The term “crowdfunding” is appearing everywhere on the internet.
Crowdfunding has made its way into real estate investing, thanks to platforms like RealtyShares.
To put it another way, RealtyShares has been called the “Lending Club of real estate.”
This review will go over RealtyShares to see if it really is the best Online Investment platform out there.
You’ll learn whether Crowdfunding is right for you.
And at the end, you’ll find answers to some of the most frequently asked questions regarding RealtyShares and crowdfunding in general.
RealtyShares is a real estate-focused online investment platform. Investing on the website connects you with lenders, borrowers, and sponsors all in one place.
While other online real estate platforms concentrate on large apartment buildings and commercial investments, RealtyShares focuses on smaller business investments, such as single-family house flips.
Over 200 properties in dozens of cities across 17 states were invested in by RealtyShares in 2014. This amounted to $300 million in property value in 2014.
A RealtyShares feature that sets it apart from other underlying real estate investments such as REITs is the ability to invest in a portfolio of properties or in a single, particular property.
RealtyShares evaluates investment opportunities to ensure they meet the platform’s minimum requirements. If it does, the investment will be listed on the site.
It will include everything from general information about the transaction to legal documents that specify risk factors associated with the transaction.
Investors can buy anything ranging from a small portion of a larger investment to the entire investment.
The site dashboard tracks the investment’s earnings history and also provides year-end tax information to investors.
Equity investments or real estate loans can be funded by investors. Commercial real estate can be a good place to put your money. The platform will even allow you to introduce your own investment, financed by the website.
To invest in RealtyShares, follow these five simple steps:
Certainly, preferred equity deals invest in RealtyShares subsidiaries’ debt obligations, known as payment dependent notes.
The performance of the underlying loans is linked to the performance of these notes. RealtyShares uses a third-party trustee in these transactions to limit counterparty risk for investors.
ROI (return on investment) Equity investors typically receive monthly distributions, whereas debt investors receive quarterly distributions.
Distributions are deposited directly into your linked bank account, and equity investors will share in any net appreciation upon the sale of a property.
RealtyShares allows real estate investors to build a real estate investment portfolio rather than committing all of their capital to a small number of investments.
Investors can participate in a variety of transactions by funding loans or taking on private equity positions. This allows investors to participate in more significant investments that were previously only available to huge investors.
Investors on the platform can diversify their holdings in various types of properties and investment positions and geographically.
The investments are also passive in nature, similar to financial assets. The investor is not required to be involved in the day-to-day management of a property.
The service has proven to be beneficial to both investors and real estate companies in need of capital.
RealtyShares conducts the investigation. The site evaluates each opportunity before conducting a background check on the principal executives of the sponsoring real estate company or borrower.
They also look over pro forma financial statements, title reports, and property inspections, as well as comparable sales data and other pertinent information.
The findings of their investigation are available on the platform or can be sent to you via email. As a result, risk factors for each investment are known ahead of time. RealtyShares handles all of the research for you.
If the investment does not close for any reason, any funds invested in the transaction will be fully refunded to you.
Pricing. There are no registration fees on RealtyShares, and once registered, you can browse investment listings at your leisure. RealtyShares charges a one-percentage-point annual fee to manage equity investments.
Additionally, they may charge an “over-raise” fee to cover the initial legal costs and other specific expenses associated with the investment.
For debt investments, RealtyShares charges a servicing fee equal to the difference between the borrower’s interest rate and the investors’ net interest.
Security. RealtyShares employs SSL with 128-bit encryption, similar to that used by banks. Third-party security firms review the platform regularly to ensure that security standards are met.
Furthermore, the platform does not store your banking information on their servers. You will be logged out automatically after 15 minutes of inactivity.
If you invest in debt securities, your funds will be deposited into an FDIC-insured account with Wells Fargo, N.A. (up to $250,000). Equity and preferred equity investments are held in escrow by the broker-dealer partner and a third-party bank.
Clearing agency. North Capital Private Securities Corporation provided execution services for RealtyShares’ equity and preferred equity investments.
RealtyShares is also subject to North Capital’s compliance and regulatory oversight. North Capital is a registered broker-dealer that is also a member of FINRA and SIPC.
I’ll keep you updated. RealtyShares provides quarterly updates on equity and preferred equity investments.
However, additional updates will be provided as new information becomes available. There is information available online as well as via email sent directly to you.
Reporting of taxes Before April 15th, the platform will also provide you with the necessary tax documents (IRS Schedule K-1 and/or 1099-INT) for your investments.
Holding time. Each RealtyShares investment has a holding period ranging from less than six months to more than five years. However, they may extend beyond the original production.
The initial investment is minimal. Although the general minimum for any single investment is $5,000, some investments may be available for as little as $1,000.
I began by investing in a few small debt deals to get my feet wet, especially since most of these had low minimum investments. In these types of investments, the investor acts as a lender to the property owner or deal sponsor.
The loan is secured by the property, and investors earn a fixed rate of return based on the loan’s interest rate and the amount invested.
The investor is at the bottom of the capital stack in a debt deal, which means they prioritize claiming a payout from the property.
These transactions were simple to understand, but one of the major drawbacks is that returns are limited by the loan’s interest rate. In other words, their profits are limited.
As I grew more comfortable with RealtyShares, I decided to take the next step and start researching preferred equity investments.
The investor becomes a shareholder in a specific property with these investments. Their stake is proportional to the amount invested.
Returns are calculated as a percentage of the property’s rental income, less any service fees paid to the crowdfunding platform.
If the property is sold, investors may be paid a portion of the appreciation value.
What drew me to these equity deals was the possibility of profiting from the sale of the property.
In essence, there was no cap on returns, and the tax benefits were exceptional.
One advantage of owning an investment property is deducting certain expenses associated with its ownership, such as depreciation and repair costs.
Real Estate deals in equity crowdfunding are typically structured through an LLC, taxed as a flow-through entity. This means that investors can benefit from the depreciation deduction without directly owning property.
With the possibility of higher returns comes the possibility of higher risk. These transactions are typically riskier than debt transactions, but I was willing to take a chance.
RealtyShares informed investors via email on November 7th, 2018, that they would be closing down. After failing to secure additional funding, they will not accept new investors or make new investments, instead of focusing on servicing the deals they have already made.
Yes, You can!
There’s a lot that comes along with Real Estate Investing that many people struggle with.
Now, don’t get the wrong idea…
It’s not impossible to make money with Real Estate Investing but if you’re gonna put in the amount of grueling work to do this business (which, trust us, isn’t easy), you might as well bring in some REAL money while you’re learning the ropes.
Yes, it seems legitimate. But based on BBB this company is not accredited to them as of now. RealyShares Inc. has a -D rating on the BBB website. There is no definite reason why they have that rating.
But, when it comes to building a business, you have plenty of options.
And even if you’re dead set on becoming a Real Estate Investor, you’ve got way better options than RealyShares.
Keep in mind, we don’t get paid to promote any of the programs we review. We personally think Real Estate Investing is a great business model, but you could end up leaving way too much money on the table.
The ability to diversify into real estate for a crowdfunding platform, particularly one that allows for small real estate investments, is a great reason to use the services of a site like RealtyShares.
The fees are low, and the website contains all of the technical information you require, so you won’t lose money.
The service has several advantages and disadvantages. Still, RealtyShares would work better if it did not require accredited investors. Crowdfunding, in general, democratizes investing by making it accessible to even the most inexperienced investors.
The requirement for accredited investors restricts the platform’s use to high-income and high-net-worth individuals.
Our review team has come across a program in the real estate industry that is next level!
Although it’s not real estate in the traditional sense, it’s all digital.
With digital real estate, you have the opportunity to completely walk away from your 9-5 job!
Sound too good to be true?
Of course it does!
But it isn’t… in fact, business owners wish they had this skill!
What exactly is the skill?
Well, basically you are acting as a conduit for small business to increase their bottom line.
What we mean is…
You are helping these businesses grow!
All you have to do is build and rank a website and forward certain jobs off to a business owner in town, you could even email it to them!
This works for literally any service based business… i.e.: tree service, plumbing, towing, etc.
Simple, after you forward the jobs off to a business owner and he makes closes the deal, you simply ask to agree to a WIN-WIN arrangement.
A fair price to charge per lead, depending on the industry is 10-20%… let’s just use the tree service industry for example and go by worst case scenario.
Let’s say you build and rank the site and only 20 jobs a month come in. The average tree service job is anywhere from $500-$2000!
That means at bare minimum you have an asset worth $1000 a month!
See why they call it digital real estate now? That’s a rent payment.
The great thing is how easy it is to scale. You don’t have to answer the phone…all you have to do is get the phone to ring.
Truly passive income!
The training program takes making money online to a whole other level. The owner of the program walks you through how to build and rank a site hand in hand, with the occasional voice over when he is sharing his screen.
You will learn the importance of keywords, website name, how to send call notifications via email, backlinking, etc.
Once the training program is completed you will also have access to a Facebook group where you can ask questions and be in a community with others on the same journey as you.
Digital real estate allows you to have passive income with most of your day being spent OUT of the brick and mortar landscape.
Now, we know you probably have tons of questions…