Illinois P2P RE Crowdfunding Investor

New Member Introductions
10yFollow

Illinois P2P RE Crowdfunding Investor

Jack Reidy
Investor · Downers Grove, IL · Member since 2016 · 3 posts · 0 votes

I am keenly interested in the alternative marketplace which is Crowdfunding/P2P Real Estate Sites since early 2013. I have invested in over 100 deals thus far with over half already completed. 

I am here to share my experiences and learn from those who deal with Real Estate outside of these platforms

Jack

0Reply
9 views

Most Popular Reply

Jim Groves
Lender · Chicago, IL · Member since 2015 · 191 posts · 86 votes
10y

Welcome Jack.  Perhaps you can start it off by mentioning some of the key takeaways you've seen, platforms that you think work well, and more importantly any deals that have not performed as promised.

1Reply
See this reply in the discussion

5 Replies

Jump to latestLatest
  • Jim Groves
    Lender · Chicago, IL · Member since 2015 · 191 posts · 86 votes
    10y

    Welcome Jack.  Perhaps you can start it off by mentioning some of the key takeaways you've seen, platforms that you think work well, and more importantly any deals that have not performed as promised.

    1Reply
  • Jack Reidy
    OP
    Investor · Downers Grove, IL · Member since 2016 · 3 posts · 0 votes
    10y

    Jim,

    Thank you for the welcome.  I think the best way to address your inquiry is to provide you a review I did concerning the major players in the Crowdfunding Real Estate marketplace. This is not a comprehensive list but an analysis based on my experiences with these sites. I think this may be a benefit to those contemplating investing in these sites.

    Real Estate Crowdfunding Company Reviews---3/1/16

    This review is for those who are accredited investors, have an interest in making passive income, but have yet to select a Real Estate Crowdfunding platform or platforms to invest their dollars.

    Let me start out by stating that I am not a financial planner nor do I have extensive expertise in the real estate industry. With that in mind, I am an avid fan of P2P or marketplace lending and I have been investing in FinTech companies since 2008. I have my real estate broker’s license but my primary job for the past 20 years is in the technology industry. My background in both real estate and technology intrigued me to try out Real Estate Crowdfunding.

    I started investing in early 2013 with Realty Mogul and then found other sites that were offering similar investment opportunities. Soon thereafter, I was reviewing and investing in many different Crowdfunding sites. For the most part, my experience utilizing the sites specifically for Real Estate have been positive.

    If you speed up to the present day, I have invested in a total of 95 individual transactions utilizing various Real Estate Crowdfunding platforms. Almost half of these transactions have been fully completed (principal & interest) with very good monetary gains. Of the 40 or so completed deals, the average return has garnered a 9.75% yield. The amazing thing is that I have yet to lose any principal which I cannot say the same for my consumer lending experience.

    Over the past 3 years I have reviewed 30 or 40 Real Estate P2P sites and invested in roughly a dozen of the platforms. There are more sites popping up each and every month and I believe there will be over 100 sites by the end of this year. These sites that I have reviewed are, or were, considered in the top ten for Crowdfunding Real Estate destinations at the end of 2015. Keep in mind these sites were all early adopters after the JOBS Act was passed in 2012 which allowed for these type of platforms to begin to proliferate. Below are the list of companies that I have spent the most time with in the past 3 years:

      • Realty Mogul
      • Patch of Land
      • Ifunding
      • Realty Shares
      • Fundrise

    I have invested in at least a half dozen transactions with each site above and have gone through the whole lifecycle from the initial investment to periodic payments and finally close out of the investment. As a result, I have unique experience on the whole process and how each FinTech company handles the investment from cradle to grave.

    However, instead of reviewing each one of these sites individually, I chose the path of reviewing these sites against each other. In the real estate industry, a broker will prepare a CMA or "comps" for a homeowner to give them an idea of how much their home is worth. For this review, I wanted to give the investor the feedback that they need to determine which Real Estate Crowdfunding site was "worth" investing in. Not all sites are equal and not all investments on these sites are the same.

    There are a number of ways to review these platforms but I chose variables or characteristics that were similar across all platforms. I will illustrate how each variable was scored and measured against its peer further in the review. Below are the criteria of how I compared each site to its peers and in most cases how my experience was and is with each:

    • Website Features, Menus and Options— This category is grouped by how the website is presented and flows from page to page. I reviewed the features, drop down menus and options that each site offers and how they compare/contrast to each other. This might not sound like a big deal but the more information that a site provides, the more comfortable an investor feels about the company. The clear leader in this space is Fundrise. Their site was revamped in the past 6 months and is way ahead of its competitors in look and feel. Fundrise provides a wealth of information and each page helps investors drill deeper into their holdings. Most of the other websites are working on enhancing their sites but they still have a ways to go.
    • Website Ease of Use as it relates to investing---Of all the sites, I think Patch of Land has the smoothest process for signing up, transferring money, and executing paperwork. PoL deals with only Debt investments and has done a wonderful job streamlining there site so investors can get into investments quickly. The other sites take a little longer and have more paperwork to fill out. There is nothing wrong with this extra paperwork and in some cases it is vitally needed.
    • Customer Service & Ongoing Communication of your investments – Each one of these startups has gone through “growing pains” as they ramp up in size so no company is immune to improving this aspect of their business. The key here is how the sites provide Communication on your investments and how this information is disseminated. Most of the sites do a great job of providing timely information but I have to give the edge to Realty Mogul who I have worked with the longest and believe have done the best job to date. They have very good leadership which should help them evolve in this category as they continue to grow.
    • Financial Backing – Each one of these early adopters in Real Estate Crowdfunding has had public money backing them which I think is important to the potential longevity of the business. Although, I do not know the private funding that may have been floated to these organizations, the public announcements on sites like Crowdfund Insider and Lend Academy provide valuable insights on who is backing who in this marketplace. From my research, I believe Realty Mogul has been backed the most financially in the public realm. Since this is a very competitive landscape, it is important to see where the so called “smart money” is going and who they are backing.
    • Fees for Investors – These sites all need to make money in order to survive so fees, expenses, etc. should be expected. Some of them charge the sponsors, others charge the borrowers and still others have a combination of factors for their fees. In my opinion, Patch of Land provides the best value for the investors since all of their investments are pre-vetted and curated and thus are no fees for the investor. The interest rates that are published at the outset are usually the rates that you end up receiving.
    • Diversification or types of real estate opportunities – this category is actually broken down into three subdivisions:
      • Debt or Equity
      • Geography
      • Property Types

    There are normally two options for investors when they participate in a deal….either Debt or Equity Investments. Furthermore, these investment options are further delineated by the location of the property which may be anywhere in the United States. This gives investors options on where (Geography) they want to invest their dollars. Many of these sites have a minimum of $5000 to participate in the opportunity and bump up from there depending on the investment. Lastly, there are a plethora of property types to invest in across this great country of ours including the following:

    Retail, Commercial, Multi-family, Hotel, Self-storage, Industrial and Mobile homes.

    Based on these factors, I think there are two distinct leaders as it relates to Diversification between Realty Shares and Realty Mogul with the latter given the slight edge. An investor can get their money into hot markets like southern California to the beaches of Miami and just about everything in between. I think investors need to diversify not only by Crowdfunding site but by the various aforementioned subdivisions above in order to get a well-rounded P2P portfolio.

    • Due Diligence & Vetting Process— Each investor who invests in these platforms is hoping that the companies have done their homework and that the information that is provided to the public is enough for the investor to make an educated decision. Not all of the investments go as planned but as long as the investor is informed about the potential risks then this will go a long way to build trust for the investor community. Most of the sites I have used provide a bevy of background information on each investment opportunity.In fact, many of them allow potential investors to ask questions regarding the investment prior to committing any funds.

      Based on this criteria, Realty Mogul gets the slight nod over their competitors based on the information that they supply the investor. In addition, Realty Mogul turns away more deals that they put on their website because they want to be conservative with their offerings.

    • Average Investment Returns – Investors want to know how much interest and principal is required and how long their money will be tied up to make this return. The interest rate or internal rate of return is major factor in determining where an investor will get the most “bang for their buck”. Realty Shares provides a sample investor return which is extremely helpful for novice Crowdfunding investors. Although receiving a higher return is a very important aspect of Crowdfunding, the potential higher return also increases the risk so investors need to factor that in when contemplating each investment offering.

      Out of all my investment platforms, I have made the highest percentage returns on Ifunding. This site has some high return/high risk offerings which have luckily paid off for me thus far. I would tread lightly and figure out how much risk is acceptable before investing.

    • Inventory or Opportunities to Invest – I usually scan each of these sites daily to see when opportunities are available on the website. Some of them have gone to a predictable schedule while others are kind of erratic as to when they will release inventory on the website. Recently, Fundrise started utilizing their site to pool opportunities together for a crowdfunding investment trust (eREIT) so there has been a reduced amount of inventory to choose from on their site.

      Without a doubt, Realty Shares has the most ample inventory available on a weekly or monthly basis over the past year and a half compared to their peers. As an investor, it is comforting that a company is diligently putting opportunities in front of you so you can decide how and when to allocate funds on your next investment.

    • Performance---Estimated vs. Actual Returns – Each investment site provides the investor an estimated return on their money with some variances based on the deal being a debt vs. equity transaction.Some of the investments achieve higher results then estimated and some perform lower than anticipated. I reviewed the 40 or so investments that I had completed to see which companies were on target with their estimate and what they actually returned. Based on my results, Fundrise and Patch of Land are neck and neck in my portfolio with a slight edge going to Fundrise.
    • Average Score Compared to its Peers – Below are the 10 performance indicators scored from 5 (being the best) to 1 (being not the best) and how each site ranked against each other. The last column averaged the score of the 10 to yield the average ranking against its peer.

    Summary

    As you can see from my review, there are some things that one particular company may do well as compared to another and vice versa. This review is a snapshot in time and each investor may have a different experience then myself with each of these companies if not others. Nonetheless, I suspect the industry will continue to evolve as it gets mature and there will be plenty more Real Estate Crowdfunding sites for investors to review. All in all, my experience has been a positive and I will continue to invest in this platform.

    0Reply
  • Chris T.
    Investor · Downers Grove, IL · Member since 2015 · 1k+ posts · 955 votes
    10y

    @Jack Reidy

    thank you for the comprehensive reviews of these websites. 

    I'm also in DG, if you're available, love to meet up for coffee and get more ideas from you. 

    0Reply
  • Jack Reidy
    OP
    Investor · Downers Grove, IL · Member since 2016 · 3 posts · 0 votes
    10y

    Chris,

    We can certainly meet and exchange ideas.......

    0Reply
  • Michael BarbariPro Member
    Banker · Downers Grove, IL · Member since 2014 · 396 posts · 107 votes
    10y

    @Chris T. I'm in Downers as well would be interested in meeting up. Keep in touch.

    0Reply
Join the conversationCreate a free account to reply, vote on answers and follow this thread.
Log InJoin for Free