Has anyone used RealityShares?

46 Replies

www.realityshares.com . I suppose there's a few of these out there, but this one came up on my radar because they accept bitcoin. They pay off interest in direct bank deposits, however. As I'm sure you are all aware, they require you to be an accredited investor, but the evaluation is based off self reporting through check boxes. I just clicked that I was worth over 1million, made over 300k a year, etc, and I was able to get as far as actually depositing money or bitcoin.

My question is, do these sites just have no way of verifying if you are actually an accredited investor? This one seems to go completely off faith. What's to stop me from basically lying about my income and net worth and making an investment through them? I guess I could run into legal problems, but it seems like any trouble I could run into would actually be their liability for not making sure their investors are accredited. What am I missing here?

Updated almost 8 years ago

Update: bad link, https://www.realtyshares.com

The correct site is RealtyShares. I worked with them for a stretch to list deals, but they're not doing ground-up development deals. I actually found them to be quite arrogant relative to the bulk of the other real portals, but they seem to be reputable.

They likely have carve-outs in their contracts with promoters pushing the "reasonableness" of 506(c) to the promoter in the event something goes sideways. Thus the promoter would need to do the REAL screening before they take your dollars into their deal. Promoters may also have a Reg. A placement in which case they wouldn't need to screen out non-accredited investors.

For any particular deal you invest in on any particular portal you need to ask about the screening for THAT DEAL. Self-certification to see the deal is one thing, but actually taking these dollars into the deal heightens the risk not only for the promoter and the site, but also for the other investors in the deal. You're right to do diligence on this, but the rules are quite technical and confusing. Your attorney is your best friend in these instances.

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I dug up the thread with their securities attorney for your (and BP's) benefit @Lee Davis. Question 3 is the one you're basically asking about above, but there is a lot more detail to it.

(Questions are mine....answers are from Adam Whitaker at RealtyShares)

1. Are you guys just a SAAS provider or do you provide broker-dealer services as well?

With RealtyShares, you get access to thousands of pre-screened accredited investors and the ability to raise capital for your debt or equity real estate offering through our streamlined funding process. We pool all of our investors into a single LLC that we manage, so that you can focus on operating the real estate. You deal directly with us as manager of the LLC rather than individual investors. We do not currently provide broker-dealer services to our sponsors.


2. How are deals generally put together? Do you JV with folks or do you provide a portal for operators to raise money using their own fund apparatus? If it is the latter do you allows Regulation A offerings for non-accredited investors? Are you positioning yourself for Title III and Title IV?


For each investment, we pool all of our investors into a single RealtyShares LLC that we manage. For equity deals, that LLC then invests as a single entity into the LLC or LP that you, the sponsor, use to hold the property. For debt deals, that LLC provides a secured loan to the sponsor. We handle all necessary securities filings for our RealtyShares LLC but it is typically up to the sponsor to handle all compliance with the sponsor’s investment vehicle.


Currently our offerings are conducted using Regulation D, Rule 506(b). We also utilize Regulation S to offer our investments to foreign investors, a steadily growing portion of our investor base. However, we are also positioning ourselves to utilize Title IV to offer our investments to both accredited and non-accredited investors in the future.


3. How are investors screened? I am specifically interested in your "reasonableness" process if you're operating under 506(c) and help to raise capital. I am also interested in learning more about how you screen accredited investors based on assets


We currently conduct our offerings under 506(b) and therefore are not subject to the more stringent accredited verification standards of rule 506(c). To verify the accredited status of investors we use a series of questionnaires whereby investors can self-certify their income and net worth levels. We also call all of our investor sign-ups and have generally confirmed their status prior to their commitment in any investment opportunity on our site.


4. How does RealtyShares make money?
RealtyShares makes money through a small management fee charged to investors over the life of the investment. For our debt offerings, this takes the form of an interest rate spread of around 2%. For our equity offerings, our management fee is taken from cash flows and from a portion of profits upon successful sale of the investment. Upon completion of a successful capital raise, the sponsor also typically pays an upfront fee of around 2-3% of funds raised to cover upfront legal, compliance and accounting costs.

5. How many investors does your platform expose our opportunities to?


We have several thousands investors in the RealtyShares network, both domestic and foreign, and that number continues to grow daily.


6. Do you do ground-up development projects?


We do not currently support construction or development projects. On the equity side, we look for cash-flowing apartment, office and retail properties with 3-5 year hold periods, as well as residential fix-and-flips with hold periods of less than a year. On the debt side we’re looking for residential or small commercial rehab projects with a term of 1 year or less.


7. Do we get direct contact with investors found through your portal?


RealtyShares packages all investors into a single LLC and handles all investor management so that you can focus on managing the real estate. This means you deal directly with the LLC rather than individual investors and there is only one K-1 and one distribution. We do typically ask the sponsor to be available for a webinar with our investors so that they can ask you questions about the property and your team. We have found this to be a very positive experience, increasing conversion for for our offerings.


8. How much do you charge for raising money if this is a service you provide?


We typically charge the sponsor a one-time fee of 2-3% of capital raised upon reaching the funding goal.

@Lee Davis thank you for sharing this post. I was always too "chicken" to say that I was accredited, but you raise some interesting issues. If there is a few bad eggs you lie their way to an investment that they were not suppose to be a part of, I would imagine that due diligence on the funding portals would come up in court as a responsibility along with the individual's fraudulent representations. Interesting to see how this all plays out!

@Lee Davis Thanks for an interesting post.  I invest through RS and no one ever called me to verify my status, it's just a questionnaire. I am curious about how they are able to charge a success fee on the capital raise without being a broker dealer?   

506(b) was used by real estate syndicators for years prior to the JOBS Act, and does not require anything more than self certification of accrediation.  However, 506(b) does not allow for general solicitation, so how can RS do this?

With credit to Mark Roderick, the "Crowdfunding Attorney" this note should clear up some confusion:

2013 No-Action Letters

In the beginning of 2013, the SEC issued no-action letters to FundersClub and AngelList under Rule 506(b). These no-action letter provided that if an online portal merely “registered” a user with a name and email address, the portal could immediately show investments to the user. To many familiar with the history of Rule 506(b) that sounded a lot like general solicitation and advertising, but the SEC concluded that it was not.

With the two no-action letters, the SEC effectively launched the Crowdfunding industry even before the JOBS Act officially came into effect.

More broadly, with the two no-action letters in hand, portals may feel they have a clear road map to legal Rule 506(b) offerings, while they remain hesitant about Rule 506(c) pending more advice from the SEC. My own view is that portals are probably more comfortable with the no-action letters than they should be, but that is a story for another day.

I have an investment with patch of land and have to update my accreditation status every 3 months with actual bank statements or certification by an accountant 

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I have several investments with them and so far so good but still early.

PS This forum is not very active - does anyone know of another site where there is more investor discussion about their experiences with different RECF companies?

Does anyone have any updates on how their investment is doing on RealtyShares?  I've been actively watching, I'm past my cooling off period and think I'm ready to invest!

Originally posted by @Robert Davis :

I have several investments with them and so far so good but still early.

PS This forum is not very active - does anyone know of another site where there is more investor discussion about their experiences with different RECF companies?

 Robert,

I found this review through Google:

http://nomadcapitalist.com/2015/11/04/my-review-of...

Even though it sounds like the typical slamming of a competitor because the author feels that his product is better.  He even slams 'flippers', lol.  I'm not taking much heed, except for the point that most projects fall behind and there is not way to monitor or control anything from an investors standpoint.

@Lydia B. I think its important to note that the CF portals are basically HML and or equity partners.. Just because they are have a new vehicle to get a potential investment to market does not change the fact that these are investments and the CF portals make their money exactly like Mortgage broker does .. points for allowing the investment to be on the portal and normally some servicing revenue.. IE payments are made to portal they distribute to smaller investors.. plus filing tax reporting.

NO lender or investment company Is perfect and to Expect 100% performance on each and every deal is  fantasy... NO one can do that.

However some how the public seems to think these guys need to do that and if they don't they get hammered.

that's my take on it..  and for the record I think I was the very first deal that RS did.. and I know Jilliene at RM personally however have not done a deal with them.  RS is just like any other lender they vette and make the best decision they can.

This other person who you posted his link he as you state is a competitor so his opinions don't count.   Plus he looks like he is 18  LOL... BE very wary of any off shore or foreign investment schemes.. if they go bad you have ZERO recourse