Crowdfund real estate investing is a growing trend for investors to diversify their portfolios. While individual investors can own single-family rental homes, commercial real estate is unaffordable for many.
Streitwise lets accredited and non-accredited investors invest in private commercial real estate with a low minimum investment (approximately $2,500) and earn quarterly dividends.
This Streitwise review can help you learn more about this investment platform and decide if this alternative investment is a good fit for your portfolio.
How Streitwise Works?
Streitwise is a real estate investment trust (REIT). The platform states it invests in “stabilized, commercial properties” like office parks along with mixed-use retail and commercial sites.
There is currently one REIT investment option for all, regardless of their investor status. There isn’t an option to invest in individual properties like some platforms offer high net worth accredited investors.
Investors can earn quarterly dividend payments. Unlike traditional private real estate investing, investors don’t have to screen tenants, hire a property manager, or handle the day-to-day business operations.
Instead, Streitwise invests in properties they believe have creditworthy tenants and long-term income potential. The service collects payments from the tenants and distributes the proceeds as a dividend to investors.
The historical annualized dividend rate is 8% after fees that rivals the average annual return of the S&P 500.
Who Can Invest with Streitwise?
Streitwise is open to non-accredited and accredited investors that live in the United States.
The platform also accepts international investors that are a non-US resident and have a non-US bank account.
Is Streitwise a Good Investment?
Streitwise can be a good investment if you share these investment goals:
- Want to invest in commercial real estate
- Earn higher dividends than real estate stocks
- Can invest for at least five years to avoid early redemption fees
This investment idea can also be a good option if you don’t have the cash, skill, or desire to invest in commercial real estate without a professional investment platform.
You must also be comfortable having the fund manager choose the investment properties. Investors can effortlessly earn passive income but don’t influence the day-to-day portfolio management decisions such as acquiring or selling properties and screening tenants.
Minimum Investment
The minimum initial investment is buying ten shares of the 1st Streit Office REIT.
The share price updates quarterly. As of the 2nd quarter of 2021, the minimum initial investment is $2,522.50 ($10.09 per share).
Subsequent investments are $500 per transaction.
Investors can enroll in the dividend reinvestment plan to reinvest the quarterly dividend payments without an investment minimum.
Investors can only redeem shares penalty-free after holding them for five years. It’s essential only to invest cash you won’t need for the next five years to avoid potential redemption fees.
Investment Limits
Non-accredited investors can only invest up to the following amounts each year:
- Up to 10% of your individual or joint net worth (excluding the value of your primary residence)
- No more than the individual or joint income for the past two years or the expected income for this year
There are no investment limits for accredited investors. Basic requirements are an annual income of at least $200,000 ($250,000 for joint investors) or a minimum $1 million liquid net worth.
Streitwise Fees
Streitwise has several investor fees:
- Organizational and offering costs: One-time 3% fee on new investments
- Annual management fee: Recurring 2% fee withheld from distributions
- Redemption fee: Up to 10% of share price when selling shares early
The service may also withhold operating expenses from the dividend payments. These fees vary and cover third-party expenses such as property management and utilities.
You can avoid the maximum 10% redemption fee by holding your shares for at least five years. The early redemption fee is between 2.5.% and 10% of the net asset value (NAV) when selling earlier than five years. There are no selling fees on shares you hold for at least five years.
Investment Account Options
It’s possible to invest with Streitwise using a taxable or retirement account.
The default account type is a taxable non-retirement account.
Investors can also fund their investments with a self-directed IRA or a 401k. Streitwise doesn’t offer IRA accounts giving investors the flexibility to use their retirement fund for various platforms and assets, like physical gold.
Investment Option: 1st Streit Office REIT Inc
There is only one available investment option for Streitwise. It is the 1st Streit Office REIT Inc.
This review will cover the key features of this REIT, but you should read the offering circular to learn more. The circular provides in-depth details of how the REIT can make money, its potential risks, and the investment experience for individual investors.
The limited investment options are one downside of the platform as other crowdfunding platforms pursue different asset classes and investment strategies.
However, if you only want to invest in commercial real estate, Streitwise can be a good option. It’s easy to open an account and invest in stocks and bonds and different real estate investments on other platforms.
How Investors Make Money
Investors can make money by receiving quarterly dividends. The target annual dividend yield for 2021 is between 8% and 9% (after fees).
Streitwise makes money by collecting rent from tenants. It’s also possible to make money if the fund sells properties for a profit.
Streitwise can earn higher dividends than most stocks and investment-grade bonds. One reason is that investors must commit to a minimum one-year investment and can only sell shares quarterly. You also directly invest in projects and can earn more for the additional investment risk.
The minimum investment period is one year and you must hold shares for at least five years to avoid early redemption policies. This long-term holding period is standard for crowdfunded real estate.
Here are the potential redemption fees when selling shares:
| Holding Period | Redemption Fee |
| Less than 1 year | Cannot sell shares |
| 1-2 years | 10% |
| 2-3 years | 7.5% |
| 3-4 years | 5% |
| 4-5 years | 2.5% |
| 5+ years | 0% |
| Owner dies or becomes 100% disabled | 0% |
Streitwise only lets investors sell shares four times each year. You will have to submit written notice at least 15 days before the end of the current calendar quarter to sell shares.
When you’re ready to sell your shares, you will need to notify Streitwise before these dates:
- March 31
- June 30
- September 30
- December 31
The illiquidity of selling shares is similar to other crowdfunding platforms. This illiquidity is one reason Streitwise can offer higher investment returns than competing real estate stocks.
While you can redeem your shares quarterly, Streitwise may pause redemptions until market conditions improve. Some of the reasons include a macroeconomic downturn or a property-level investment failure that can cause investor panic.
For a highly liquid real estate investment, consider real estate stocks. The potential dividend yield is lower but you can sell your shares on any stock market trading day to raise capital.
Investment Strategy
This public, non-traded REIT invests in two different property types:
- Office buildings
- Mixed-use (commercial and retail businesses)
Investors new to real estate investing may think that commercial real estate is risky. Every investment has some level of risk, including commercial and retail properties.
However, these properties have the benefit of leasing to multiple tenants. Some of the suites can be vacant but the rental income from the other tenants can be profitable.
With single-family rental homes, the landlord doesn’t make money until they find a new tenant.
Streitwise also looks for properties in relatively stable real estate markets and properties with high occupancy rates and current tenants that consistently pay rent. These complexes may house corporate headquarters, regional offices, or individual retail stores.
Portfolio Holdings
The fund currently invests in two properties (as of May 14, 2021):
- Panera Bread HQ (Streitwise Plaza): A Class A office park in St. Louis, MO with three buildings.
- Allied Solutions Building: A mixed-use building in Indianapolis, IN with one building and a parking garage.
There isn’t a minimum or a maximum number of properties the REIT can hold at one time. The managers consistently review potential investments but must meet strict screening criteria for high potential growth, minimal risk, and not requiring a high amount of debt.
To help find prospective properties with higher growth potential, Streitwise looks to invest in non-gateway markets which are cities that can be smaller but can have promising growth potential.
You can probably locate many of these cities on the map with ease. If you’re an avid traveler, you have likely driven or flown through some of these cities.
These secondary cities can be riskier real estate markets as they are not the nation’s largest cities with high population densities and opportunities for many tenants. Several gateway cities include New York City, Los Angeles, and Chicago.
Some of the non-gateway/secondary cities that Streitwise has invested in include:
- Indianapolis, IN
- Phoenix, AZ
- San Antonio, TX
- St. Louis, MO
Streitwise avoids the high-priced coastal markets that are more difficult to earn the high potential dividends that crowdfunded real estate platforms offer.
Some of the well-known businesses that occupy Streitwise investment properties include:
- Berkshire Hathaway
- Energizer
- IBM
- Nationwide Insurance
- Panera Bread
- Verizon Wireless
- Walgreens
With Panera Bread, for example, the fast-casual restaurant chain has its company headquarters in Streitwise Plaza in St. Louis, Missouri.
Potential Risks
Several potential investment risks can result in reduce dividend yields or investment losses:
- Tenants do not pay rent
- Tenants do not renew lease and property becomes vacant
- New tenants do not occupy vacant properties
- Depressed local real estate market
- Property sells for a loss or less-than-expected sales price
- Catastrophic property damage
These inherent risks are shared with any commercial real estate investment.
As the Streitwise REIT only invests in a slim number of properties, the investment risk can be higher than funds that hold more properties or have a broader geographic diversification.
How Does COVID-19 Impact Streitwise?
The COVID-19 pandemic forced many businesses to close temporarily and some to (sadly) never reopen. Real estate investors are unsurprisingly curious how residential and commercial real estate performs during a pandemic.
As of March 2021, Streitwise reports it has collected the rent obligations from each tenant. They evaluate rent relief requests on a case-by-case basis and have offered relief to three tenants in 2020.
Despite the unexpected volatility, the REIT has maintained its 8-9% annual dividend target during the COVID-19 pandemic.
Investors have the assurance they will earn passive income by investing with Streitwise. Like any investment, diversification is vital to manage investment risk.
Why Invest with Streitwise Instead of Real Estate Stocks?
So why should prospective investors use Streitwise instead of buying similar real estate stocks that trade on the stock market?
Here are several reasons to consider Streitwise instead.
Avoid Stock Market Volatility
The Streitwise REIT is a non-traded asset and the share price updates quarterly instead of daily. While you must commit to a multi-year investment horizon, the share price value is less volatile than stocks.
For example, real estate stocks can decline in value during a broad market selloff as investors panic, sell, and take profits.
But if you need easy access to your cash, real estate stocks can be better as they have high liquidity. Selling for a loss and spending or reinvesting your investment sale can be better than having to wait for the quarterly selling window that Streitwise offers.
Higher Dividends
Another benefit of committing to a long-term investment with Streitwise is the ability to earn a higher annual dividend. The annualized dividend yield is 8% for this crowdfunding platform.
Nareit states the average dividend yield for the total REIT market is 3.32% as of April 2021. However, a share price decline below the annual dividend yield can mean investors lose money.
Some REITs with a riskier investment strategy can have similar dividend yields as Streitwise.
Exposure to Different Real Estate Markets
There are many ways to invest in commercial real estate. Investors may like Streitwise to invest in smaller real estate markets and investment properties that are too illiquid for publicly traded stocks.
Traditional REITs may stick to the well-established real estate markets with more predictable returns and ample investment opportunities.
It can also be easier to see what the investment portfolio is with Streitwise as the public REIT may not disclose the precise property locations.
Streitwise vs Fundrise
Streitwise is one of the best crowdfunding platforms for commercial real estate. But you may also consider Fundrise as it has many investment options with a low minimum investment.
Here is a quick comparison between both platforms. You may decide to invest with one or both.
Read our in-depth Fundrise review to learn more about this real estate platform.
Investment Options
Streitwise only offers one REIT that specializes in commercial real estate.
Fundrise only offers REITs but invests in commercial and multifamily properties. Each REIT holds a mixture of both property types.
These REITs can have different investment strategies that determine how investors make passive income:
- Supplemental income: Focuses on dividend income and earns some from property appreciation.
- Balanced investing: Balances earning dividend income with long-term growth from property appreciation.
- Long-term growth: Best for long-term investors. Most of the potential income comes from selling properties for a profit and earns minimal dividend income.
The Streitwise REIT is similar to the supplemental income investment strategy. Most of the returns come from monthly tenant rent payments. But the fund may also make additional income by selling investment properties for a profit.
Investment Minimum
The Streitwise minimum investment updates quarterly as the net asset value of the portfolio increases or decreases. New investors will need to buy ten shares. In May 2021, the minimum initial investment is $2,522.50.
Fundrise requires an initial $1,000 investment for the “Starter Portfolio” that seeks a balanced investment strategy between quarterly dividends and long-term growth. It’s possible to invest in focused portfolios that focus on either dividends or long-term growth with a minimum $5,000 account balance.
Fundrise also offers advanced strategies like single-family rental homes with a minimum $10,000 balance.
Who Can Invest?
Both platforms are open to accredited and non-accredited investors at least 18 years old.
However, Fundrise is only open to US citizens and permanent residents. International investors will need to consider Streitwise as the platform accepts US and foreign investors.
Is Streitwise Safe?
Streitwise isn’t a risk-free investment and it can be as risky as other crowdfunded real estate platforms. As the portfolio only holds a couple of properties, one property failure can negatively impact investment returns.
Thankfully, each property has multiple tenants, increasing the likelihood that the monthly rental income will cover overhead expenses and pay passive income.
The 1st Streit Office REIT launched in 2017 and has consistent 8% annual dividend returns. This return is consistent with other crowdfunding platforms.
As private real estate is naturally illiquid, this sector has different investment risks than stocks or fixed income assets like bank CDs or corporate bonds. A recession in commercial real estate in the local markets can cause reduce dividend returns or difficulty redeeming shares.
Also, Streitwise doesn’t have FDIC Insurance or SIPC Insurance to protect your assets if the investment platform fails or goes out of business.
Positives and Negatives
Here are some of the highlights and drawbacks of Streitwise.
Pros
- Target 8-9% annual dividend yield
- Open to US and international investors
- Invests in commercial properties with multiple tenants
- Low investment minimum (approximately $2,500)
Cons
- Only one investment fund
- Multi-year investment period
- The fund holds few properties (i.e., potential lack of diversification)
- Can only sell shares quarterly
Summary
Streitwise provides high annual returns in commercial real estate without the volatility of real estate stocks. You may consider this platform to diversify your portfolio with the cash you can invest for at least five years.
