My previous post was a general overview of real estate crowdfunding and why some might consider it in their investment portfolio. This post will take a deeper dive into the 3 platforms that I have invested in and talk about some future plans.
I currently have 4 traditional real estate investments and those require continuous hand-holding from fixing washing machines to finding tenants. So for me crowdfunded real estate was a good addition, I got more exposure to real estate without having to be a landlord or go hunting for properties. The returns are a little bit lower but more predictable which allowed me to come up with House Hacking 2.0.
Currently, I have 150K invested in 3 different platforms with a variety of deal types. I’ll stay away from the super detailed review topics like account creation, funding and website interface because they are all fairly modern websites with similar nuts and bolts. The differences are in the type of deals available and the type of investors they allow and attract.
|Total Amount Invested||$80,000||$30,000||$15,000|
|Type of Investments||REIT, Equity||Debt, Preferred Equity||REITs|
The Real Estate Crowdfunding Review
A website I like to use to research real-estate crowdfunding sites is The Real Estate Crowdfunding Review. This website claims to not take any affiliate or sponsor money from the platforms which gives me some peace of mind that it is unbiased. The other thing that I like about the site is that they change their rankings over time depending on the strategic direction of the platform. Below is the “code of ethics” posted on their site:
Code of Ethics: We do not receive any money from any sponsor or platform for postings, reviews, referring investors, affiliate leads or advertising. Nor do we negotiate special terms for ourselves above what we negotiate for the benefit of members.
Founded in 2012, RealtyMogul is an all-in-one type platform with all types of deals (debt, equity and REIT). The debt and equity deals usually have higher minimums ($25-50K) which are open only to accredited investors while the REIT only require as little as $1000 and open to non-accredited investors.
I researched multiple deals on the platform but never pulled the trigger with the $50K minimums or the rushed decision-making process because of demand.
Eventually, I invested $15,000 in the REIT I which focuses on debt deals and consistently returns 8%. You have the option to re-invest your dividends or get cash distributions which are paid out on a quarterly basis. I recently changed from re-investment to cash distributions to start my House Hacking 2.0.
In the fall they came out with REIT II which is focused on growth through equity deals on multifamily properties. They will distribute quarterly dividends but are expected to be less than REIT I because the focus will be the sale of the properties in 3-5 years.
Plano Multifamily Property
Both REITs actually invest in the same properties that are available on the platform as individual properties. I realized this after I invested in my first individual investment at the end of 2017 and then saw it listed within REIT II. This is a multifamily property in Plano, Tx. They are planning a 5-year hold period with first-year distributions at 6% going up to 13%. They expect the following returns over 5 years:
- Target IRR: 17.8%
- Target Cash on Cash: 10.6%
- Equity Multiple: 2.05x
|Deal Type||$ Invested||Monthly Return (%)|
|REIT I - Diversified|
|Plano Multifamily||Equity||$50,000||First Dist. in June|
Founded in 2013, RealtyShares offers only Debt and Equity Deals and currently transitioning to only commercial real-estate deals. I signed up in 2016 based on a $100 Amazon gift card promo but didn’t end up investing until the end of 2017. The minimums on this platform range from 5K – 50K and hold periods from 12 mos to 5 years. This type of variety can be great because there is something for everyone but the downside is that you have to do your homework.
SmartFund – Cleveland
Nov 2017, I ended up investing 15K in a Preferred Equity deal based on a fund in Cleveland, OH. The funds will be used for purchasing, renovating, and selling or leasing up single-family and small multi-family residential properties. Expected return is 10% with a holding period of 30 months.
Retail Shopping Plaza – Elmhurst, IL
Jan 2018, I found another debt deal which was a mortgage refinance on a retail shopping plaza in a suburb of Chicago. This was a Second Lien Debt which can be higher risk but the return was also higher and with a holding period of only 12 mos. I felt it was worth the risk.
|Type of Deal||$ Invested||Monthly Return|
|SmartFund - Cleveland||Preferred Equity||$15,000||$125 (10%)|
|Retail Shopping Plaza||Debt||$15,000||$156.25 (12.5%)|
While typing this post I got an email for a new deal in North Carolina that I will be taking advantage of but as of this post, the deal was still pending funding.
Founded in 2010, Fundrise is one of the oldest platforms and probably the most mature in the sense it is trying to appeal to a wider audience with lower minimums and recently exited the accredited investor market. I invested $5,000 each in the west coast, east coast and heart eREITs. They all produce 8% returns which are paid out quarterly.
|$ Invested||Monthly Return|
|Fundrise eREIT||$15,700||$102 (8%)|
Overall I would recommend Crowdfunded Real Estate anyone looking to add real estate to their portfolio but don’t have the time to manage a traditional property. As you can probably see, I started to invest heavily in these towards the end of 2017 because the bull run in the stock market was starting to get me worried about a bubble. I know people will say that I was timing the market but I would see it as diversification. Building a real estate portfolio takes a lot of time and energy but with crowdfunded platforms, most of that work is taken away.
If you are keeping score at home, I currently earn around $600 / month and can expect another $300 from the Plano property putting me at $900 / month. This will help knock off a significant chunk of the mortgage payment on our primary home which frees up cash flow for other things. Check out my post on House Hacking 2.0
Where to Next?
Now that I have played around with multiple platforms, I will start to consolidate my crowdfunding portfolio. Some deals will expire naturally with the short holding periods and I will likely start the process of withdrawing from some of the REITs. I’m always looking out for deals popping up on the platforms and their agents are also good about calling when a new deal pops up.
What has been your experience with Crowdfunded Real Estate?
Check out my Monthly Investment Reports with actual returns.
P.S. There may be a storm brewing in the crowdfunded real estate market. Take caution before diving in head first.