Just the Peaks

This newsletter, at a glance

  • Today’s commercial real estate sector is valued at a massive $6T
  • Investors with as little as $10k can now participate in the game
  • Everest spotlights CrowdStreet and their $670M investment fund

The recent crowdsourcing trend is transforming the CRE landscape
Learn how this form of alternative finance has small investors stepping up

For many bright-eyed investors, breaking into the commercial sector remains a fervent wish—for good reason. For decades, entry into this exclusive asset class was reserved for the country’s über-wealthy. To land a big real estate deal, individual investors would have to contribute $250,000 (and way up) to be taken seriously.

Not to mention, longstanding federal legislation made it impossible for small investors to have a fair crack at the commercial realm, as real estate syndication operated offline. But with the passing of Title II of the JOBS Act (Jumpstart Our Business Startups) in 2012, all of that changed. The law allows small businesses to connect with potential investors through crowdfunding and other creative online means.

Kickstarters go commercial

CrowdStreet, a real estate technology and services company, is one of those platforms seeing huge success at the moment. Although the site only invites accredited investors, participants can join for as low as $10k, enjoy $0 account fees, and have the freedom to directly invest in properties without the control of a larger, publicly traded vehicle.

To date, CrowdStreet boasts seriously impressive stats, including 25.5% total average annual returns, $63M funds returned to investors, and $670M total funds invested. Members have three choices: invest in an individual deal, a blended fund, or a private account managed by their in-house advisory team. Check out the marketplace’s other financial feats:

CrowdStreet money milestones

  • Since formation in 2012, CrowdStreet attracted 40,000+ accredited CRE investors
  • Commercial development projects came from 330+ sponsors across 42 U.S. states, equaling $8.5B
  • Investment projects ranged from as little as $10M to as high as $100M, landing CrowdStreet in the ‘middle market’
  • Though investors get a foot in the door for as low as $10k, CrowdStreet reports an investment average of $50k
  • Most contributors spread their cash across 2+ projects, choosing diversification over specialization
  • As of July 2019, 17 of CrowdStreet’s CRE offerings have been fully realized, with their target investment period spanning 5 to 10 years
                                                                          **For more stats, visit CrowdStreet and Investor Junkie

A revolutionary RE model

While a number of real estate crowdsourcing platforms have cropped up in recent years, CrowdStreet is fairly selective. Beyond their high standards for investors, real estate sponsors are also subject to rigorous criteria. Online reviews report that only 2% of project applicants ever make it to the CrowdStreet marketplace.

So, why the sudden switch to online investment?

For one, small investors enjoy new opportunities for diversification. As the climate on Wall Street remains volatile, the average Joe can finally invest in lucrative areas of real estate, including hotels, office buildings, shopping malls, warehouses, multifamilies and more. Again, this newfound freedom is all thanks to legislative changes in Washington.

“The law eased restrictions that prevented developers and private real estate from reaching out online to accredited investors, those earning $200,000 or more annually, or holding a minimum $1 million in assets not including their primary homes,” explains Ian Formigle, contributor for The Street.

Just a decade ago, real estate developers were mostly limited to working with affluent investors. These individuals were universally known within their local CRE communities and often netted “double-digit returns,” says Formigle. “Unlike the days when deals were struck over a round of golf, all investment data and deal terms are [now] easily accessible on the website for all investors to review.”

Considering the online leap?

CrowdStreet’s story is inspiring. But whether you’re a CRE newbie, seasoned investor or experienced developer, Everest still believes in exercising caution. Strategy is paramount, and while trendy online vehicles offer convenience, they do not guarantee the proficiency and personalization of a veteran financial firm.

Like CrowdStreet, our philosophy is to show you the same care regardless of how deep your pockets are. It’s our peak personalization that leads to peak results.

Everest says: Trend goes, but tradition grows