CrowdStreet vs. CRE-PRO
Commercial real estate online investment opportunities have expanded considerably in recent years with numerous platforms and investment firms surfacing to offer exposure to the sector. As competition for access has intensified, it has increased the importance of understanding the core differences that exist amongst investment vehicles. This article takes a look at CrowdStreet, one of the world’s largest and most successful online investment platforms, and contrasts it with CRE-PRO in order to provide insight into the key ways these firms differ, and what these differences imply for investors.
What’s the Difference Between CrowdStreet and CRE-PRO?
CrowdStreet is an online real estate crowdfunding and investment platform that gives investors direct access to commercial real estate investment opportunities. While the company additionally offers funds and portfolio management services, it primarily operates under a direct-to-investor model that matches individual investors with third party sponsors, allowing investors to invest directly in projects sourced from these parties. CrowdStreet is first and foremost an online marketplace that generates revenue by charging fees to sponsors for hosting offerings. The company does not charge fees to investors to join its network or invest through its marketplace.
CRE-PRO is a real estate investment firm that operates through a fund structure rather than offering individual investments. Investors pool money into funds alongside CRE-PRO investment managers who invest the capital into projects they originate themselves. Each fund offers exposure to a diverse portfolio of income-producing commercial properties, and the cash flows these assets generate are used to repay investors. While CRE-PRO charges both front and back-end fees to investors, CRE-PRO’s principals are significantly invested in their vehicles and are primarily compensated based on the performance of their investments.
There are several additional considerations and distinctions to explore that will further bring to light the advantages and drawbacks of each.
- Types of investments – CrowdStreet offers individual development projects on its Marketplace platform as well as a broad selection of diversified CrowdStreet funds suited to a variety of investment objectives. CRE-PRO’s offerings consist of only two funds, the CRE-PRO Equity Fund and the CRE-PRO Mezzanine Fund, which invest in diversified portfolios of commercial properties.
- Investment strategy – CrowdStreet’s funds generally focus on generating stable, long-term passive income from commercial properties. Through the Marketplace platform, CrowdStreet investors can pursue individual investments in accordance with their own personal investment strategy as one might with a stock or bond. CRE-PRO’s managers specialize in the niche foreclosure auction market and focus on acquiring undervalued properties from special servicers and distressed sellers. Producing stable passive income is a foundational component of the investment strategy, however, the company also generates a significant portion of investor return from a gain on sale of properties at market value.
- Targeted Investment Period – CrowdStreet’s investment opportunities at the time of writing range between 2 and 10 years, while CRE-PROs funds target investment periods of fixed return for 18 or 36 months on the Mezz Fund, and 2-5 Years hold on the Equity Fund.
- Investment minimum – CrowdStreet’s investment minimums run significantly higher than the industry average. CrowdStreet requires minimums of $25,000 for individual deals and $25,000 – $100,000 for managed funds. Investors can participate in any of CRE-PRO’s funds for as little as $5,000.
- Fees – CrowdStreet investors aren’t subject to account fees, however, the company does charge fees on individual investments and its funds carry fees ranging from 0.5% – 2.5%. CRE-PRO charges a flat 3% acquisition and disposition fee, as well as a 2% annual asset management fee.
- IRA accessibility – CrowdStreet investors can invest through a self-directed IRA, while CRE-PRO investors are able to invest through an IRA, 401k, LLC, or trust.
Which Option is Right for Me?
CrowdStreet and CRE-PRO both offer simple and convenient ways for accredited investors to diversify into commercial real estate without having to buy a physical property. For a relatively low minimum, CrowdStreet and CRE-PRO provide exposure to valuable commercial assets producing stable passive income that could potentially fund a retirement.
Investing in commercial real estate comes with a variety of unique risks, and it’s imperative that investors conduct proper due diligence before committing any capital. Unlike stocks and bonds which can easily be bought and sold, commercial real estate investments are illiquid with capital tied up in properties typically for a number of years. In addition, the high degree of leverage magnifies the adverse impact of market downturns on cash flow and equity value. Consequently, these investments are not appropriate for individuals with a low-risk tolerance, high liquidity requirements, or without capital they can afford to lose.
CrowdStreet will appeal to the investor who seeks a minimal fee structure, desires a wide selection of investment opportunities, and who would prefer to invest in projects of his or her own choosing and according to personal strategy rather than have a fund manager selects investments on his behalf. CRE-PRO caters more to investors seeking diversification from a single investment and who value alignment of interests with a team of specialized investment professionals who can leverage their expertise to potentially generate outsized returns.
Whether or not either of these options suits your needs will depend on your own unique circumstances, and it is crucial that you identify your investment goals and constraints prior to making any decisions.