If you’re thinking of investing in real estate, you may have heard about crowdfunding.
Real estate crowdfunding is a relatively new investment option that has been growing in popularity over the past few years. It is a subset of crowdfunding, a process of pooling money from a large number of people to invest in a project or venture.
It’s become a popular way to invest in everything from startups to property. With real estate crowdfunding, everyday investors pool their money together and invest in large real estate projects, such as apartment buildings or commercial properties.
Today, there are several crowdfunding platforms that cater specifically to Canadian investors. In this blog post, we’ll take a look at some of the best real estate crowdfunding sites in Canada.
But is real estate crowdfunding a good investment option for you? What are some of the benefits and drawbacks? What are the factors to consider when choosing a platform? This post will answer these questions and more!
So if you’re ready to learn more, keep reading!
What is Real Estate Crowdfunding?
Real estate crowdfunding is a type of investment that allows you to pool your money with other investors to finance a real estate project. It is growing in popularity because it offers several advantages over traditional methods of investing in real estate.
With the traditional method, you would need to have a large sum of money saved up to be able to buy a property outright or take out a mortgage. This can be difficult and almost impossible for most people.
Crowdfunding allows you to spread the cost over many people, which can make it more affordable. A typical project could pool a few hundred to thousands of people, each investing a small amount and owning a piece of the property that they would not have been able to afford on their own.
Real estate crowdfunding goes by many names such as Propsharing and fractional real estate ownership.
Best Real Estate Crowdfunding Sites in Canada
Our neighbours to the south have several options when it comes to real estate crowdfunding platforms. There is Fundrise, CrowdStreet, PeerStreet and several other websites that make is easy for US residents to invest in real estate.
Canadians may not have so many options to choose from, but the existing platforms offer the same advantages and benefits.
Below are some of the best real estate crowdfunding sites in Canada at the moment.
1. addy Invest
- Minimum investment: $1
- Fees: $0 but $25 annual membership applies
- Minimum annual returns: N/A
- Eligibility: Accredited and non-accredited investors
addy Invest is a Vancouver-based real estate crowdfunding company that was launched in 2018.
The platform welcomes both accredited and unaccredited investors with a low minimum investment of $1.
With different properties to choose from, addy Invest doesn’t charge any fees beyond its $25 annual membership fee.
Pros
- Low minimum investment ($1)
- No transaction or management fees
- Accepts both accredited and unaccredited investors
Cons
- Low investment limit for unaccredited investors ($1,500 maximum per property)
- Few investment opportunities available to pick from
- No early redemption
2. Fundscraper
- Minimum investment: $5,000
- Fees: 0.5-2% trading fees
- Minimum annual returns: 7-12%.
- Eligibility: Accredited and non-accredited investors
Fundscraper is a Toronto-based Exempt Market Dealer offering real estate crowdfunding services across Ontario, British Columbia, PEI, Alberta, Quebec and New Brunswick.
This platform has a wide range of private real estate investment options, ranging from:
- Real estate investment trusts
- Mortgage investment corporations
- First Mortgage
- Second Mortgage
- Private equity
- Bridge financing
The platform has a $5,000 minimum investment requirement with 7-12% average annual returns.
Pros
- Diversified investment access
- Supports registered accounts (such as TFSA, RRSP and RRIF)
- Low trading fees
- Accepts both accredited and unaccredited investors
Cons
- High minimum investment
- No early redemption
3. NexusCrowd
- Minimum investment: $10,000
- Fees: N/A
- Minimum annual returns: N/A
- Eligibility: Accredited investors
NexusCrowd is a real estate crowdfunding site operating as a registered Exempt Market Dealer.
The platform was founded in 2015 and is available to the residents of Alberta, Ontario and British Columbia.
As a member of the Private Capital Markets Association of Canada (PCMA), NexusCrowd offers diversified crowdfunding Investment opportunities across equity, loans and mortgage debt.
That said, NexusCrowd has a relatively higher minimum investment of $10,000 and it’s only open for accredited investors at the moment.
Pros
- Diversified investment options
- Low risk (the platform invests only when a project reaches 50% of its funding target)
- Multiple investment options
Cons
- Available for only accredited investors
- Higher minimum investment amount
4. Willow
- Minimum investment: 10% of the property amount
- Fees: $4.99 trading fees. 1% property acquisitions fee. 0.5% management fee.
- Minimum annual returns: N/A
- Eligibility: Accredited and non-accredited investors
Willow is a new PropSharing investment company founded in January 2022. It was the first company to offer PropSharing investment in Canada.
The company is headquartered in Toronto and allows both accredited and unaccredited investors to buy units of income-generating industrial, residential, office and retail properties.
When you invest in units of Willow properties, you will have shared legal ownership, earn appreciation and income.
The interesting part is, you can sell the property whenever you wish. This gives you more control of your money than a regular real estate crowdfunding investment.
Pros
- More control of your money
- Diversified investment opportunity
- Professionally managed properties
- Liquid investment
- Accepts both accredited and unaccredited investors
Cons
- The minimum investment may be higher depending on the property price
- Higher fees
- Limited investment options
5. BuyProperly
Minimum investment: $2,500
Fees: 2.5% management fee
Minimum annual returns: 10%+
Eligibility: Accredited and non-accredited investors
BuyProperly is a Toronto-based startup that makes it simple and accessible for Canadians to invest in real estate without the high cost.
Unlike many of the other real estate crowdfunding platforms on this list, BuyProperly offers properties in both Canada and US, making it a great choice for someone looking to diversify geographically.
One other benefit of BuyProperly is that you can redeem your investment before maturity. It has a marketplace that facilitates trading between investors.
Pros
- Diversified geographically
- Regular cashflow from rentals and capital appreciation
- Marketplace to sell your investment early
Cons
- Limited investment options
- Higher minimum investment amount
6. FrontFundr
- Minimum investment: $100
- Fees: Charges only a trade fee indicated in your trade confirmation
- Minimum annual returns: N/A
- Eligibility: Accredited and non-accredited investors
FrontFundr is an equity crowdfunding company operating as an Exempt Market Dealer across Alberta, British Columbia, Manitoba, Quebec, Nova Scotia, Ontario, Saskatchewan, and New Brunswick.
Through FrontFundr, you can invest in startup investment properties regardless of whether you’re an accredited or unaccredited investor.
That said, FrontFundr has a relatively low minimum investment of $100 compared to other equity crowdfunding sites in Canada.
Pros
- Diversified investment opportunity
- Regulated by the FINTRA
- Relatively low minimum investment
- Accepts both accredited and unaccredited investors
Cons
- Less information on returns
7. Equivesto
- Minimum investment: CAD 100
- Fees: None
- Minimum annual returns: N/A
- Eligibility: Accredited and non-accredited investors
Equivesto is also an equity crowdfunding site registered as an Exempt Market Dealer. The platform is currently available only for the residents of Alberta, Ontario, British Columbia, and Nova Scotia at the moment.
With CAD 100 minimum investment, Equivesto gives you the opportunity to invest in Canadian real estate, small businesses and startups.
Currently, Equivesto has more than 4000 members and has invested over $25 million in 55+ projects.
With no trading fees, annual fees, and commissions, Equivesto also allows you to invest in registered accounts (TFSA and RRSP).
Pros
- Diversified investment opportunity
- Relatively low minimum investment
- No trading fees
- Supports TFSA and RRSP
- Accepts both accredited and unaccredited investors
Cons
- Less information on returns
8. Vested
- Minimum investment: $100
- Fees: Variable
- Minimum annual returns: N/A
- Eligibility: Accredited and non-accredited investors
If you like investing in Canadian start-ups across different industries, Vested could be your perfect option.
As an equity crowdfunding platform, Vested partners with several startups and you can start investing with as little as $100. It’s been operating in Canada since 2015 and has raised more than $4.1million since then.
The trading fees and investing returns vary per the project you invest in and you can choose from different companies across different industries.
Pros
- Diversified investment opportunity
- Relatively low minimum investment
- Accepts both accredited and unaccredited investors
Cons
- Less information on minimum returns
Benefits of real estate crowdfunding
There are several benefits to investing in real estate crowdfunding. We’ll go over a few of them below:
- Hands-off investing: Crowdfunded real estate investing offers a more hands-off approach than traditional methods. You do not need to be actively involved in the property management, as this will be handled by the platform or the property developer.
- Potential for high returns: With any investment, there is always a risk involved. However, if the project is successful, you could see a higher return on your investment than with other types of investments.
- Diversification: Investing in real estate is a way to diversify your investment portfolio, reduce your overall risk, and provide stability in times of market volatility. And by investing in multiple properties through crowdfunding sites, you can further diversify your real estate portfolio.
- Small investment amount: Don’t have thousands of dollars to invest? No problem! You can invest a small amount of money in a property project through crowdfunding sites. This is a great way to get started in real estate investing if you don’t have a lot of money saved up.
Drawbacks of real estate crowdfunding
Of course, there are also some drawbacks to real estate crowdfunding that you should be aware of before you invest. These include:
- Less control: When you invest in a crowdfunded real estate project, you have less control over what happens with the property than if you were to buy it outright. The platform or property developer will make all the decisions about the property, and you may not agree with all of them.
- More risk: There is always a certain amount of risk involved in any investment, but with crowdfunding, you are investing in a property that you may not have much information about.
- Illiquid investment: Once you’ve invested your money in a crowdfunded real estate project, it can be difficult to get your money out before the project is completed. This is because most crowdfunding platforms do not allow investors to sell their shares in the project.
- Fees: Some crowdfunding platforms charge fees, which can eat into your investment returns. However, the fees are necessary and go towards the costs of running the platform, vetting projects, ongoing investment management, and more. Be sure to read the fine print before investing so that you are aware of any fees that may be charged.
Factors to consider when choosing a real estate crowdfunding platform
Now that you know some of the benefits and drawbacks of real estate crowdfunding, let’s look at a few factors you should consider when choosing a crowdfunding platform:
Project selection: One of the most important factors to consider when choosing a crowdfunding platform is the selection of projects. Make sure that the platform you choose carefully vets all of the projects before they are listed.
Investment minimums: Another factor to consider is the investment minimums. Some platforms have very high investment minimums, which may not be suitable for everyone.
Fees: As we mentioned above, some platforms charge fees. Be sure to take this into consideration when choosing a platform, as it can eat into your investment returns.
Reputation: It is also important to consider the reputation of the crowdfunding platform. Make sure that the platform is reputable and has a good track record. In assessing the individual real estate investment options on the platform you go with, you need to also consider the factors below:
Experience of the team behind the project: The experience of the team behind the project is another important factor to consider. Make sure that they have a good track record and are experienced in the real estate industry.
Stage of development the property is in: If the property is already constructed and generating predictable cash flow, there is less risk involved than if it is in the early stages of development. Of course, the riskier the investment, the higher the returns you can expect.
Type of investment (equity or debt): Depending on the site and project, you may be able to choose between equity and debt investments. Equity investors own a piece of the property and receive a share of the profits (if any) when it is sold or from regular distributions.
Debt investors lend money to the project and receive interest payments, but do not own a piece of the property. Debt investors get paid before equity holders, so it is relatively less risky.
Who should invest in crowdfunded real estate?
Real estate crowdfunding is not suitable for everyone. So who should invest in real estate crowdfunding projects?
It is best suited for investors who are:
- Willing to take on a higher degree of risk for the potential of higher returns.
- Interested in diversifying their investment portfolio.
- Able to commit their investment for the long term
- Accredited investors (as defined by Canadian securities laws) in some cases
If you are not comfortable with any of the above factors, then real estate crowdfunding is probably not right for you.
Are Real Estate Crowdfunding websites legal?
Yes, real estate crowdfunding websites are legal in Canada. However, there are some restrictions and regulations that these platforms must adhere to.
In most cases, these platforms are licensed and registered as “exempt market dealers” with the securities regulators for each of the provinces where they operate. For example, the Ontario Securities Commission (OSC) in Ontario.
This allows them to offer certain types of securities without the need for distributing prospectus to prospective investors.
In other words, they are fully registered securities dealers and comply with all relevant securities laws.
So, if you’re considering investing through a real estate crowdfunding platform, you can be confident that it is a legal and regulated investment option.
That said, be sure to confirm the registration status of any platform you’re considering investing through. You can do this by searching the OSC’s website or contacting the securities regulator in your province.
How Do I Start Real Estate Crowdfunding?
Starting real estate crowdfunding in Canada is easier than other investments because you can do everything online.
All you need to do is choose your perfect crowdfunding platform and sign-up. To start investing, you will need to deposit the minimum investment of your preferred project.
Once the project reaches its funding target, the funds will be invested and earn you a dividend while you focus on other aspects of your life.
Some FAQs
You could lose money on crowdfunding real estate just as with other investments. However, investing in a reputable and diversified real estate crowdfunding platform will help reduce your risk.
An accredited investor is a person, institution or entity with a special investment status based on any of the following factors:
$5+ million net individual or joint assets with a spouse
$200,000+ annual individual income or $300,000 joint annual income with a spouse
$1,000,000 individual or joint aggregate financial assets with a spouse
Registered dealer or adviser under securities legislation
An adviser-regulated investment fund
Crowdfunded real estate is worth it if you’re looking for a low-cost opportunity to invest in the Canadian real estate market.
However, if you’re looking for a liquid investment with more control of your money, you may want to consider PropSharing or other investment opportunities.
Yes, there are different Fundrise equivalents in Canada, including NexusCrowd, addy Invest, Fundscraper and Willow. Learn more about Fundrise Canadian alternatives here.
Conclusion
Crowdfunding is a great way to get involved in the real estate market without having to put down a large amount of money or go through the hassle of traditional financing.
However, it’s important to do your research and choose a reputable platform before investing. Be sure to consider your investment goals and risk tolerance when choosing a crowdfunding platform and picking a project to fund.
Remember, real estate investments, especially the types you’ll usually find on crowdfunding platforms, are illiquid. That means it can be difficult or impossible to sell your investment if you need the money quickly for an emergency.
If you’re patient and comfortable with a long-term investment, real estate crowdfunding can be a great way to earn passive income and build wealth over time. However, it’s not without its risks, so be sure to do your due diligence before investing.
Ready to start investing? Any of the best real estate crowdfunding platforms covered above are a great place to start. Each of these platforms has its own strengths and weaknesses, so be sure to compare them and choose the one that best meets your needs.
Have you ever invested in a real estate crowdfunding project? Share your experience in the comments below!
Related: Best Investments in Canada
