Real Estate

Self-Storage REITs: A Beginner’s Guide To Investing in 2025

Unlock the storage of wealth with self-storage REITs, the booming real estate investment that offers the potential for high yields, low volatility, and recession-resistant returns.

This article explores a unique Real Estate Investment Trust (REIT) sector: self-storage real estate. The self-storage market exploded over the last decade. Experts expect the sector to grow nearly 32%, to 53.92 billion customers, by 2026.

If you’re interested in real estate investing and considering physical real estate vs. REITs, then self-storage may be a good opportunity for your portfolio.

What Are Self Storage REITs?

Self storage REITs are a specialty sector of the Real Estate Investment Trust market that own and operate storage facilities and rent space to individuals and businesses.

Self storage REITs generate income by collecting monthly rent from their customers. The storage facility can also appreciate, further generating wealth for its owners through the disposition of this asset.

Advantages of Self Storage REITs

Self storage REITs offer many significant advantages over other investments, such as generating passive income, low building and operating costs, and strong demand in an up or down economy.

Generate Passive Income

One of the most significant advantages of self storage REITs is their ability to generate strong dividend yields for their investors.

As of this writing, the average dividend yield for self storage REITs is around 3.5%, according to Nareit, a trade organization for REITs.

Meanwhile, the S&P 500, a stock market index that tracks the performance of 500 large-cap U.S. companies, has an average dividend yield of around 1.3%, thus highlighting an attractive opportunity for income-oriented investors.

Low Building and Operating Costs

Another advantage of self storage REITs is their low construction and operating costs.

With storage REITs, there are no expensive brick veneers to build or broken toilets to fix.

To further highlight how self storage REITs are reducing operating costs is their increasing adoption of automation technology. Many self storage operators are fully or partially automating their properties. Adopting automation can significantly increase the net operating income of a self storage REIT.

A Cushman & Wakefield white paper on self storage highlights that automation can reduce the need for an onsite property manager, saving a storage operator upwards of $60,000, thus increasing the property’s net operating income.

Strong Demand in Up or Down Market

Lastly, another key advantage of self-storage REITs is their demand resiliency. Consumers need and demand self storage units whether the economy is in an upturn or a downturn – a characteristic largely unique to the self storage business.

For example, when the economy is in a downturn, people downsize. Downsizing often requires rental space to store belongings that can no longer fit in their home or apartment.

When the economy is prospering, consumers commonly purchase more items than they can keep in their homes. And utilizing their extra income, consumers will likely rent a self storage unit to store their extra possessions.

Investing — According to the Self Storage Association, the self storage market is expected to grow nearly 32% to a 53.92 billion market in 2026.

Risks of Self Storage REITs

Self-storage real estate investment trusts (REITs) have some risks like any investment. Here are some potential risks to consider before investing in self storage REITs:

Regulatory Risk

Self storage REITs are subject to regulations related to zoning, building codes, and environmental issues. Changes in laws could impact the ability of self storage REITs to operate or expand their facilities, which could affect their profitability.

Limited diversification

While self storage REITs invest in properties across different geographic locations, they are still primarily focused on a single asset class. This lack of diversification may not be suitable for all investors looking to diversify their portfolios across multiple asset classes.

Potential for Oversupply

Because self storage has low building and operating expenses, and therefore fewer barriers to entry 5han apartment REITs, self storage REITs run the risk of oversupply, i.e., more self storage space than there is demand.

How To Evaluate Self Storage REITs

Here are some key factors to consider when evaluating self storage real estate investment trusts (REITs):

Occupancy Rates

Occupancy rates are among the most important metrics for evaluating self storage REITs. This indicates the percentage of units that are currently rented out. A high occupancy rate suggests that the REIT successfully attracts tenants and manages its properties effectively.

Rental Rates

Rental rates are another important factor to consider. Higher rental rates generally indicate a strong demand for storage units and a competitive market position.

Geographic Diversification

It’s important to evaluate the geographic diversification of the REIT’s portfolio. A REIT with properties in multiple locations can help mitigate risks associated with localized economic or regulatory changes.

Property Quality

The quality of the REIT’s properties can impact its competitiveness in the market. Look for properties that are well-maintained, secure, and have modern amenities.\

Financial Performance

Review the REIT’s financial performance, including revenue, net income, and funds from operations (FFO), a key metric for evaluating REITs. A history of strong financial performance can indicate a well-managed and financially stable REIT.

Management Team

The experience and track record of the REIT’s management team can also be an important factor. Look for a management team with a proven history of success in the self storage industry.

Valuation

Lastly, evaluate the valuation of the REIT relative to its peers and the broader market. Consider factors such as the price-to-earnings (P/E) ratio and dividend yield.

Popular Self Storage REITs

If you are interested in self storage, below are some of the most popular publicly-traded self storage REITs.

Public Storage (PSA): Public Storage is the largest self storage REIT in the United States, with over 2,500 facilities in 38 states. The company was founded in 1972 and has a market capitalization of over $47 billion as of September 2021.
Extra Space Storage (EXR): Extra Space Storage is the second-largest self storage REIT in the United States, with over 1,900 facilities in 40 states. The company was founded in 1977 and has a market capitalization of over $21 billion as of September 2021.
CubeSmart (CUBE): CubeSmart is a self storage REIT that operates over 1,200 facilities in 38 states. The company was founded in 2004 and has a market capitalization of over $9 billion as of September 2021.
Life Storage (LSI): Life Storage is a self storage REIT that operates over 950 facilities in 34 states. The company was founded in 1982 and has a market capitalization of over $7 billion as of September 2021.
National Storage Affiliates Trust (NSA): National Storage Affiliates Trust is a self storage REIT that operates over 800 facilities in 35 states. The company was founded in 2013 and has a market capitalization of over $5 billion as of September 2021.

These self storage REITs have grown in popularity due to the growing demand for self storage units and the stable income generated by renting out these units monthly. They offer investors a way to invest in real estate without buying property.

The Bottom Line

Self storage REITs can be a good investment option for income-seeking investors and those looking to diversify their portfolio with exposure to the real estate sector.

Self storage REITs also offer the potential for long-term growth and diversification in a portfolio. However, as with any investment, it’s important to conduct thorough research and seek the advice of a financial professional before making any investment decisions.

Arrived Homes Review 2025: Invest in Rental Homes with only $100

Arrived Homes is a real estate investing platform that lets you buy fractional shares in long-term and vacation rental properties with a low minimum investment.

Quick Summary:

Arrived Homes is a long-term rental and vacation real estate crowdfunding platform that allows non-accredited investors to invest passively in real estate for just $100.

Overall Rating:

Property Quality:

Tools & Features:

Ease of Use:

Price:

Best For:

Buy and hold investors

PROS

Low $100 min investment
Taxed as a REIT
Recreates economics of traditional property ownership

CONS

No dividend reinvestment features
Non-recourse loans tend to have higher interest rates on properties that have financing.

Fees:

1% Asset management fee

Returns:

2.4% – 8% in annual dividends (historical)

Features:

5 – 7 year investment horizon

Focuses on long-term and vacation rentals

Multiple account types

Weekly market recaps

Mobile App?

Current Promotions:

None listed

TRY ARRIVED

Arrived Homes: At a Glance

Minimum Investment: $100
Investment Options: Long-term rentals, vacation rentals
Investment Horizon: 5 – 7 years
Returns: 2.4% – 8% in annual dividends (historical)
Sourcing Fee: 3 – 6% of property purchase price
Asset Management Fee: 1% of rental income
Account Types: Individual Accounts, LLCs, Trusts, Corporations, Self-directed IRAs, and solo 401(ks) (partners with Rocket Dollar)
Dividend Reinvestment? No
Early Redemption Features: Pending Regulatory Approval

What is Arrived Homes?

Arrived Homes is a real estate crowdfunding platform that enables individuals to invest in shares of long-term rental and vacation properties while passively earning income from rent and potential property appreciation.

This real estate investing platform is backed by serious players in the Venture Capital world, including funding from Jeff Bezos’s VC arm, Bezos Expeditions.

The company was founded in 2019 by tech veterans Ryan Frazier, who is also the CEO, Kenny Cason, and Alejandro Chouza.

Since its inception, Arrived has funded over $65 million worth of transactions across over 185 properties.

Arrived Homes is headquartered in Seattle, Washington.

How Does Arrived Homes Work?

Arrived homes allows individuals to buy shares in single-family long-term rental and vacation homes owned and entirely managed by Arrived.

Instead of buying an entire rental property, investors can buy fractionalized shares of an investment property and receive a pro-rata portion of rental income and potential property appreciation, less expenses, and fees.

Arrived takes full operating responsibility for the rental property, including finding and vetting renters, dealing with maintenance, repairs, payment collection, and any ad-hoc tenant requests or concerns.

Arrived also budgets for ongoing operating expenses, both planned and unplanned. They maintain a cash buffer equivalent to approximately 2% of the property value that can be used for an unexpected tenant vacancy or expense.

In addition, Arrived Homes also budgets for expenses like property tax, insurance, and maintenance. Expected dividends are quoted net of operating expenses.

Who Should Invest With Arrived Homes?

Arrived homes is good for…

Investors who want to dabble in real estate investing without committing large amounts of capital.
Portfolio diversification

Arrived homes is not good for…

Investors who cannot commit to locking up their money for 5 – 7 years

Investment Options

Arrived Homes offers a wide range of long-term rental and vacation properties across the United States while targeting a 5 -7-year holding period.

Through the Arrived Marketplace, you can filter and sort properties based on property location, neighborhood quality, long-term rental vs. vacation rental, return type, amount of leverage used, and much more.

1) Filter and find real estate investments that suit your goals

Property Location
Neighborhood Quality
Long-Term vs. Vacation Rental
Return Type (Appreciation, Balanced, Dividend Focused)
Leverage (None, Low, Medium, High)

2) Once you find a property that piques your interest, you can view a detailed property analysis.

The research includes helpful information like targeted and historical returns for that market, property location, images of the actual property, and offering details, including the purchase price and associated fees.

Arrived does not list information serious real estate investors would be interested in reviewing, like the purchase agreement, inspection report, and appraisal. Hopefully, Arrived Homes will add these details in the future.

Partial Property Ownership Explained

When you purchase shares in an Arrived home offering, you buy ownership in a Series LLC that owns the home.

The LLC protects shareholders from personal liability and allows the investment to be taxed as a REIT, which provides valuable tax benefits for investors. Furthermore, the LLC structure allows Arrived to fractionalize the homes into shares for investing.

Partial Ownership Example
If you purchase 1% of the shares in a single home offering, you are entitled to 1% of any quarterly dividend distributions and 1% of any increase in the price per share or proceeds when the property is sold.

Arrived Homes manages all aspects of property management, while investors have no operational responsibility.

The Arrived Homes business model recreates the economics of traditional home ownership without the hassle.

Fees

There are no fees to open an account or other recurring fees; you only incur costs once you invest. Arrived charges main 2 types of fees: a sourcing fee and an asset management fee, plus some ongoing fees.

Sourcing Fee

A one-time fee is charged to investors to help cover the work required to source properties and holding costs incurred while preparing a property for investors. I reviewed a handful of properties, and the sourcing fee ranges from 3% – 6% of the purchase price.

The sourcing fee for each property is listed in the offering details section of each property page.

Meanwhile, other arrived homes reviews did not mention this, but the service fee is reasonable. Another rental investing platform, Here.co, charges up to a 16% sourcing fee.

Asset Management Fee

1% paid quarterly out of rental income to investors. The 1% asset management fee is on par with other real estate crowdfunding platforms like Fundrise.

Property Management Fee

8% of rental income. The property manager does not collect a fee if the property is not rented. Standard property management fees range between 8% – 12% for individual properties, so I thought Arrived would have been able to negotiate a lower management fee due to the volume of properties they manage.

Disposition Fee

If a property is sold, investors will pay a disposition fee of 6-7% of the sale price. The disposition fee covers brokerage commissions, title escrow, and closing costs.

Redemption Options

Real estate, in general, is considered a long-term investment, and Arrived Homes is no exception.

While the company targets a 5 – 7-year holding period, Arrived has plans to offer a redemption program, pending regulatory approval.

If approved, investors can liquidate their shares every quarter if held for at least 6 months.

But it’s important to note that share redemptions may be subject to early redemption fees, and Arrived does not guarantee that redemptions will always be possible. Early redemption fees can significantly eat into potential returns, so I wouldn’t plan on investing without holding until the rental property is sold.

Returns

Since its inception in 2019, Arrived Home investors have earned between 2.4% and 8% in annual dividends, not factoring in any potential property appreciation.

All open investments will list their anticipated returns on the offering details page, and all anticipated dividends are quoted after operating expenses.

Because Arrived Homes are still in its infancy, this real estate investing platform has yet to realize any returns through property sales.

To provide some context, over the last 20 years, single-family homes in the United States have appreciated an average of 3.9% per year.

Many factors determine how much money you can make investing through Arrived Homes. Local market dynamics and general economic conditions weigh significantly on individual property returns.

And while it’s never guaranteed, the historical returns show a 4.7% – 12.8% combined annual return on investment from investing in rental homes.

This potential highlights the unique value-add of single-family homes and a way to add diversification and reduce volatility in your overall investment portfolio.

Opening an Account

Once you find a property that suits your needs, you can open an account in under 4 minutes and start investing.

To open an account, you must be at least 18 years old and a U.S. citizen or resident. But unlike other real estate investing platforms, you don’t need to be an accredited investor with Arrived.

Investments can be made through individual accounts, LLCs, Trusts, and Corporations. Through Arrived’s partnership with Rocket Dollar, you can invest through self-directed IRAs and Solo 401(k)s.

Browse Homes – Investors browse the available Arrived homes open to new investors and already pre-vetted based on their income potential.
Select Shares – Investors determine how much money they want to invest in each home and select shares.
Sign & Invest – Investors review the terms, sign an online contract, and fund the investment by linking their bank account.
Earn Income – Investors sit back and collect their share of net rental income and participate in the property value appreciation.

Best Alternatives

With a minimum investment of just $100 and accessibility to non-accredited investors, the barriers to investing in single-family rentals through Arrived Homes are low. But its limited track record (founded in 2019) could be a reason for apprehension for some potential investors.

Many other real estate crowdfunding platforms offer a wider breadth of investment options with unique and helpful features.

Feature
Overall Rating
Minimum Investment	$100	$10	$10
Fees	1% Asset Management Fee	None, borrower pays	1% Asset Management Fee
Property Types	Single Family & Vacation Rentals	Residential Fix and Flip	Commercial REITs
Types of Accounts	IRAs, Solo 401K	IRAs	IRAs
	SIGN UP	Read Review	Read Review

Groundfloor is my favorite real estate crowdfunding platform. Groundfloor provides short-term loans to real estate flippers. With an average loan duration of 10 months and average interest of around 10.8%, coupled with a low $10 minimum investment, it’s a way to get your feet wet in real estate investing without committing for an extended period or a lot of money.

Fundrise is another popular real estate investing platform. One of the oldest online real estate investing platforms around, Fundrise allows you to invest in a wide variety of REITs and Funds with various investment strategies, from Midwest REIT strategies to commercial real estate investments; there is an option for everyone.

Fundrise also has a minimum investment of just $10, but like Arrived, it requires you to lock up your funds for at least 3 – 5 years.

Is Arrived Homes Worth It?

Arrived Homes offers a unique business model, unlike most other real estate crowdfunding platforms.

Because real estate crowdfunding is a great way to invest in real estate without becoming a landlord, with a minimum investment of $100, you can give Arrived Homes a try without putting a substantial amount of your capital at risk while also gaining exposure to an unfamiliar real estate market.

But make no mistake, while Arrived markets itself as a hands-off investing platform, you are paying for that “passivity” in the form of management and service fees.

That said, given its limited operating history, I certainly wouldn’t liquidate my 401K or 403B and invest it in real estate, but if you want to explore other alternative investments as part of your diversification strategy, investing with Arrived Homes is worth a shot.

Frequently Asked Questions

401K vs. Real Estate with George Washington in background

401K vs. Real Estate Investing: Which Is Better?

One of the biggest debates in personal finance revolves around the choice between 401k vs real estate investments.

401K vs. Real Estate behind George Washington

The path to financial freedom and a comfortable retirement is paved with crucial investment decisions.

Both options have merits and drawbacks, but which fits your financial goals, risk tolerance, and preferences?

In this blog post, we will explore the ins and outs of both 401k and real estate investments, compare their risks and returns, and provide strategies for combining the two to create a well-rounded investment portfolio.

Key Takeaways

401k investments offer tax advantages, employer matching, and diversification benefits but come with fees & penalties for early withdrawals.
Real estate investing provides potential rental income, property appreciation & legacy building opportunities.
When comparing 401k vs real estate, consider management responsibilities & your financial goals to create a balanced portfolio.

Understanding 401k Investments

401k investments are popular retirement accounts that offer the following benefits:

Tax Advantages: Contributions to a 401k are made pre-tax, which reduces your taxable income and lowers your current tax burden.

Employer Matching: This is a significant benefit of 401k investments. Many employers offer matching contributions to their employees’ 401k plans.

Diversification: 401k plans typically offer a range of investment options, allowing you to diversify your portfolio.

Diversification is another perk of 401k investments, as they allow you to spread your investments across various asset classes, reducing risk and volatility. However, 401k investments have limitations, such as restricted investment options and gradual growth over time.

Tax Advantages of 401ks

One of the main benefits of investing through your 401K is the tax advantages they provide. Pre-tax contributions lower your taxable income, meaning you pay less in taxes today.

Furthermore, your investments grow tax-deferred in tax-advantaged retirement accounts, allowing your money to compound without the drag of taxes until you withdraw the funds in retirement. This can potentially result in lower tax rates upon withdrawal, depending on your income level at that time.

Keep in mind early withdrawals from a 401k may incur penalties and taxes.

Employer Matching

Employer matching is a significant benefit of 401k investments. Many employers offer matching contributions to their employees’ 401k plans, meaning they will match a certain percentage of your contributions, effectively providing “free money” for your retirement savings. According to Fidelity Investments, the average employer match is approximately 3%, dollar for dollar. So, if you contribute $100, your employer will contribute $3.

This can significantly boost your retirement savings and help you reach your financial goals more quickly. Being mindful of your employer’s plan’s specific rules and vesting schedules is crucial to maximizing your benefits.

Diversification

Diversification is a crucial advantage of 401k investments. You can reduce risk and volatility in your portfolio by spreading your investments across different asset classes, such as stocks, bonds, and mutual funds.

However, 401k investment options are often limited to what the financial institution allows, restricting your ability to diversify your portfolio further. Despite this limitation, diversification within a 401k is still a fundamental part of retirement planning.

Pros and Cons of 401ks

401k investments have their pros and cons, like any other investment option. While providing tax advantages, employer matching, and diversification benefits, 401ks also come with limited investment options, some high fees, and penalties for early withdrawals.

Grasping the pros and cons of 401k investments is key to making informed retirement strategy decisions.

PROs of 401ks

The PROs of 401k investments include:

Tax Advantages: 401k investments can lower your taxable income and defer taxes on investment growth until retirement.

Employer Matching: Many employers offer matching contributions to your 401k, which is essentially free money.

Diversification: 401k plans typically offer a range of investment options, allowing you to diversify your portfolio.

Employer matching contributions can boost your retirement savings, providing additional funds for your future. Diversification across various asset classes reduces risk and volatility in your portfolio, making 401k investments a more stable retirement option.

CONs of 401ks

On the other hand, 401k investments come with their share of drawbacks.

Limited Investment Options: Restrict your ability to diversify your portfolio further, and you may miss out on potentially lucrative investments outside the provided options.

Fees: associated with 401k plans, such as administrative fees and management fees, can erode your retirement savings over time. Early withdrawals from a 401k may be subject to penalties and taxes, which can significantly impact your financial goals.

Real Estate Investing

Real estate investing offers an alternative to 401k investments, with benefits such as rental income, property appreciation, and leverage. Investing in real estate allows you more control over your investment decisions, from choosing the property type and location to deciding when to invest.

In addition, real estate investments can provide a hedge against inflation and the opportunity to build a lasting legacy.

Rental Income and Cash Flow

One of the main advantages of real estate investing is the potential for steady monthly cash flow and passive income from rental properties. Tenant payments can cover expenses and provide a steady stream of income, allowing for financial independence and early retirement for some investors.

However, managing rental properties requires active involvement, including finding tenants, collecting rent, and maintaining the property.

Property Appreciation

Real estate properties can appreciate in value over time, increasing your net worth and providing potential capital gains upon the sale of the property. While appreciation rates can vary depending on factors such as market conditions, location, and property improvements, real estate investments can offer long-term growth potential for investors.

Leverage and Mortgage Financing

Leverage through mortgage financing is another advantage of real estate investing, allowing you to control a larger asset with a smaller initial investment. This can result in higher returns and accelerated wealth growth for investors willing to take on the additional risks associated with leverage.

Yet, comprehending the risks and responsibilities associated with mortgage financing and leverage in real estate investing is vital.

Pros and Cons of Real Estate

Real estate investing, like 401k investments, has its pros and cons. The advantages of real estate investing include owning a tangible asset, the potential for higher returns, and tax benefits, while the downsides encompass capital-intensive investments, management-intensive investments, lack of liquidity, and potential market fluctuations.

Pros of Real Estate

The pros of real estate investing include:

Tangible assets provide a sense of stability and security compared to intangible assets like stocks and bonds
Potential for higher returns
Tax benefits

Real estate investments offer these advantages in the ever-changing real estate market.

Additionally, real estate investments can offer higher returns than other investments due to the possibility of appreciation and rental income. Tax benefits of real estate investing include deductions for mortgage interest, property taxes, and depreciation, providing additional financial advantages.

CONs of Real Estate

The cons of real estate investing include:

The need for active management

Capital-intensive investments

Illiquidity

Potential market fluctuations

Managing rental properties requires continuous involvement, from finding tenants to maintaining each rental property.

Real estate investments are capital-intensive, often requiring a significant upfront investment and ongoing expenses. Additionally, real estate investments are illiquid, meaning they cannot be quickly converted to cash when needed.

Lastly, real estate investments are subject to market fluctuations, which can impact the value of your investment.

Comparing Risk and Return

When weighing the risk and return of 401k and real estate investments, one must factor in elements such as market volatility, management responsibilities, and investment control.

Market Volatility and Diversification

Real estate investments can provide a hedge against market volatility, including the stock market, and offer diversification benefits compared to traditional investments like stocks and bonds.

By investing in real estate, you can potentially achieve more stable returns and reduce the impact of market fluctuations on your investment portfolio.

Management Responsibilities

Real estate investing requires active management, including researching potential investments, finding and managing tenants, and maintaining the property. Property management company Hemlane points out that the average property owner spends 4 hours per month on their rental property.

Note: 4 hours a month on property management can add up to significant time requirements – especially if you do not live close to your rental property.

On the other hand, 401k investments are more passive, with nearly no management responsibilities, besides rebalancing your portfolio, if required.

Your personal preferences and available time should be considered when deciding between these two investment options.

Investment Control

Real estate investments offer a higher level of control over your investment decisions compared to 401k plans. Here are some reasons why:

You can choose the type of property, location, and timing of your investments
You have the ability to actively manage and improve your investment
Real estate investments can provide a steady stream of rental income

Overall, real estate investments give you more flexibility and control over your financial future, paving the way to financial freedom compared to traditional retirement plans like 401k.

This added control can be appealing to investors who prefer to be more hands-on with their investments.

Tax Implications and Benefits

Tax implications and benefits of both 401k and real estate investments should be taken into account when making investment decisions.

401k investments offer tax advantages, such as tax-deferred growth and potentially lower tax rates upon withdrawal. In contrast, real estate investments provide tax benefits like depreciation, lower capital gains tax rates, and the possibility of 1031 exchanges.

Tax Benefits of Real Estate Investing

Real estate investments offer several tax benefits, including:

Depreciation: allows investors to deduct the cost of the property from their taxable income, providing a tax advantage
Lower capital gains tax rates
Possibility of 1031 exchanges

Lower capital gains tax rates apply to profits from selling a property, which can result in significant tax savings compared to ordinary income tax rates. Lastly, 1031 exchanges enable investors to defer capital gains taxes when trading one property for another, allowing for tax-efficient portfolio growth.

Capital Gains Tax Comparison

Capital gains tax rates for 401k withdrawals and real estate investments vary depending on your taxable income and can range from 0% to 20%. Potential tax implications of both investment options should be taken into account when strategizing for your retirement.

While 401k investments may offer tax-deferred growth, they may also result in higher taxes upon withdrawal if your income level is higher in retirement. In contrast, real estate investments can provide lower capital gains tax rates and additional tax benefits like depreciation and 1031 exchanges.

Combining 401k and Real Estate Investments

Combining 401k and real estate investments is one strategy to consider for retirement planning. This approach can provide the benefits of both investment options, such as tax advantages, diversification, and the potential for higher returns.

Balancing retirement savings in a 401k with real estate investments can create a well-rounded investment portfolio tailored to your financial goals, risk tolerance, and preferences.

Balancing Retirement Savings and Real Estate Investments

Balancing retirement savings in a 401k with real estate investments can provide a diversified investment portfolio, reducing the risks associated with market volatility and fluctuations.

By maxing out your 401k contributions to receive any available employer match and investing in real estate, you can take advantage of both the tax benefits and potential returns of each investment option.

Real Estate Investment Trusts (REITs)

Real Estate Investment Trusts (REITs) offer a way to invest in real estate within a 401k or IRA. REITs are companies that own or finance income-producing real estate across various property sectors and can be traded on major exchanges, similar to stocks.

Investing in REITs can provide exposure to real estate investments without the need to own and manage physical properties, although they may not offer the same tax benefits and higher returns as directly owned real estate investments.

Bottom Line

401k and real estate investments both offer unique benefits and drawbacks when it comes to retirement planning.

401k investments provide tax advantages, employer matching, and diversification, while real estate investments offer tangible assets, potential for higher returns, and immediate tax benefits.

Ultimately, the best investment strategy depends on your individual financial goals, risk tolerance, and investment preferences. By carefully considering the pros and cons of each investment option and exploring strategies for combining the two, you can create a well-rounded investment portfolio tailored to your needs and set yourself on the path to financial freedom.

Frequently Asked Questions

Is it better to invest in 401k or real estate?

Investing in a retirement fund with diversified stocks is the best option if the goal is to retire at a common age with a set amount of savings. However, real estate can be a good investment option if you have enough capital and a tolerance for risk and want to increase your wealth to retire early.

Is it better to save for a house or 401k?

It can be difficult to decide between saving for a house or retirement, but generally, it’s best to prioritize retirement savings. Even if you’re planning on purchasing a home, contributions to a 401k or IRA can yield larger returns on your investment and help you build long-term financial security.

Should you take money out of 401k to invest in real estate?

It is possible to use both your 401k and individual retirement accounts (IRAs) to invest in real estate without suffering steep withdrawal penalties. However, it may not be cost-effective as you could be pushing a large chunk of your income into a higher tax bracket and miss out on cash flow benefits.

What is the 2% rule in real estate?

The 2% rule states that rental income from an investment property should equal or exceed 2% of the purchase price. For example, a home purchased for $150,000 would have a rental income of $3,000 per month.

Can I invest in both 401k and real estate simultaneously?

Yes, it is possible to invest in both a 401k and real estate simultaneously. This will allow you to diversify your investment portfolio and create a more secure retirement plan.

Yieldstreet vs. Fundrise Review 2025

Yieldstreet vs. Fundrise: Which Investment Platform Delivers Higher Yields and Greater Investor Returns?

At a Glance:

KEY FEATURES
QUICK SUMMARY	An alternative investment platform for accredited and non-accredited investors that enables them to invest in alts such as real estate, art, and legal finance	Real estate investment platform that offers a wide variety of REITs and Funds with varying strategies and property types
MINIMUM INVESTMENT	$10,000	$10
FEES	Varies	1-1.85%/yr
INVESTMENT OPTIONS	Alternative investments Art Real estate debt	Multi-family Comercial REITs Interval funds

Who should use these platforms?

Yieldstreet is good for…

Accredited Investors: YieldStreet’s offerings are generally limited to accredited investors. This means individuals who have earned income exceeding $200,000 (or $300,000 for joint income) for the last two years with the expectation of the same for the current year or have a net worth over $1 million, either alone or together with a spouse (excluding the value of the person’s primary residence).
Investors Seeking Diversification: YieldStreet allows investors to diversify their portfolios beyond traditional investment products such as stocks, bonds, or mutual funds. If you’re an investor looking to broaden your portfolio with alternative assets, YieldStreet can offer this opportunity.
Investors Seeking Passive Income: The investments on YieldStreet generally provide passive income through interest or rental payments, making it a good platform for those interested in generating steady cash flow.
Investors with Long-term Investment Horizons: Most YieldStreet offerings have a term of 1-5 years and are not easily liquidated before the end of the term. Therefore, this platform is more suitable for investors who can afford to have their capital locked up for an extended period.

Fundrise is Good for…

Non-Accredited and Accredited Investors: Unlike many other real estate investing platforms, Fundrise opens up opportunities to non-accredited investors, allowing more people to invest in real estate. It also offers advanced plans for accredited investors.
Investors Seeking Diversification: Fundrise can be a great tool for portfolio diversification. It allows investors to spread their funds across multiple real estate projects rather than tying up large amounts of capital in a single property.
Investors Interested in Passive Income: Fundrise offers eREITs (electronic Real Estate Investment Trusts) and eFunds, which typically distribute dividends, offering investors the opportunity to earn passive income.
Long-term Investors: Fundrise’s investments are most suitable for those with a long-term investment horizon, as real estate is traditionally a long-term investment, and there may be penalties for early withdrawal.
Investors who Prefer Hands-off Approach: For those who want to invest in real estate but don’t want the hassle of managing properties, Fundrise can be a good fit. The platform handles all the details of property acquisition, management, and disposition.

PROs and CONs

Yieldstreet

PROS

Less than 10% of investment opportunities have made it onto the platform
Wide range of alternative investment options
Low stock market correlation

CONS

Most individual investments are open only to accredited investors only (1except the prism fund)
Limited liquidity options

Fundrise

PROS

$10 minimum investment
Investor goals and tools
Wide range of real estate investment options

CONS

Limited liquidity
No investment options outside of real estate

What is Yieldstreet?

Yieldstreet is a crowdfunding platform that specializes in collateralized alternative investments. Alternative investments are unique because they typically have a low correlation to stock market movement.

Yieldstreet primarily caters to accredited investors who want to invest in alternative asset classes such as Art, Commercial, Consumer, Litigation Financing, Real Estate, and Corporate. All loans on Yieldstreet’s platform are asset-based, meaning they are secured by collateral, providing a way to recoup your investment in the case of a default.

Founded in 2014 by Milind Mehere and Michael Weisz, a strong duo who collectively have extensive experience in entrepreneurship and alternative investing.

Since its inception, Yieldstreet has funded over $4 billion in investments and boasts over 400,000 registered users.

The company is headquartered in New York City.

Read our full Yieldstreet Review

What is Fundrise?

Established in 2010, Fundrise is one of the oldest real estate crowdfunding platforms. Fundrise offers people an alternative option to investing in commercial real estate through its eREITs and eFunds without the stress and costs of traditional real estate investing.

In its latest foray, Fundrise has recently started to branch out of real estate through the launching of its Innovation Fund. Launched in mid-2022, the Innovation Fund invests in late-stage private technology companies and some public equities.

Fundrise boasts various investment options and strategies, goal-planning features, and a user-friendly investment dashboard.

More than 2 million people use Fundrise today and have invested over $7 billion in properties throughout the U.S. Fundrise has had 21 consecutive quarters of returns, averaging 22.99% in 2021.

Fundrise is based in Washington, DC, and was founded by Ben Miller, who has over 20 years of experience in the real estate industry.

Read our full Fundrise Review.

How does investing with Yieldstreet work?

Below, we’ll go through how Yieldstreet works, from opening an account to selecting an investment.

1. Open Your Account

Start by creating an account on the YieldStreet website. During the registration process, you’ll need to provide personal details and financial information to determine if you meet the criteria to become an accredited investor.

Once your Yieldstreet account is opened, you can view all open and some recently closed investments. After investments pass a thorough due diligence process, they are listed on the Yieldstreet platform for investing.

2. Accredited Investor Verification

To invest with YieldStreet, you must be an accredited investor. This generally means having an income exceeding $200,000 (or $300,000 combined income if married) for the past two years and expecting the same in the current year, or having a net worth over $1 million, excluding the value of your primary residence. YieldStreet will verify this information during the signup process.

Note: Individual investments are only open to accredited investors, but non-accredited investors can always invest in the Yieldstreet Prism Fund, which has a minimum investment of $10,000 and is invested across 5+ alternative asset classes. It provides quarterly distributions and liquidity options.

3. Explore Investment Options

Once your Yieldstreet account is opened, you can view all open and some recently closed investments. After investment passes a thorough due diligence process, they are listed on the Yieldstreet platform for investing.

YieldStreet provides a wide array of options, including real estate, marine finance, legal finance, and more. For each offering, you can review details like the investment premise, expected returns, and fees, to name a few.

You can also view metrics such as strategy, minimum investment, asset class, and if the investment is IRA eligible. Individual investments have a minimum investment of $10,000.

Yieldstreet investments — _{Yieldstreet open investments}

How Does Investing with Fundrise Work?

With Fundrise, you are investing in either Fundrise eREITs or eFunds with a minimum investment of just $10.

eREITs and eFunds comprise a basket of non-traded real estate properties, from multifamily apartments to industrial complexes. The eREITs and eFunds aim to seek a combination of dividend distribution and capital appreciation, depending on the strategy.

When you open an account with Fundrise, they offer a wide range of account levels; Basic accounts require a minimum investment of $10, and its Advanced Portfolio requires a minimum investment of $10,000. The premium level is reserved for accredited investors only, with a minimum investment of $100,000.

However, Fundrise’s most popular account is its ‘Core’ portfolio, which has the most investment options and features. A Core account requires a minimum investment of $5,000.

You can create a customized investment strategy at the Core account level and above. Investors can customize their portfolio by diversifying across a wider variety of funds with specific objectives, such as income, growth, and balanced.

Head-to-Head Comparison

In this Yieldstreet vs. Fundrise review, we will look closely at a few categories, including investment options, returns, fees, user experience, and much more.

Investment Options

Winner: Fundrise

Yieldstreet offers a broader range of investment options compared to Fundrise. However, you must be an accredited investor to access most of Yieldstreet’s investment offerings.

Not only does Yieldstreet offer real estate investing like Fundrise, but you can also get instant diversification by investing in their Prism Fund, which invests across 8 alternative asset classes, including real estate. The Yieldstreet Prism fund is open to non-accredited investors with a minimum investment of $10,000.

However, Fundrise is a real estate investment platform, and Yieldstreet is an alternative investing platform. Alternative investing can span many products, including art, private credit, litigation financing, and real estate.

While Fundrise does not offer many investment options outside of real estate except for its Innovation Fund, they have a wide variety of real estate eREITs and eFunds to choose from.

At the same time, Yieldstreet also offers a wide range of investment options in the alternative investment space.

Therefore, Fundrise and Yieldstreet have a respectable number of options for their respective specialty.

Yieldstreet Investment Options

Yieldstreet offers 3 types of investments to its users:

Individual investments (available to accredited investors only) and minimum investment starts at $10,000,
Prism Fund (Open to all investors) with a minimum investment of $10,000
Short Term Notes (accredited investors only) with a minimum investment of $10,000.

Yieldstreet boasts a truly diverse range of alternative investments across multiple asset classes throughout the capital stack. Some of their strategies include income, growth, and balanced.

Some of Yieldstreet’s most popular investment options include:

Prism Fund (invested across most asset classes offered by Yieldstreet)
Real Estate (Income and Growth strategies)
Private Credit
Litigation Financing (Cash advances on future litigation claims)

Fundrise Investment Options

Fundrise investment options primarily focus on real estate investing across the capital stack, except for its newly launched Innovation Fund. Fundrise has 11 active eREITs and 2 eFunds. Like Yieldstreet, Fundrise strategies range from income generation to growth, with varying degrees of risk.

Returns

Winner: Yieldstreet

Yieldstreet returned 9.66% IRR (Internal Rate of Return), net of fees since 2015. Meanwhile, Fundrise returned 5.29% net of fees across all clients since 2017.

So Yieldstreet has better returns than Fundrise. However, Fundrise does not advertise its returns before 2017, so we are comparing returns between Yieldstreet and Fundrise during different periods, so take that with a grain of salt.

Yieldstreet returns: 9.66% IRR since 2015
Fundrise: 5.29% since 2017

Furthermore, while total returns are important, the returns do not take into account the level of risk involved in the investment and liquidity events.

The riskier an investment is, the greater the returns are likely(think equity investments). And conversely, the lower investment is in the capital stack (debt investment), the lower the risk and the corresponding returns will be. Many Fundrise and Yieldstreet investments invest across the entire capital stack.

As a discerning investor, it’s critical to understand that risk and return are generally correlated before investing.

In addition, Fundrise focuses on real estate investing, while Yieldstreet focuses on more esoteric asset classes, which tend to be more illiquid and should have a higher return.

Fees

Winner: Tie

Yieldstreet charges a management fee between 1 – 4%, depending on the investment. All targeted returns listed by Yieldstreet are quoted net of listing and management fees but not the flat rate annual expenses. The flat rate annual expense fee is charged on each investment and is deducted from your first interest distribution; this fee varies per investment and is applicable for each investment. There are no fees to sign-up for the Yieldstreet platform.

I wish Yieldstreet was a little bit clearer that the returns are net of management fees but not the flat rate annual expenses, I find this a little misleading and could easily be misunderstood. While it’s listed in the offering documents, I’m sure plenty of individuals overlook the flat rate expenses.

Meanwhile, Fundrise charges a 1% management fee per year, comprising a 0.85% management fee and a 0.15% advisory fee.

The management fee is used for investment allocation and advisory oversight of their real estate projects. The advisory fee is used to reimburse Fundrise for expenses related to building its platform, e.g., customized client performance reporting and customer support and investor relations.

It’s also worth noting that depending on the investment, additional fees are often buried in the offering circular that Fundrise does not advertise. All returns quoted by Fundrise are net of fees.

Yieldstreet fees: 1-4%, depending on the investment + flat rate annual expense (which varies per investment)
Fundrise fees: 1% of AUM (0.85% management fee + 0.15% advisory fee)

That said, there’s no clear winner when it comes to fees, so it’s a tie between Fundrise and Yieldstreet in the fees category.

User Experience

Winner: Tie

Both Yieldstreet and Fundrise have a well-designed website and investment platform, making it easy to sign-up, browse investments, and manage your portfolio.

In addition, Yieldstreet and Fundrise offer a mobile app for download in the Apple App Store and Google Play.

Yieldstreet’s incredibly well-designed interface shows you a summary of your Yieldstreet investments and their performance. You can also view your total amount invested on Yieldstreet and any accrued interest that has not been paid.

Yieldstreet User Interface — Yieldstreet Portfolio Overview

Other Features and Benefits

Outside of investing, Yieldstreet offers an FDIC-insured checking account called Yieldstreet Wallet. The Yieldstreet Wallet earns 3.25% annual interest on funds held, and your wallet is automatically created when you set up your investor account. However, 3.25% is lower than what you can earn at other “high yield” bank accounts.

On a more positive note, funds are FDIC-insured for up to $1 million. Yieldstreet Wallet also gives you the ability to move funds instantaneously between different assets on the platform, by avoiding delays caused by transferring funds from external accounts.

Meanwhile, if you invest $1,000 or more with Fundrise, you can buy an ownership stake in Fundrise, the company itself, the Fundrise iPO. Furthermore, if you refer others who sign-up and invest with Fundrise, you can earn bonus shares between $25 and 100 per referral.

Yieldstreet other benefits: FDIC-Insured High Yield Checking Account
Fundrise other benefits: Ability to invest in the Fundrise iPO and $25 – $100 referral bonuses.

Bottom Line

The truth is that Yieldstreet is more of an alternative investing platform, and Fundrise is primarily a real estate crowdfunding platform. While both platforms have delved slightly out of their specialties over the past few years, it’s best to stick with the basics.

If you are more interested in strictly real estate investing, Fundrise is a better option. However, if you want to invest in alternative assets with non-correlated returns outside of real estate, Yieldstreet is a better option.

That said, Yieldstreet only caters to accredited investors except for its Prism Fund offering, making it an unavailable option for many investors. Meanwhile, Fundrise focuses on non-accredited investors, and therefore you can sign-up with just $10.

Either way, both Yieldstreet and Fundrise are legitimate investing platforms that have been around for many years. Both platforms offer an excellent alternative to investing outside publicly traded stocks, ETFs, and bonds.

Review Methodology

When I decided to compare Yieldstreet and Fundrise, I knew there were a few critical aspects to consider.

Tools and Features

We dig deep into the suite of tools that each platform offers. Whether it’s automated investment features, tax-optimization, or specialized charting tools, we evaluate how these features contribute to smarter investing decisions. We ask questions like:

What is the investment offering, and how does it compare to its peers?
How effective are the risk assessment tools?
Are there any value-added services like educational content?

Price and Value

Price matters, especially when it comes to investing, where every penny counts. We analyze:

Subscription fees
Hidden Charges
Price compared to the overall value received

We’ll let you know if the platform gives you the most bang for your buck.

Ease of Use

User experience can make or break an investment platform. We assess:

Interface Design – Is it intuitive and easy to use?
Mobile app availability and functionality
Customer Support – where applicable.

Nobody wants to navigate a clunky interface when dealing with their hard-earned money.

Returns

We compare total returns and try to make an unbiased analysis of any investment returns taking into account any nuances of the asset class.

How We Do It

Hands-On Testing: We sign up for accounts and put the platform to the test. This is how we give our nuanced opinion.
Customer Reviews: What are other users saying? We look at reviews and customer feedback to gauge public opinion. I may overlook a feature or functionality that others may notice.
Comparative Analysis: Finally, we compare each platform against competitors in terms of features, pricing, and user experience.

We take a comprehensive approach so that you don’t have to.

By sticking to this methodology, I hope to guide you toward investment tools and products that align with your financial objectives. Happy investing!

7 Best Real Estate Investing Apps of 2025

We’ve compiled a list of the Top 7 Real Estate Investing Apps in 2023 that have transformed the landscape for investors and can allow you to start investing with as little as $10

Best Real Estate Investing Apps

In today’s digital age, investing in real estate has become more accessible and dynamic than ever before. Long gone are the days of needing hundreds of thousands of dollars to start your journey into property investment. With the help of technology, you can now dip your toes into the world of real estate through your smartphone or computer, using the power of real estate crowdfunding and REITs.

We’ve compiled a list of the top 7 real estate investing apps in 2023 that have transformed the landscape for investors: Fundrise, Groundfloor, Streitwise, RealtyMogul, EquityMultiple, Fund That Flip, and Arrived Homes.

Let’s dive deeper into each one.

1. Fundrise

Best for: Beginner Real Estate Investors

Try Fundrise with just $10

Overview: Fundrise is a crowdfunded real estate investing app that allows small investors to put their money into large real estate projects and portfolios. Fundrise offers eREITs (electronic Real Estate Investment Trusts) and eFunds, and caters to both accredited and non-accredited investors.
Minimum Investment: $10
Investment Type: Real Estate Investment Trusts (REITs)
Fees: 1%/year
Pros: Low minimum investment requirement, diverse investment opportunities, and simple, user-friendly platform.
Cons: Investments are not very liquid, and there may be fees during the lifespan of the investment.
Current Promotions: None listed

Go Deeper: Read our full Fundrise Review

2. Groundfloor

Best for: Short Term Real Estate Investors

Overview: Groundfloor specializes in short-term, high-yield real estate debt investments, specifically in the form of real estate loans for renovation projects.
Minimum Investment: $10
Investment Type: Fix and Flip individual properties
Fees: None. Borrower pays.
Pros: Open to non-accredited investors, low minimum investment ($10), and potential for high returns.
Cons: Investments come with the risk of borrower default, and the platform mainly focuses on single-family residential properties, limiting diversification.
Current Promotions: None listed

Go Deeper: Read our full Groundfloor Review

3. Streitwise

Best for: Dividend Investors

Overview: Streitwise offers crowdfunded investments in commercial real estate. It focuses on creating and managing its own REITs, aiming for high dividends.
Minimum Investment: $5,000
Investment Type: Real Estate Investment Trust
Fees: None. Borrower pays.
Pros: Reasonable fees, access to commercial real estate opportunities, and solid dividend track record
Cons: Illiquid investment, minimum investment of $5000 could be high for some investors.
Current Promotions: None listed

Go Deeper: Read our full Streitwise Review

4. RealtyMogul

Best for: Active Real Estate Investors

Overview: RealtyMogul is a real estate crowdfunding platform that offers investments in commercial and rental real estate. They cater to both accredited and non-accredited investors, making this platform good for passive and active real estate investing.
Minimum Investment: $5,000
Investment Type: REITs, individual properties
Fees: 1-1.25% for REITs
Pros: Variety of investment options, including individual properties, REITs, and 1031 exchanges. Strong track record of successful deals.
Cons: High minimum investment for individual properties, illiquid investments.
Current Promotions: None listed

Go Deeper: Read our full RealtyMogul Review

5. Diversyfund

Best for: Multifamily Real Estate Investing

Overview: DiversyFund is a real estate crowdfunding platform that invests in multifamily real estate through a non-Ttraded REIT (Real Estate Investment Trust). The REIT currently manages 12 multifamily assets across 6 states with a current market value of $175 million.
Minimum Investment: $500
Investment Type: Real Estate Investment Trust (REIT)
Fees: 2%/year
Pros: Fund managers invest alongside investors,
Cons: No early redemption options, complicated fee structure
Current Promotions: None listed

Go Deeper: Read our full DiversyFund Review

6. Arrived Homes

Best for: Rental Property Investing

Overview: Arrived Homes is a platform that allows you to invest in rental properties by purchasing shares in individual homes.
Minimum Investment: $100
Investment Type: Single-family rental property
Fees: 1%
Pros: Offers a unique model of owning fractions of a rental property, low minimum investment, and potential for income from rental yields and property appreciation.
Cons: Relatively new to the market, which could come with inherent risks. No dividend reinvestment
Current Promotions: None listed

Go Deeper: Read our full Arrived Homes Review.

7. Fund That Flip

Best for: Rental Property Investing

Overview: Fund That Flip is a real estate crowdfunding platform focused on providing short-term loans for residential real estate flippers.
Minimum Investment: $5,000
Investment Type: Single Family Fix and Flip
Fees: 1-3% per investment
Pros: The platform offers quick turnarounds on loans and a strong track record. It offers high-interest rates to investors and caters to both novice and experienced investors.
Cons: Only available to accredited investors. Investments come with the risk of borrower default.
Current Promotions: None listed

Go Deeper: Read our full Fund That Flip Review.

The Bottom Line

Each of these apps and platforms offers unique ways to invest in real estate, catering to different financial goals and risk tolerance levels. While this list serves as a useful guide, it’s essential to conduct your own research and consider seeking advice from a financial advisor before diving into the world of real estate investing.

5 Best Real Estate Crowdfunding Platforms For Non-Accredited Investors

Below are some of the best real estate crowdfunding sites for non-accredited investors.

Many real estate crowdfunding platforms are only open to investors who meet a specific net worth or income requirement

Luckily there is hope for the rest of us.

Below I review the 5 best real estate crowdfunding platforms for non-accredited investors.

Accredited vs. Non-Accredited Investor

First, let’s clearly define the difference between an accredited and a non-accredited investor.

Accredited investors meet either the financial criteria or the professional criteria. If you do not meet any of these criteria, you are considered a non-accredited investor and are subject to more investment restrictions.

Financial Criteria

Net worth over $1 million, excluding your primary residence (individually or with spouse or partner)
Income over $200,000 (individually) or $300,000 (with spouse or partner) in each of the prior two years and reasonably expects the same for the current year.

Professional Criteria

Investment professionals in good standing holding the general securities representative license (Series 7), the investment adviser representative license (Series 65), or the private securities offerings representative license (Series 82)

Best Overall: Groundfloor

Groundfloor is an award-winning real estate crowdfunding platform founded in 2012.

Groundfloor enables non-accredited investors to invest in short-term real estate loans starting at just $10, with most loans averaging 6 – 12 months in duration, while most real estate crowdfunding platforms require you to lock up your money for at least 5 years or pay a fee to sell your shares early.

Plus, investors can pick which loans they want to fund, creating a truly diversified real estate portfolio on their terms.

Tehis is why Groundfloor is my number one choice for real estate crowdfunding investing if you are a non-accredited investor.

Minimum Investment: $10

10% average interest

GROUNDFLOOR PROS

Low Minimum Investment: Groundfloor has a very low minimum investment amount, typically around $10. This makes it highly accessible for people who are just starting to invest or who don’t have a lot of capital to work with.
Zero Fees For Investors: Borrowers pay fees.
Short Term Investments: The real estate loans on Groundfloor typically have relatively short terms, usually 6-12 months. This can be beneficial for those who want to see returns more quickly, rather than waiting for years as is typical with some other forms of real estate investing.
Risk/Return Profile: Groundfloor loans range from A (lowest risk) with yields starting at 5% to G (highest risk) with a yield starting at 15%. There are investment options for investors with all types of risk appetites.
Greater Control: You can choose the projects you want to fund and how much you want to invest in each project.

GROUNDFLOOR CONS

Lack of Liquidity: Investments made through Groundfloor are not liquid. Once your money is invested in a loan, it is tied up until the loan term is completed or the borrower pays back the loan
.Risk of Default: Like any lending platform, there’s always a risk that the borrower may default on their loan, resulting in a loss of your investment.
Limited Diversification: Groundfloor focuses exclusively on real estate, more specifically on single-family residential home loans for renovation projects. As a result, your portfolio diversification is limited.
No Secondary Market: Unlike some other lending platforms, Groundfloor does not currently have a secondary market where you can sell your loans if you need to exit the investment early.

Read our full Groundfloor Review

Runner-Up: Fundrise

Fundrise is arguably the most well-known real estate crowdfunding platforms.

They have been around since 2010 and boast over 300,000 investors on the platform. In reality, Fundrise isn’t a true crowdfunding platform like Groundfloor, but they still enable individuals to invest in private real estate through various REITs and Funds.

In addition, Fundrise allows investors to create a customized real estate investing strategy when they open a ‘Core’ account.

Fundrise’s low minimum investment and wide variety of investment options make it a great option for non-accredited investors.

Minimum Investment: $10

Fees: 1%

FUNDRISE PROS

Strong Track Record: 21 consecutive quarters of returns, averaging 22.99% across all investors in 2021.
Low Minimum Investment: Open an account with just $10
History: Most mature crowdfunding platform – founded in 2010
Customized Recommendations: Real estate portfolio recommendations are created for your risk tolerance.
Multiple Investment Strategies: Depending on your goal, they offer income generation and capital appreciation.
Mobile App: Fundrise is one of the few real estate platforms that offer non-accredited investors a mobile app.

FUNDRISE CONS

Longer Investment Horizon: The investment horizons on Fundrise are typically quite long, often five years or more. If you want to see quicker returns, Fundrise may not be the best choice.
Lack of Control: While Fundrise’s management of properties can be a pro for some, it could be a con for others who prefer to have direct control over their real estate investments.
Early Redemption Fees: While Fundrise does offer liquidity options if an investor wants to sell their shares early, there is a 1% early redemption fee if you held your shares less than 5 years.

Read our full Fundrise Review

Best For Passive Income: RealtyMogul

Minimum Investment: $5,000

6 – 8% distribution rate

The RealtyMogul Income REIT (Real Estate Investment Trust) is a public, non-traded REIT. The Realty Mogul Income REIT has made 64 consecutive months of distributions with an annual distribution rate of 6.00%. This is a great investment option for someone looking for purely reliable income generation through real estate investing.

REALTYMOGUL PROS

Consistent Income: The Income REIT has distributed 67 months of consecutive distributions with an annual distribution rate of 6-8% since its inception in 2016.
Thorough Due Diligence: RealtyMogul has a rigorous vetting process – to date, only 1.1% of opportunities have been funded.
Retirement Account Investing: You can invest in a retirement account through a self-directed IRA (SDIRA).
Diversification: Cash flow from equity and debt investments create diversification across the capital stack.

REALTYMOGUL CONS

High minimum investment
Fewer investment opportunities vs competitors

Read our full RealtyMogul Review

Best For Commercial Real Estate: Streitwise

Minimum Investment: $5,000

8-10% distribution rate

STREITWISE PROS

Same Investment Options For All Investors: Streitwise offers non-accredited and accredited investors the same investment options. Other platforms offer additional investment options or services for accredited investors.
Own & Operate Real Estate Investments: Most platforms do not own and operate the investments posted on their platforms. They serve as a middleman for real estate developers to raise funding for their projects. This can create a misalignment between investors and the company.
Transparent Fee Structure: Streitwise is upfront about its fee structure. There are no hidden fees buried in its offering documents.
Over $5 million skin-in-the-game: The founders invested over $5 million of their own money with Streitwise. This means there is a shared alignment between investors and shareholders.
Modest Leverage: Streitwise only borrows 51% to fund its current project. Modest leverage reduces risk and maximizes returns.
Dividend Yield: 8 – 10% quarterly dividend since 2017

STREITWISE CONS

Illiquidity: Like many real estate investments, investments made through Streitwise are not highly liquid. Although they offer a redemption plan, it’s limited and comes with early redemption penalties within the first five years.
Limited Investment Options: Streitwise primarily focuses on office properties, which may not suit investors looking for a more diversified real estate portfolio.
Minimum Investment: There is a relatively high minimum investment required to start, which could be a barrier for some investors.

A Note About Fees: Many real estate crowdfunding platforms advertise a fee between 1% – 2%, but there are often additional fees buried in their offering circulars that are not widely publicized.

Read our full Streitwise Review

Best For A Set-It And Forget It Approach: DiversyFund

Minimum Investment: $500

DIVERSYFUND PROS

Focused Value-Add Investment Strategy. The fund only focuses solely on a value-add investment strategy that targets an IRR of 10% – 20%. This means they acquire and renovate properties in order to increase value. Given that they only manage 1 type of strategy this allows the company to become experts at value-add strategies, which in the long run will be beneficial for their investors.
Preferred EquityReturns. Investors are given preference relative to common equity investors as it relates to cash flow distribution.
Skin-in-the-Game: This means the fund managers (DiversyFund) also invested their own money into the investments offered to its clients. This shows that the sponsor has a vested interest in making the deals profitable as they stand to make or lose money too.
Own and manage all their properties: Manages the entire process in-house. For some investors, this can provide peace of mind.

DIVERSYFUND CONS

Complicated Fee Structure: DiversyFund takes a 2% asset management fee, but they also take a performance fee of 7% on the profits, which could eat into your returns.
No Dividend Payments: While many REITs offer regular dividend payments, DiversyFund does not. The return on investment comes from the appreciation of the properties in the portfolio when they are eventually sold.
Illiquidity: . They do not offer a secondary market to sell your shares, and the investment is not meant to be short-term.

Read our full Diversyfund Review

The Bottom Line

For non-accredited investors interested in real estate crowdfunding, there is a wide range of options and features with varying minimum investments.

What matters is what are you looking for in your real estate crowdfunding experience. Some individuals like at perks and features of Fundrise, while others want a focused investment strategy like DiversyFund, while others may not want to lock up their money for 5 years.

Real Estate vs. Index Funds: Which Investment Is Better?

Real estate vs. index funds: which investment powerhouse reigns supreme for building long-term wealth and financial freedom?

Overview of Index Funds

Index funds are a type of mutual fund or exchange-traded fund (ETF) that aims to replicate the performance of a specific stock market index, like the S&P 500, NASDAQ, or Dow Jones Industrial Average.

The fund manager of an index fund purchases the same securities in the same proportion as the index being tracked, meaning that the fund’s returns should closely match the index’s returns.

This passive investment approach contrasts with actively managed funds, where fund managers try to outperform the stock market by buying and selling securities based on their analysis and predictions.

According to a recent article, not one actively managed fund consistently outperformed the stock market over the last 5 years.

Index funds are known for their low fees compared to actively managed funds because they follow a predetermined index and thus require less management and research.

In general, index funds are a popular and efficient way for investors to gain exposure to the stock market with low fees and implicit diversification.

You might also be interested in: The Ultimate Guide to Index Fund Investing

Overview of Real Estate

Real estate investing involves purchasing, owning, managing, renting, or selling real estate for profit. This can include various types of properties, such as residential homes, commercial buildings, and land.

There are several strategies for real estate investing, including:

Flipping: Buying a property with the intention of renovating and reselling it quickly for a profit.
Rental properties: Owning and renting out a property to generate rental income.
REITs: Investing in Real Estate Investment Trusts, companies that own and manage income-generating properties.
Real estate wholesaling: Contracting to buy a property and then selling the contract to another buyer at a higher price.
Real estate crowdfunding: Investing in real estate projects with a group of other investors through an online platform.

Successful real estate investing requires knowledge of the local market, a good understanding of financing options, and the ability to manage properties and tenants effectively. It also involves careful analysis and due diligence before making any investment decisions.

Advantages of Real Estate

Real estate investing can be a profitable way to build wealth, generate passive income, and diversify your investment portfolio. There are several advantages of real estate investing, including:

Passive Income

Real estate can be a great way to generate passive income. Passive income refers to income that you earn without having to actively work for it on a regular basis.

Owning rental properties is a common way to generate passive income from real estate. When you rent out a property, you receive monthly rent payments from your tenants. This income can be used to cover the property’s expenses, such as mortgage payments, taxes, and maintenance, while also generating a profit.

You Can Build Equity

Building equity in physical real estate is the difference between your property’s value and what you owe on your mortgage. Home equity is a way essentially a “forced savings” and a long-term wealth-building strategy.

While many people can argue that you can make more significant returns investing in the stock market, the “forced savings” of homeownership is still the largest financial asset for middle-income households, according to the Brookings Institute.

And while this article is more directed toward investment properties and not primary residences, the overarching concept still applies.

Disadvantages of Real Estate

While there are several benefits to investing in real estate, there are also risks and challenges, such as market fluctuations, property management issues, and unexpected expenses.

Maintenance

Owning physical real estate means there will be unavoidable maintenance costs. If you are unable or unwilling to manage the property yourself, you may need to hire a property management company. Property management companies charge 8% – 12% of your monthly rental income, which certainly isn’t chump change.

It’s important to note that a property management company doesn’t include the cost of repairs but more the management.

Tenant and Liability Risk

When you own rental property, there is always a risk that something catastrophic happens, and you could be sued due to negligence or perhaps you have an ambulance-chasing tenant.

According to a recent article, rental property insurance is about 25% more expensive than traditional homeowners insurance, which costs approximately $1,445, so you can expect to pay about $1,800 for rental property insurance, which eats into your investment property cash flow.

Advantages of Index Funds

Index funds are a popular and efficient way to gain exposure to the stock market. There are several advantages of index funds, including:

Passive diversification
Transparency
Accessibility
Low costs

Diversification

Investing in an index fund that tracks a major market index, an investor can own a diversified portfolio of stocks that represent a broad cross-section of the market. This reduces the risk of investing in individual stocks and can help investors achieve their long-term financial goals.

Low costs

One of the most significant advantages of index funds is their low costs. An index fund like Vanguard’s VOO has an annual fee of just .03%, nearly XX lower than actively managed funds and cheaper than real estate management fees.

Accessibility

Accessing index funds has become easier in recent years due to the growth of online investing platforms and brokerage firms.

Many popular online investment platforms, such as eToro, Webull, M1 Finance, and Robinhood, offer a wide range of index funds for investors to choose from. These platforms often have low fees and minimum investment requirements, making it easy for investors to get started with index fund investing.

In addition, many 401(k) plans and other retirement accounts now offer index fund options, making it even easier for investors to access these funds.

Stock,Market,Or,Forex,Trading,Graph,And,Candlestick,Chart,Suitable — The S&P 500 has outperformed private real estate over the past 20 years.

Disadvantages of Index Funds

Index funds, while popular for their low costs and ease of use, have some potential disadvantages. Investors should carefully consider these drawbacks before investing in index funds.

Lack of Flexibility

Because index funds are designed to track a particular index, their holdings are determined by the composition of that index, and they may not be able to adjust quickly to changes in the market or take advantage of certain opportunities.

This lack of flexibility may limit their potential returns compared to actively managed funds.

No Opportunity for Outperformance

Because index funds are designed to track the performance of a stock market index like the S&P500 or Nasdaq, there is no opportunity to outperform the benchmark.

So, there could be years where certain market sectors significantly outperform the overall market, thereby leaving potential gains on the table.

Tracking Error

While index funds are designed to track their benchmarks as closely as possible, they may experience some tracking errors or differences in performance between the fund and the index it tracks.

This could be due to factors such as transaction costs, management fees, and cash drag, which could lead to lower returns for investors.

How are Real Estate and Index Funds the Same?

Real estate and index funds are both investment vehicles that allow investors to gain exposure to the broader market with relatively low costs and potential for diversification.

Passive Investments

Real estate and index funds are passive investments. Rental income from a real estate property can provide a stable source of cash for investors. Meanwhile, the diversified nature of index funds does not require portfolio rebalancing and can generate a consistent dividend.

Diversification

Both real estate and index funds provide investors with the opportunity to diversify their portfolios. Real estate allows investors to diversify into a different asset class, while index funds allow investors to diversify their stock market exposure.

How are Real Estate and Index Funds Different?

Despite these similarities, there are also some key differences between real estate and index funds.

Minimum Investment

If you are investing in physical real estate, there is a significant upfront investment required, whereas you can invest in index funds through an online broker like eToro with just 1 share.

According to Rocket Mortgage, the average duplex cost is around $300,000; factoring in closing costs and down payment, you need at least 10% of the purchase price of the investment property to invest- in this case, $30,000.

Ongoing Management

Additionally, real estate investments require ongoing management and maintenance, whereas index funds are passively managed and require little attention from investors.

Liquidity

Index funds can be easily bought and sold through your brokerage without a wide bid/ask spread. Meanwhile, buying and selling real estate comes with significant transaction costs and can take at least 1 month to close.

Volatility

Because real estate is not publicly traded, it is not subject to market volatility; meanwhile, because index funds are publicly traded investments, they are subject to the volatility of the overall stock market.

Leverage

Another key difference between Real Estate and index funds is leverage. When you buy real estate, you can use borrowed money to amplify your returns. Meanwhile, you generally cannot use leverage if you are buying publicly traded REITs.

Sure, you can use margin loans and introduce leverage when investing in REITs, but margin loans are much more expensive than a mortgage and introduce another level of risk.

The average margin loans between 8 -12% at big-name brokers, with the best rates usually only for clients with $1,000,000 or more in assets, and it can’t be amortized over 30 years like a mortgage.

You can Build Equity

When you invest in real estate, the idea is that your mortgage payments will pay down your principal and interest while, hopefully, the property appreciates in value. As a result, you can generate equity in your property, the difference between your mortgage and what your property is worth.

This can be very advantageous for real estate investors because they could use the equity to help fund another real estate investment.

Real Estate Returns vs. Index Fund Returns

Over the past 20 years, the S&P 500 has outperformed the NCREIF Property Index (NPI) in terms of average annual returns.

According to data from NCREIF and Bloomberg, the NPI has provided an average annual return of approximately 7.8% from 2002 to 2021, while the S&P 500 has provided an average annual return of approximately 9.8% over the same period.

However, it is important to note that real estate and stocks have different risk and return characteristics, and investors should consider their investment goals and risk tolerance when deciding between the two asset classes. Additionally, real estate investments may provide diversification benefits to an investor’s portfolio, as they may have a low correlation with stocks and bonds.

Bottom Line

Both index funds and real estate offer unique investment opportunities with their own set of advantages and disadvantages. Index funds are generally more accessible, require less management, and offer diversification at a lower cost.

Real Estate, while requiring a higher upfront investment and ongoing management, provides avenues for passive income and equity building. Your choice between the two should be based on your financial goals, risk tolerance, and investment strategy.

Frequently Asked Questions

Is real estate riskier than index funds?

Real estate is generally riskier than index funds because you are investing a large amount of money in a single asset class. Meanwhile, index funds provide implicit diversification because the fund invests in stocks across different industries and sectors.

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What Are Self Storage REITs?

Advantages of Self Storage REITs

Generate Passive Income

Low Building and Operating Costs

Strong Demand in Up or Down Market

Risks of Self Storage REITs

Regulatory Risk

Limited diversification

Potential for Oversupply

How To Evaluate Self Storage REITs

Occupancy Rates

Rental Rates

Geographic Diversification

Property Quality

Financial Performance

Management Team

Valuation

Popular Self Storage REITs

The Bottom Line

Arrived Homes: At a Glance

What is Arrived Homes?

How Does Arrived Homes Work?

Who Should Invest With Arrived Homes?

Investment Options

Partial Property Ownership Explained

Fees

Sourcing Fee

Asset Management Fee

Property Management Fee

Disposition Fee

Redemption Options

Returns

Opening an Account

Best Alternatives

Is Arrived Homes Worth It?

Frequently Asked Questions

Key Takeaways

Understanding 401k Investments

Tax Advantages of 401ks

Employer Matching

Diversification

Pros and Cons of 401ks

PROs of 401ks

CONs of 401ks

Real Estate Investing

Rental Income and Cash Flow

Property Appreciation

Leverage and Mortgage Financing

Pros and Cons of Real Estate

Pros of Real Estate

CONs of Real Estate

Comparing Risk and Return

Market Volatility and Diversification

Management Responsibilities

Investment Control

Tax Implications and Benefits

Tax Benefits of Real Estate Investing

Capital Gains Tax Comparison

Combining 401k and Real Estate Investments

Balancing Retirement Savings and Real Estate Investments

Real Estate Investment Trusts (REITs)

Bottom Line

Frequently Asked Questions

Is it better to invest in 401k or real estate?

Is it better to save for a house or 401k?

Should you take money out of 401k to invest in real estate?

What is the 2% rule in real estate?

Can I invest in both 401k and real estate simultaneously?

At a Glance:

Who should use these platforms?

PROs and CONs

Yieldstreet

Fundrise

What is Yieldstreet?

What is Fundrise?

How does investing with Yieldstreet work?

1. Open Your Account

2. Accredited Investor Verification

3. Explore Investment Options