Streitwise ranks among my favorite real estate crowdfunding platforms.
It has a strong track record of steady dividends, quarter in and quarter out. They allow anyone to invest, not just high-net-worth accredited investors, and make it easy to diversify into commercial real estate.
But like all investments, Streitwise comes with its share of drawbacks, including a high initial investment requirement. Make sure you understand the good, the bad, and the ugly before parking a minimum of $5,000 with the platform.
Key Features of Streitwise
As you explore Streitwise as a potential crowdfunding investment, keep the following features in mind.
Commercial Office Space Focus
Streitwise owns two large commercial properties that include five buildings total.
Their Streitwise Plaza office park campus features three office buildings with a combined 290,000 square feet, located in St. Louis. In addition, they own the Allied Solutions Building, a mixed-use building outside Indianapolis with 142,000 square feet, and the rented parking garage next door.
Both properties lease higher-end office space to name brands like Panera Bread, New Balance, Wells Fargo, Edward Jones, Nationwide Insurance, and Allied Solutions.
When I spoke with Streitwise, they explained they’re currently looking for new properties to add to their portfolio but didn’t have any concrete plans to buy a specific property as of early 2022.
Private REIT
Streitwise is a private real estate investment trust, or REIT. You buy shares directly from Streitwise, rather than on public stock exchanges.
The Securities and Exchange Commission (SEC) regulates private REITs differently than their publicly-traded counterparts. Public REITs must pay out at least 90% of their profits each year as dividends to shareholders. Private crowdfunded REITs do not, which allows them to reinvest profits into growing their portfolios.
Streitwise offers an equity REIT, as it owns the properties directly in its investment portfolio. Contrast that against mortgage REITs, which own debt secured against real estate rather than owning properties directly.
Long-Term Investment: Poor Liquidity
Because there’s no secondary market to buy and sell shares, the only way to sell shares is by redeeming them with Streitwise themselves.
And Streitwise hits you with hefty penalties if you sell back shares within five years of buying. They don’t allow you to sell shares within the first year at all. For four years after that, they hit you with decreasing penalties:
- Year One: No share buybacks allowed
- Year Two: 10% penalty
- Year Three: 7.5% penalty
- Year Four: 5% penalty
- Year Five: 2.5% penalty
- Thereafter: They pay you the full current net asset value — the NAV, or share price
Real estate is inherently a long-term investment with limited liquidity. Because Streitwise can’t buy and sell properties at a moment’s notice, it imposes these share sale restrictions so that they don’t have to buy back more shares than they can afford. Even so, Streitwise has a reliable track record of share buybacks, and didn’t pause them even during the pandemic.
Share Price Stability
Liquidity and volatility are two sides of the same coin. When anyone can buy or sell company shares instantly, those prices can fluctuate wildly.
But one advantage to the low liquidity of real estate crowdfunding investments is their stability. The forces responsible for stock market volatility don’t impact crowdfunding share prices.
Streitwise debuted in 2017 at $10.00 per share. Its shares hit a low of $9.86 per share in March 2020. As of the second quarter of 2022, shares sell at $10.15.
High Dividend Yield
On the spectrum of real estate crowdfunding investments, Streitwise falls squarely on the income-oriented side.
Streitwise has paid quarterly dividends of $0.21 per share since 2020. It previously paid $0.25 per share, an annual yield of approximately 10%.
That works out to an annualized dividend yield in the 8% to 9% range since early 2020. In the second quarter of 2022, Streitwise will pay a $0.21 dividend for the 20th consecutive quarter, for an annual yield of 8.4%.
All tenants met their contractual lease obligations in the pandemic, although Streitwise did work out a few payment plans. That’s pretty impressive, given how badly office space fared during the switch to remote work.
Low Leverage
To buy their properties, Streitwise borrowed only 55% of the purchase price of each. Their current loan-to-value ratio (LTV) has dropped to 50%.
The owners raised much of the rest from regular investors and covered the remainder out of their own pockets. They left $5 million of their own money invested as “skin in the game.”
For context, the Streitwise founders bought the Allied Solutions building for $32 million and the Streitwise Plaza property for $44 million. So, their $5 million represents a 6.6% equity stake in the original $76 million cost of the buildings. That’s a significant stake — and a strong incentive to keep their properties occupied and in good working order.
Fees
Streitwise pays the sponsor — the investor responsible for having bought and maintaining the properties — a one-time fee of 3% of all new shares purchased. In this case, the sponsor is Tryperion Partners, which is run by the founders of Streitwise.
Streitwise illustrates the upfront fee with this example: “If you invest 500 shares at $10/share ($5,000), $4,850 (97%) goes towards the REIT and $150 (3%) goes to the Sponsor. You will still own 500 shares.”
Every year thereafter, the sponsor receives an annual management fee of 2%. That doesn’t mean investors lose 2% of their investment annually — the fee is part of the operating expense of the REIT, which affects the taxable income that forms the basis for dividend payments.
However, Streitwise pays out dividends net of fees. So if you invest $5,000, and the going dividend rate is 8.4%, you receive $420 in dividends that year.
Streitwise makes a case that their fees look higher on paper than their competitors because they disclose them transparently rather than burying them in the offering circular. For example, some crowdfunding platforms advertise “no fees” and then disclose in the offering that they deduct fees like waterfall fees, financing fees, disposition fees, acquisition fees, developer fees, and more from the profits.
Advantages of Streitwise
I personally invest my own money in Streitwise for several reasons.
- Strong Dividends. As someone planning to reach financial independence by age 45, I build as many passive income streams as I can. It’s hard to beat a stable dividend investment yielding 8% to 9% every year.
- All Investors Allowed. Unlike many crowdfunded investments, Streitwise allows nonaccredited investors to participate.
- Affordable Commercial Real Estate Investing. Given their massive price tags, it’s hard for the average person to buy large commercial office properties.
- True Diversification from Stocks. Publicly-traded REITs move in uncomfortably close correlation with stock markets at large. That largely defeats the purpose of diversification. But since you buy and sell shares directly from Streitwise, share prices don’t suffer the stock market’s gyrations. You earn returns based on the real estate properties’ performance.
- Low Risk Factors. The low loan-to-value ratios on the properties, the owners’ high amount of skin in the game, and the fact that the original founders remain as the owners all help reduce risk. Also, the properties’ high-quality commercial tenants add stability and further reduce risk.
- International Investors Allowed. Most US real estate crowdfunding platforms only allow American citizens or permanent residents to invest, but Streitwise allows foreign investors.
- Real Estate Tax Advantages. Streitwise investors benefit from some real estate tax advantages such as depreciation, if indirectly.
- Flexible Investing Features. The platform allows you to set up automated investments, dividend reinvestments, or to invest money through Bitcoin. You can also invest as a legal entity, or through retirement accounts such as your IRA or 401(k).
Disadvantages of Streitwise
No investment comes without cons. Beware of these risks and drawbacks before investing.
- Poor Liquidity. You can’t sell shares at all within the first year of buying them, and you can only sell at a discount for the four years after that.
- High Minimum Investment. While Streitwise used to let you invest with as little as $1,000, they raised the minimum to $5,000. I asked them about it once, and they explained that they want to target more experienced investors. First-time investors may be more likely to try and sell shares prematurely as well.
- Weak Appreciation to Date. From 2017 to 2022, the NAV share price has risen from $10.00 to $10.15. That’s only 1.9% total — not per year, but for the entire time span. That said, the existing properties have plenty of room to appreciate, and Streitwise may well add new properties to the portfolio and drive up share prices.
- Only One Investing Option with Two Properties. While the Streitwise REIT owns four buildings and 432,000 square feet in commercial real estate, it’s spread over only two properties. That doesn’t make for a broadly diversified portfolio. Unlike some competitors, Streitwise doesn’t let you choose among multiple REITs or other investment options, you can only buy shares in one fund.
- Low-Tech Dashboard. As Streitwise is quick to tell you, they’re a real estate investing platform first, a fintech company second — if at all. They use a third-party dashboard called ComputerShare for investors to log into and manage their investments. Don’t expect a sleek dashboard, but it gets the job done. They did recently launch a mobile app however, for a more modern experience.
How Streitwise Stacks Up
I invest in multiple real estate crowdfunding platforms, so I’m familiar with many of them firsthand.
Here’s how Streitwise investments stack up to competing crowdfunding platforms.
| Streitwise | Fundrise | RealtyMogul | |
| Underlying Investment | Commercial properties | Residential & commercial real estate | Residential & commercial real estate |
| Ownership Type | Shares in pooled funds | Shares in pooled funds | Shares in pooled funds |
| Ease of Selling Shares | Difficult | Moderate | Difficult |
| Minimum Investment | $5,000 | $10 | $5,000 |
| Availability | All investors | All investors | All investors |
| Dividend Yield in 2021 | 8.4% | 2.9%-5.0% | 4.5%-6.0% |
| Operating Since | 2017 | 2012 | 2013 |
On the opposite end of the spectrum, with all profits reinvested for growth and none distributed in dividends, you can check out DiversyFund.
Final Word
For a stable, high-yield way to invest in commercial real estate for the long term, Streitwise offers a great option. It complements your stock portfolio nicely, trading price growth for income yield, volatility for stability, liquidity for long-term holdings.
Just don’t plan on selling shares within the next five years.
You can also check out competing platforms like Fundrise and Groundfloor, each of which comes with its own strengths and weaknesses. If you prefer a shorter-term investment still tied to real estate, with a low minimum investment, try Groundfloor.
Not that you have to choose. Personally, I invest in all three.