals (residential, industrial, commercial real estate) that would typically be inaccessible to individuals on their own. Instead of purchasing an entire building or lot, you’re essentially buying a share in the project, with returns based on the income it generates or the appreciation over time.

This model introduces real estate investment to non-institutional participants with lower investment minimums. It’s possible to invest in apartment buildings in major cities, hotel projects, retail buildings, or even fix-and-flip ventures—all while avoiding being an actual landlord and property manager yourself.

How Crowdfunding Works: Models & Mechanics

The two main models in real estate crowdfunding are equity-based and debt-based.

In equity crowdfunding, you own a slice of the property or development project. If the property appreciates or generates rental income, you receive a proportional share of the profits. In debt crowdfunding, you're essentially acting as the bank. Your investment helps fund a real estate loan, and in return, you receive fixed interest payments over a set term. 

Such real estate investments are generally done through online platforms that screen deals, handle investor relations, and deal with all paperwork. Simply stated, real estate crowdfunding democratizes access to an asset class previously only available to high-net-worth individuals and provides flexibility with potential for returns.

Diving Deeper: Types of Real Estate Crowdfunding Investments

Once you’ve wrapped your head around the basics, the next step is understanding the types of real estate crowdfunding investments available and how they're structured. 

Equity Crowdfunding

This is the most common. By being an equity investor, you're actually buying a fractional share in a property development. Your returns are from rents and property appreciation most often distributed in the form of dividends or in a lump sum when a property has been sold or refinanced. There are higher returns with these investments but also higher risks. They generally have longer holding periods (think 3–10 years) and don't guarantee any returns.

Debt Crowdfunding (Lending)

Whereas equity investing involves ownership, debt crowdfunding involves being the lender. Here, you invest in a share of a real estate loan and receive set interest for an agreed time frame, usually between 6 to 36 months. Your yield does not hinge on property appreciation but the borrower’s repayments. It’s typically lower-risk with more certain income—albeit with less upside. 

Hybrid Models

Certain crowdfunding platforms now have hybrid offers that mix debt investments and equity. You could get regular payments of fixed interest upfront and a percentage of profits when the project is sold. These can have a balanced risk-reward equation but are typically more sophisticated and need careful consideration of terms.

Common Property Types

The nature of property being crowdfunded also significantly influences how an investment may perform. These are among the most common categories:

• Residential: Includes single-family homes, multi-family units (like duplexes or apartment buildings), and short-term vacation rentals.
• Commercial: Think office buildings, shops, and warehouses. These generally come with higher returns but are sensitive to market cycles.
• Development Projects: Includes new builds, major renovations, or land development. These carry higher risk but can deliver significant returns if the project is successful.
• Specialized Real Estate Properties: Student housing, age-restricted housing, self-storage units, and even agricultural land come under this category.

Why Invest? Benefits of Real Estate Crowdfunding for Beginners

Real estate crowdfunding offers an effective and affordable gateway to one of the world’s stable asset classes.

Low Barrier to Entry ($10–$1,000 vs. traditional real estate)

Whereas buying a prospective property that may cost upwards of six figures or more upfront, crowdfunding platforms typically enable beginners to buy in with only $10 to $1,000. That makes it less burdensome for younger people to get their first foray into property investment.

Portfolio Diversification

Since property values and rental income aren’t typically tied to the performance of the S&P 500 Index, this makes real estate crowdfunding an appealing option during market downturns or inflationary periods.

Passive Income Through Rent and Interest

When you invest, your money begins to work for you through ongoing distributions—be it from rental income in an equity arrangement or fixed interest in a debt offering. You won’t have to deal with tenant calls or property taxes with owning a rental property outright.

Access to Commercial Deals Normally Exclusive to Institutions

Through crowdfunding, beginners can tap into institutional-grade commercial real estate that typically require millions in capital. Now, crowdfunding platforms are opening that access to everyday investors, effectively leveling the playing field.

Professional Management by Experienced Sponsors

The majority of deals are overseen by experienced real estate sponsors who attend to all aspects of property acquisition through development to tenants. The professional management can mitigate a beginners' learning curve and potentially de-risk the investment. Although due diligence into the sponsor and their management team is still a critical requirement for every investor. There is no guarantee of returns or capital preservation and all investments carry inherent risks.

The Pitfalls: Risks to Consider Before Investing

While the upside of real estate crowdfunding is compelling, it’s not without its downsides. 

Illiquidity

Real estate, inherently, is an illiquid asset. Crowdfunding does not make it any less so. The majority of real estate investments have holding periods of 3 to 7 years in which your capital remains illiquid and committed.

Platform Risk

Your investment will only be as robust as the platform through which it is being conducted. Your money can be lost if a crowdfunding site handles money improperly or goes into bankruptcy.

Lack of Control

You’re leaving your money in the hands of the sponsor or platform running the project and you won’t have a say in things like renovations, rents, or how to exit.

Accreditation Requirements

Certain higher-return or institutional-grade investments are reserved for accredited investors. An accredited investor must make at least $200,000 a year (or $300,000 jointly with spouse) in each of the past two years and have a net worth of over $1 million.

Fees and Expenses

Crowdfunding platforms and even sponsors of projects have fees that may lower your investment returns significantly. Some of them are acquisition fees, asset management fees, servicing fees, and usage fees of platforms.

How to Select a Real Estate Crowdfunding Platform

Your chosen platform can make or break your crowdfunded real estate investing experience. With dozens of platforms to choose from, it makes sense to do a comparison of deal quality, transparency, management fees, minimum amount, and support for investors. Some platforms are geared toward accredited investors with big-ticket institutional deals, while others are geared toward newbies with minimal capital and straightforward products.

Well-known platforms such as Concreit, Fundrise, Realty Mogul, and Crowd Street have become popular for various reasons. Fundrise, for instance, has low minimums and hands-off diversified portfolios. Crowd Street relies on single-commercial real estate deals and targets accredited investors. Realty Mogul blends options, enabling people to invest in REITs or private placements based on how experienced and how big their investment is. They each have their own fee structure, investment approach, and desired user.

At Concreit, rather than investing in individual properties, Concreit offers a diversified commercial property portfolio that distributes risk for investors. We've even embraced fractionalization, so that you can invest with as much or little as you’re comfortable with—great for beginners to get in.

How To Invest In Real Estate Crowdfunding: Step-by-Step Guide

Ready to take the plunge? If you're wondering how to invest in crowdfunded real estate, the good news is that getting started is more straightforward than it might seem. 

Step 1: Define Your Investment Goals

Prior to signing to any site, invest time in understanding what you're investing for. Do you seek regular passive returns from rents and interest payments or do you seek capital appreciation for accumulation over time?

Review your risk tolerance and your needs in terms of liquidity. Equity transactions can have higher returns but higher levels of risk and longer holding times, while debt investments have less uncertainty but less unlimited upside. Some platforms now combine both in a hybrid format.

Setting specific goals will allow you to steer clear of shiny deals that don't align with your financial strategy.

Step 2: Choose the Right Platform & Verify Account Requirements

To invest online, research platforms based on your investment goals, budget, and experience level. Some platforms are ideal for beginners while others cater to accredited investors with single-asset commercial deals. Most platforms will require you to create an account and complete investor verification. For non-accredited investors, this is often a quick process. 

Evaluate platforms based on:

• Minimum investment requirements (as low as $10 on some platforms)
• Available property types (residential, commercial, development)
• Fee structure (look for transparency and avoid hidden layers)
• Access level (open to all vs. accredited-only)
• Track record and sponsor vetting process

After choosing a platform, you create an account and complete a short KYC (Know Your Customer) form. As an individual investing, this generally involves entering your TIN, address, and identity confirmation.

Step 3: Fund Your Account & Select Your Investments

With your account active, you’ll transfer money via bank transfer, ACH, or wire to fund your investment wallet. This allows you to allocate funds when you’re ready to act on investment opportunities. Minimums range widely. Some platforms start at $10, while others require $5,000 to $25,000 depending on the property and platform type.

When browsing investments, review:

• Property summary and photos
• Sponsor background and past performance
• Projected returns (IRR, cash-on-cash, etc.)
• Holding period (e.g., 6 months for loans vs. 5+ years for equity)
• Exit strategy (sale, refinance, etc.)
• Risk disclosures (including market, sponsor, and execution risks)

Be sure to download and review the offering memorandum (OM) or deal pitch deck. These contain a summary of everything from financials to investment risks and business plans. Keep in mind that just because a deal has a shiny marketing page doesn’t mean it’s low-risk.

Step 4: Monitor Performance

After your investment is active, you’ll usually receive an individual dashboard with your investment status, history of distributions, and updates. Some platforms offer monthly or quarterly reports of how your investment performs each month. These reports may contain construction photos, occupancy levels, revenue updates, or valuation changes.

For equity investments, distributions can be paid quarterly based upon net operating income or in a lump sum at exit. Investments based upon debt typically include regular monthly interest payments. Make sure to monitor tax documents that may become available annually at calendar year end.

Step 5: Reinvest or Exit

When your investment reaches maturity, you’ll either get your principal amount and any remaining returns (should property be sold or refinanced), or ongoing income if holding time is extended or if the project persistently performs. Some of these websites have automatic reinvestment options or diversified REIT-like products that keep reinvesting your earnings in new projects.

Although some platforms do have early redemptions or secondary markets now, overall liquidity remains restricted. So it’s best to regard real estate crowdfunding as a medium to long-term investment. A potential strategy many investors attempt to do is to create a laddered investment portfolio with staggered exits that help to even out cash flow and reduce exposure to risks across deals.

By learning how to invest in real estate crowdfunding step by step, you set yourself up to make smarter, more strategic choices in an asset class that was once out of reach for most. 

Real Estate Crowdfunding vs. Traditional Real Estate Investing

On paper, both real estate crowdfunding and traditional investing give you exposure to the same property class. But how you engage with it is totally different. With conventional real estate, you purchase an actual property outright, meaning that you have to deal with financing and maintenance as well as tenants and taxes.

Compared to direct property ownership, real estate crowdfunding is a lower-barrier, hands-off alternative. Fractional investing in property can be done with investment minimums of just $10 in some platforms. The compromise? Less control, illiquidity for most deals, and reliance upon third-party platforms and sponsors. Make sure to balance crowdfunding's pros and cons before investing.

Tips for Successful Crowdfunding

1. Start Small and Scale Gradually

Once you get to know how various platforms and deals work for you and become familiar with them, progressively ramp up your exposure.

2. Diversify Across Deals and Property Types

Spread your investments across different asset types and geographic locations to reduce risk.

3. Understand the Holding Period and Read All Offerings Carefully

Know how long your money will be tied up. Some may lock your investment funds for 3 to 7 years, with little or no liquidity options. Also dig into the risk disclosures before committing.

4. Reinvest Earnings Strategically

Compound your gains through dividend reinvestment or payments into new ventures manually or through automatic reinvestment options if there are any.

5. Stay Updated on Real Estate Trends

Monitor market conditions, interest rates, and demand for housing. External macroeconomic conditions can have an impact even on successfully run projects.

Conclusion: A New Era for Real Estate Investment

Real estate crowdfunding has brought about a new era for investors in which it's no longer necessary to have deep pockets, a real estate license, nor time to deal with tenants in order to enjoy the property market. With lesser minimums and easy-to-use platforms and apps, this model is making real estate easier and more accessible than it has ever been before.

Learning how to invest in real estate crowdfunding means adopting a smart way to create wealth over the long-term. As the space continues to evolve, savvy investors should devote time to educating themselves, diversifying, and making their platform choices wisely to adapt to this fast-evolving landscape.

Frequently Asked Questions (FAQs)

How to invest in real estate REITs?

You can buy into Real Estate Investment Trusts (REITs) in a brokerage account just as you buy stocks. Listed public REITs are found in major exchanges and represent a liquid means of investing in real estate. There are also private or non-traded REITs with varying levels of risk and returns that can be found in some of the crowdfunding platforms.

What is the best way to invest money in real estate?

The “best” depends on your goals, risk tolerance, and budget. Conventional methods are purchasing rental property or house flipping, while less costly options are REITs or real estate crowdfunding. By passively receiving regular returns and benefiting from diversification with less property management woes, real estate crowdfunding has become a preferred option.

What is a crowdfunding investment?

Crowdfunding investment involves pooling money from various individuals to fund investment opportunities or ventures. This generally means investing in a proportion of property or construction development, among other individuals, through an online site.

Is real estate crowdfunding safe?

While platforms aim to reduce risk through vetting and diversification, no investment is completely safe. Real estate crowdfunding involves risks like project delays, market downturns, or platform failure. Thorough research is important and never invest more than you can afford to lose.

Can I lose money in real estate crowdfunding?

Yes. There is a chance of loss with any investment. There can be underperforming projects, changing market conditions, and even delays or bankruptcy. Always review risks thoroughly before investing.

Is real estate crowdfunding passive?

For the most part. Once you invest, the sponsor and platform do all of the management, operations, and reporting for you. You get updates and distributions without being directly involved in dealing with property yourself, so it’s a passive stream of income from real estate.

How do I pay taxes on real estate crowdfunding income?

Income earned through crowdfunding investments in the form of interest, dividends, or capital gains is taxable. You will usually be issued tax forms of a 1099-DIV or 1099-INT by the site. Due to differences in deal structure and location, it’s always best to speak with a competent tax professional.