One of the biggest considerations for investors using real estate crowdfunding platforms is the fees that the platforms charge. Fees can make a dent in return potential, though the significance of the dent will depend heavily on the size of each fee.
The fees charged by various platforms can vary greatly, and take place at various stages of the investing process — there’s no universal approach. Some platforms, like Groundfloor, charge no fees at all, and instead opt to charge fees to borrowers. Other platforms, like Fundrise and EquityMultiple, charge different fee percentages for different investment products they offer. (EquityMultiple’s short-term Alpine Notes, for example, are fee-free, but they charge a 0.5% to 1.5% annual management fee for equity investments and an approximately 1% annual servicing fee for debt and preferred equity investments.)
Still other platforms, like CrowdStreet and RealtyMogul, allow sponsors of individual investments to decide what the fees will be, rejecting a “one-size-fits-all” approach. In some cases, this can be a clever way of concealing high fees, so be vigilant when browsing investments on those platforms and don’t be afraid of asking questions to the IR team.
Let’s get into the nitty-gritty. What are the fee structures of all the major real estate crowdfunding platforms?
Fundrise
Fundrise charges a 0.15% annual advisory fee, a 0.85% annual management fee for their real estate funds, and a 1.85% for their Innovation Fund (not real estate—it’s a portfolio of tech startups). These fees are relatively low for the industry.
RealtyMogul
At RealtyMogul, fees vary depending on the sponsor, and every individual investment on the platform has a different fee structure. It can sometimes be hard to figure out what these fees are—they’re often buried in 350-page PDFs called private placement memorandums (PPMs), which you have to download from the RealtyMogul website. The relevant section of the PPM that discusses fees is usually titled “Fees and Expenses" or "Management Fees and Partnership Expenses.” Don’t be afraid to ask questions to IR if you’re having trouble understanding the fee structure or the legalese.
(Some annual asset management fees are on the high side—over 1%.)
Arrived
Arrived charges an AUM (assets under management) fee of 0.1% to 0.30% per quarter. This fee covers essential services like tax preparation, dividend distribution, insurance management, and property management oversight. In addition to the AUM fee, there are one-time costs built into the initial offering price (like closing and sourcing fees) and ongoing operating expenses paid from rental income (such as maintenance and property taxes). At an annual rate of 0.4-1.2%, Arrived's AUM fee structure is notably competitive compared to the industry standard of 1-2%.
Groundfloor
Groundfloor’s fees are 0% for investors, because the company only charges fees to borrowers—typically 2.75% and 4% of the principal amount of the loan in interest for underwriting the loan.
EquityMultiple
EquityMultiple’s Alpine Notes (“short-term cash management tools” with fixed APYs) are fee-free, but they charge a 0.5% to 1.5% annual management fee for equity investments and an approximately 1% annual servicing fee for debt and preferred equity investments. For all offerings, EquityMultiple may also deduct an Administrative Expense to cover tax document creation, annual filings, and entity formation—this fee is split between all investors and typically ranges from $30-$70 per investor annually.
CrowdStreet
Much like RealtyMogul, CrowdStreet’s fees are set by the sponsor and may vary. These fees are generally visible on the “Offering Details” page, but some of them are also hidden in the private placement memorandum (PPM).
Yieldstreet
Yieldstreet charges a 1-4% management fee on all offerings. (Take note: 4% is ridiculously high for the industry.)
There are also annual flat expenses investors are responsible for per investments, which are paid from the investment’s initial interest distributions, and certain offerings may have flat listing fees charged to the originator.
Other Platforms
These platforms are smaller and more obscure than the ones listed above—we haven’t written reviews for them (yet).
- Ark7: Flat sourcing fee (7-20k added to investment raise) and an 8-15% management fee (!) taken off the top of revenue
- Fundhomes: Flat sourcing fee (about $25k added to investment raise) & 20% management fee taken off the top of revenue
- AcreTrader: 2% upfront & .75% annual fee
- Diversyfund: 2% annual management fee
- Roots: $5 for first investment, $3 for follow-on investments
- Landa: 2% fee on secondary market
- CityFunds: 2% annual fee
- FarmTogether: 1.5% setup fee, 1-2% annual management fee
- RealBricks: .75% annual fee, 8% management fee taken from monthly revenue
- 7e Investments: 0% for investors
What Is a High Fee?
Annual management fees above 2-2.5% would be considered high, as many platforms charge between 1-2%. This is a general guideline, however, and all fees should be evaluated on a case-by-case basis. Fees exist in the context of the overall return profile, among other things.