Investing in commercial real estate has long been reserved for bigwigs and Millionaires and has been inaccessible for, well…normal, everyday folks.
CrowdStreet is finally changing the game.
What makes CrowdStreet so different from other commercial real estate investment platforms?
MU30 spoke with Brent Hieggelke, CrowdStreet’s CMO, to find out.
With a leadership team that combines real estate experience with technological know-how, CrowdStreet has emerged as a leader in the commercial real estate space. CrowdStreet’s investors have earned more than $245 million in distributions over more than 500 projects, and that number continues to climb.
CrowdStreet’s goal is to give investors an easy, user-friendly interface through which they can explore properties and manage their portfolios.
On the back end, they work hard to carefully vet all of the properties that are available through their platform to ensure investors have the best options possible.
Meet Crowdstreet CMO – Brent Hieggelke
When it comes to the intersection of real estate and technology, Brent Hieggelke is an expert. Hieggelke founded the first vacation rental site, Second Porch, which he then sold to HomeAway in 2010. He’s also served as CMO for several top technology companies, including Urban Airship, Brandlive, and Webtrends.
Hieggelke joined CrowdStreet as Chief Marketing Officer in 2018. He is a highly respected voice in the technology industry, having led panels and served as keynote speaker at top events like:
- Mobile World Congress.
- Advertising Week.
- And many more.
Recently, Money Under 30 spoke to Hieggelke about his work with CrowdStreet, as well as the real estate investing market as a whole. He also has a few financial tips that can help Millennials who want to start building a portfolio.
Money Under 30’s interview with Brent Hieggelke
We’re Money Under 30 – so tell us something fun and interesting about what it’s like to work at CrowdStreet. It could be absolutely anything!
Commercial real estate is something that completely surrounds us–it’s literally everything that isn’t your house–and yet, most people have never considered investing in it simply because they didn’t know they could, let alone where to start.
Bringing this world online means that in the future, it will most likely be as common as trading stocks online. It’s exciting to be playing a pivotal role during this transition time.
Can you share a bit about how CrowdStreet picked its name? Every company seems to have a story…
It’s a play on Main Street and Wall Street intersecting with the wisdom of the crowd.
CrowdStreet gives individual investors the opportunity to pool their resources and access projects they’d never have the means or connections to find on their own. Since hundreds of investors can consider, discuss, and fund each investment opportunity, the crowd is a big part of the investing experience with our Marketplace.
For someone who’s new to investing, why is real estate a better investment than other investment options?
I can’t say real estate investing is necessarily better than any other investment opportunity, as it’s incredibly dependent on your personal financial goals. But I will say that real estate can be a valuable addition to any portfolio for a few reasons.
First, it’s a hard asset and less subject to the whims of the stock market. It’s often considered “recession-resilient” so it can help bolster your other investments when the market is volatile.
According to the Modern Portfolio Theory, a well-diversified portfolio calls for 10% to 20% of one’s capital to be allocated into alternative investments, including real estate. It adds another layer of diversification to your investments away from stock and bonds.
Of course, we at CrowdStreet encourage all investors to consult with their financial, legal, and tax advisors concerning any investment.
Your platform is open only to accredited investors. How does an investor become accredited? Any advice on where to get started for someone who has never invested in real estate before?
Accredited is simply a status determined by the SEC. There is nothing you really need to do, per se.
If you want to become accredited you need to:
- Earn more than $200,000 in each of the last two years (or more than $300,000 together with your spouse or spousal equivalent in each of those years) and reasonably expect the same for this year.
- Or have a net worth of over $1 million, either alone or together with your spouse or spousal equivalent, excluding the value of your primary residence.
- Or are a holder in good standing of the Series 7, Series 65, or Series 82 licenses.
There are some other ways you can be accredited that are super technical according to the SEC rules.
Depending on if you qualify as an accredited investor or not, different real estate investment opportunities are available to you.
If you’ve never invested in real estate before, the first step is figuring out what kinds of real estate you can/want to invest in.
What kind of risk are you comfortable with? What kind of property do you want to invest in? How long are you willing to lock up your capital?
Real estate is an illiquid investment so you don’t get to “sell early.” Take your time and get your bearings, and talk with your financial, legal, and tax advisors. There is a whole language to learn, even if you are used to investing in the stock market.
CrowdStreet hosts a weekly new investor orientation for new members of our community. We also publish weekly videos with market insights and updates. Plus our resource center is chock-full of educational content to help you become a more confident investor.
How long would it take for someone to start seeing a return on an investment through CrowdStreet?
It depends on the project and the business plan.
Assuming there are returns to be distributed, it could take several months, if not years, before you actually receive any of those returns.
That’s one thing to ask yourself before you invest in any deal. Do you want a more steady cash flow on a semi-regular business? Or are you willing to wait longer (but maybe take a bigger risk) and hold out and hope for a bigger payout if/when the building sells?
Again, real estate is an illiquid investment so you can’t sell it whenever you want as you would publicly traded stocks. Of course, real estate investors must be prepared to lose it all, too.
CrowdStreet has been around since 2014, before online real estate crowdfunding was so common. How has the marketplace changed as more platforms have come onboard?
If anything, we’re more confident in our approach.
We are 100% focused on commercial real estate and are open to all accredited investors across the U.S. These aren’t “fix and flip” residential projects where anyone can invest a few hundred dollars. These projects are worth tens of millions of dollars and are backed by some of the nation’s biggest real estate firms.
Investors on CrowdStreet have now funded more than 500 deals in 39 states (including Washington D.C.) across 14 asset classes and 24 asset types.
The average deal value (total project capitalization) has increased almost fourfold from $20 million in 2014 to $78 million, reflecting our focus on institutional-quality properties. The total market capitalization of all deals on the CrowdStreet platform since inception is $20.9 billion and individual investors have received more than $220 million in distributions from project sponsors, with 54 fully realized deals to date.
Of all marketplaces specializing in commercial real estate, CrowdStreet has stood out to Dr. Adam Gower of GowerCrowd as the industry leader and the largest based on dollars raised on its marketplace.
“In a milestone for the industry, CrowdStreet has become the first online commercial real estate investment marketplace to raise $2 billion in equity from individual investors.”
One of the great things about CrowdStreet is that investors can browse properties and gather plenty of information about a deal. What sorts of details should an investor look for before investing in a property?
CrowdStreet has made it easy for investors to dig into the details of various projects. Obviously, some of the first things to consider are the city and the location of the project in that city. Then what type of asset:
- Medical office hotel.
- Data center.
- And more.
What is the risk profile of the project: is it a brand new ground-up construction project, or a 97%-already-leased office tower? Then, you want to start diving into the nitty-gritty details. Who is the sponsor behind the project, and what is their track record? Is this a firm you feel confident in investing alongside? What’s the project’s timeline? How often will distributions be paid out, and in what order?
You want to look under the hood, read all of the documents carefully, review them with your financial, legal, and tax advisors, and really think about how this deal fits into your broader portfolio and financial goals. If you don’t know, ask!
One of the benefits of the CrowdStreet platform is that we connect you directly with the sponsor behind the project so you can get all the information you want.
How did COVID-19 affect the real estate investing market and where do you see the real estate investing market going in the next few years?
Usually slower to react and slower to recover in a normal recession, real estate was hit almost immediately once COVID really became a reality because none of us could go anywhere. The entire physical world ground to a halt overnight. By default, real estate requires us to visit it, to touch it, to experience it.
Hospitality was the hardest and most immediate hit, followed closely by retail. If we can’t travel and shop in-person, there is not much those industries can do about it. On the other hand, industrial properties like warehouses and data centers actually benefited enormously from a digital-first world.
And then there was the breakdown between essential and non-essential. Dentists were closed, cancer treatment centers were not. You couldn’t go to the gym, but the grocery store could barely keep the shelves stocked. In terms of real estate investing, certain projects simply didn’t make sense given the world we were living in.
2021 is all about a return to normalcy—the caveat being that some things may not feel truly “normal” again for many years. This transition back to “business as usual” will play out differently across the various asset classes.
Certain asset classes and strategies will likely continue their upward marches. Others will hopefully finally start to see the first signs of recovery, while some may only begin to feel the true ramifications of the pandemic as tenants and landlords stop relying on the “kick the can” strategies that carried them through 2020.
Some trends we’re interested in include population migration away from the nation’s biggest metros like New York City and San Francisco and into smaller (but growing markets) like Austin, Charlotte, or Salt Lake City, which creates opportunities for multifamily investors.
We’re also excited about the e-commerce takeover which requires more space than traditional brick and mortar, and how the newly coined term “revenge travel” is actually driving a faster-than-anticipated recovery in hospitality.
You came to CrowdStreet after a long history of working with companies using innovative technologies. How do you see technology changing real estate investing as a whole?
Real estate is one of the last big industries to go digital. Until 2012, most real estate investing opportunities were happening behind closed doors. You had to know someone, and deals were made over steak dinners and rounds of golf. Only the incredibly wealthy and extremely well-connected had access to the kinds of deals you can now find on CrowdStreet.
The JOBS Act changed that and allowed real estate firms to use crowdfunding platforms to raise capital from investors across the U.S. In first-of-its-kind research, Dr. Adam Gower has looked at how real estate crowdfunding has come of age.
Gower, who has been tracking the crowdfunding market since its inception in 2012, examined over a million data points pulled from the SEC to show how crowdfunding has grown to represent nearly 25% of all private equity capital raises for commercial real estate in America, with crowdfunded deals reaching an all-time high of $15 billion in 2020 (up from $7 billion in 2019). This is going to change the financial landscape forever.
The CrowdStreet leadership team has experience in a variety of areas, including real estate, private equity, and software development. What have you learned from your fellow team members?
We all bring a deep set of experiences in a variety of industries, so our leadership team has our eyes wide open about what it takes to bring this massive opportunity to market.
The stories we collectively have are vast, but we know how to turn big ideas into executional plans.
Who in your life has been the most instrumental in teaching you about money management?
My grandfather pulled me aside as a small child and said:
“Take 10% of everything you earn, whether from mowing lawns or in your career, and invest it.”
It was such a simple concept for a kid, but clearly conveyed how to become financially successful without having to become a financial wizard.
What’s the best advice you’ve received (not necessarily money-related) that has shaped how you lead your life?
Nothing matters more than integrity. If you lose it, you can never get it back.
What’s your top personal finance tip?
Real estate has always been a leading way to make money, so add more of it to your portfolio when you can.
What is the financial book/website/podcast that has most influenced you?
We are big fans of “We Study Billionaires: The Investors Podcast.”
What piece of wisdom would you give your 20-year-old self about managing money?
Just start investing smartly. Do your research, and use common sense to guide your hunches. Don’t be afraid to ask a financial advisor for advice and insights.
With so many investment platforms available, it’s easier than ever to build a diverse portfolio. But it’s just as important to choose the right platform as it is to put your money into the right assets.
CrowdStreet is a great way to get started in commercial real estate investing since you’ll know that every property is carefully vetted.
Moving into the future, apps like CrowdStreet will only continue to level the playing field for both beginner and advanced investors.
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