What is real estate crowdfunding?
Real estate crowdfunding is online fundraising for real estate, where a platform lists deals or funds and investors buy interests with smaller checks than a typical private deal requires. The platform may simply host other sponsors’ offerings, act as the sponsor itself or run its own real estate fund.
Crowdfunding isn’t a separate legal category. Every offering still has to be registered with the SEC or fit an exemption, and the exemption decides who can invest, how much they can put in, how the deal can be marketed and what reports investors get. Knowing which rule an offering uses tells you a lot about its risk and liquidity.
The legal structures behind crowdfunding platforms
Most real estate crowdfunding runs on one of five structures. Here’s how they compare on the points investors care about most.
| Structure | Max raise | Who can invest | Advertising | Ongoing reports |
|---|---|---|---|---|
| Regulation Crowdfunding (Reg CF) | $5 million in 12 months | Anyone, with limits for non-accredited investors | Limited; notices must direct investors to the one portal or broker-dealer | Annual report |
| Reg A Tier 1 | $20 million in 12 months | Anyone | Yes, with filed materials | Exit report on Form 1-Z |
| Reg A Tier 2 | $75 million in 12 months | Anyone; non-accredited capped at 10% of income or net worth unless listed | Yes, with filed materials | Forms 1-K, 1-SA and 1-U |
| Reg D Rule 506(c) | No limit | Verified accredited investors only | Yes | Set by the operating agreement |
| Reg D Rule 506(b) | No limit | Accredited, plus up to 35 sophisticated non-accredited | No general solicitation | Set by the operating agreement |
Regulation Crowdfunding limits in 2026
Under Regulation Crowdfunding, a company can raise up to $5 million in any 12-month period, and every sale must happen online through a single SEC-registered funding portal or broker-dealer. The issuer files a Form C with the SEC, and investors generally can’t resell the securities for one year.
Non-accredited investors face a 12-month limit across all Reg CF offerings. If either your annual income or your net worth is below $124,000, you can invest the greater of $2,500 or 5% of the greater of your income or net worth. If both are at least $124,000, the limit is 10% of the greater of the two, capped at $124,000. Accredited investors have no Reg CF limit.
For example, an investor with $90,000 of income and $150,000 of net worth can put in up to $7,500 a year, which is 5% of $150,000. An investor with $200,000 of income and $400,000 of net worth can put in up to $40,000. Reg CF isn’t available to investment companies or to funds relying on Section 3(c) of the Investment Company Act, so Reg CF real estate offerings are usually a single property or a special crowdfunding vehicle rather than a diversified fund.
Regulation A+: Tier 1 and Tier 2
Regulation A lets a company raise up to $20 million a year under Tier 1 or up to $75 million under Tier 2, including limited amounts sold by existing holders, through an offering circular the SEC qualifies. It sits between a private placement and a full public offering, and a platform can use it to sell its own non-listed REIT or real estate fund.
Tier 2 carries more federal requirements but avoids state-by-state review. It requires audited financial statements and ongoing reports on Forms 1-K, 1-SA and 1-U, and it doesn’t require registration in each state, though state antifraud authority still applies. Non-accredited individuals in an unlisted Tier 2 offering can invest no more than 10% of the greater of their annual income or net worth. Tier 1 has no federal investment limit but must be registered or exempt in each state where it is sold.
Reg D 506(b) and 506(c) on platforms
Platforms that publicly list deals for accredited investors usually rely on Rule 506(c), because it allows advertising as long as the issuer takes reasonable steps to verify that every buyer is accredited. Expect to upload tax returns, bank statements or a letter from a CPA, attorney or registered adviser.
Rule 506(b) bans general solicitation, so it fits investor clubs and sponsors who raise money from people they already know rather than open marketplaces. Our rule 506(b) vs 506(c) guide covers the trade-offs, and the accredited investor requirements guide explains who qualifies.
Non-traded REITs and interval funds
A non-traded REIT is a real estate investment trust whose shares aren’t listed on a stock exchange, so you buy and redeem shares through the sponsor; many are registered with the SEC, and some are sold under Regulation A. The SEC has warned that these REITs are illiquid, that redemption programs are limited and can be suspended, that per-share values may not be published for a long time and that distributions are sometimes paid from offering proceeds or borrowing rather than operations. They also tend to carry front-end selling commissions and offering costs.
An interval fund is a registered closed-end fund that makes repurchase offers at set intervals. Under Rule 23c-3, the interval must be three, six or twelve months, and each repurchase offer must be for 5% to 25% of outstanding shares. If more holders ask to sell than the offer covers, requests can be reduced pro rata, so even a scheduled exit window doesn’t guarantee you can leave.
Real estate fund vs single-deal crowdfunding
A real estate fund pools money across many properties, while a single-deal offering puts your money into one building you can study before investing. Funds spread risk and remove the need to pick deals, but you rely on the manager’s choices and pay a fund-level fee on top of property-level costs.
Single deals let you underwrite the actual cap rate, NOI, loan terms and business plan, and the K-1 usually passes through depreciation. The trade-off is concentration: one bad market, a floating-rate loan or a renovation delay can hit the whole investment.
Platform fees, liquidity and risks
Crowdfunding fees can come from two or three layers at once: the platform, the sponsor and sometimes a fund wrapper. Read the fee table in the offering circular, Form C or private placement memorandum, and add the layers together.
- Platform fees: an annual fee on invested capital, a fee charged to the sponsor or a spread between the property’s return and what investors receive.
- Sponsor fees: acquisition, asset management, construction management, financing and disposition fees.
- Carried interest: the sponsor’s share of profit above the preferred return.
- Fund costs: management fees and fund expenses for REITs, interval funds and Reg A funds.
- Liquidity: most offerings have no trading market, Reg CF securities generally can’t be resold for a year, and redemption programs can be limited or paused.
- Platform risk: if the platform shuts down, servicing, reporting and distributions may move to a successor or the sponsor.
- Deal risk: leverage, interest rates, cap rate changes, construction delays and sponsor mistakes can reduce or wipe out returns.
Worked example: how fee drag changes returns
Say three investors each put $50,000 into real estate that earns 9% a year, compounded over seven years, before investment-level fees. Investor A pays no extra layer and keeps the full 9%. Investor B uses a platform that takes 1% a year, netting 8%. Investor C pays a 3% up-front load, so only $48,500 is invested, plus 1.5% a year, netting 7.5%.
After seven years, Investor A has $91,402, Investor B has $85,691 and Investor C has $80,464. The 1% annual fee costs B $5,711, and the load plus 1.5% costs C $10,938, more than a quarter of A’s $41,402 gain. The example simplifies by treating fees as a straight reduction in return, but the point holds: small annual percentages compound.
| Investor | Amount invested | Net annual return | Value after 7 years | Gain | Equity multiple |
|---|---|---|---|---|---|
| A: no extra fee layer | $50,000 | 9.0% | $91,402 | $41,402 | 1.83x |
| B: 1% annual platform fee | $50,000 | 8.0% | $85,691 | $35,691 | 1.71x |
| C: 3% load plus 1.5% annual | $48,500 | 7.5% | $80,464 | $30,464 | 1.61x |
Real estate crowdfunding vs direct syndication
A direct syndication is a private deal you invest in straight with the sponsor, usually under Rule 506(b) or 506(c). Crowdfunding adds a platform between you and the sponsor, which brings convenience and small minimums but can add a fee layer and distance from the people running the property.
| Factor | Crowdfunding platform | Direct syndication |
|---|---|---|
| Minimum investment | Often small, set by each offering | Usually larger, set by each offering |
| Who can invest | Depends on the exemption; Reg CF and Reg A allow non-accredited investors | Mostly accredited investors |
| Fee layers | Platform plus sponsor, sometimes plus a fund | Sponsor only |
| Relationship | Through the platform | Directly with the sponsor |
| Tax reporting | K-1 for LLC deals; 1099-DIV for REITs | Schedule K-1 |
| Liquidity | Little; some funds offer limited redemptions | Little until the property sells |
How to evaluate a crowdfunded real estate deal
Judge the sponsor first, then the property, then the structure and fees. These questions apply whether the offering is on a platform or comes to you directly.
- Which exemption is it using, and what reports will you receive?
- Who is the sponsor, what is their full track record and how much of their own money is in?
- What are the purchase price, in-place NOI and cap rate, and how do they compare with recent sales?
- What is the loan: fixed or floating, interest-only period, maturity and DSCR?
- What are all the fees at every layer, and when is each one paid?
- What is the exit plan, and what happens if it runs two years late?
- Can you sell or redeem early, and on what terms?
- What happens to your investment if the platform closes?
How this works for a 5+ unit apartment building
A building with five or more units is financed and valued as commercial property, based on NOI and cap rate, which makes it a natural fit for pooled investing. The same building can be offered under Reg CF to a broad audience, through Reg A as part of a fund or under Rule 506 to accredited investors only.
Whatever the wrapper, the property-level work stays the same: review the rent roll and expenses, check capital needs, and study the loan terms and the sponsor’s plan. Then compare what reaches you after each fee layer, using an IRR and equity multiple calculator.
Investing in multifamily with Skyline
Skyline Capital Investments is a multifamily sponsor that buys apartment buildings with five or more units. We work with passive investors directly through our Investor Network and don’t raise money through crowdfunding platforms.
Specific offerings are made only to eligible investors through the offering documents, and most are limited to accredited investors. Join the Investor Network to get educational material and hear about opportunities that may fit you, and compare us with platforms and other sponsors before you decide.
