Thoughts on RealtyShares?
I am a Residential Real Estate Agent in the state of Minnesota and have been looking into realtyshares as a possible recommendation to break into the RE investment world. Those who have experience or have heard of RealtyShares - What are your thoughts?
I think that you have a specific competitive advantage over casual investors in that you work full time in the field and can create opportunities based on your knowledge disparity vs the general public and should be looking to capitalize on that especially if you don't have millions in the bank.
I took a similar path and it has been extremely beneficial for both facets of my business. If you'd ever like to discuss, feel free to reach out.
I believe they are only open to accredited investors from what I remember. Something to take into consideration if you were not aware of that.
I've spent many man-months doing an in-depth evaluation and ranking of the top 100 real estate crowdfunding sites. This included not only looking at the sites themselves but also interviewing investors about their experiences.
Realty Shares is unusual, because it has some of the most impressive features in the industry, and it's also one of the most complained about sites.
They have a very good volume of investments (putting them in the top five there) and they have an mix of diverse investments of all kinds (every combination of commercial, debt versus equity direct investment versus fund). That's really nice for diversifying a portfolio quickly. The also have low minimums and superior bankruptcy protection. And they were the site that broke the 2016/2017 venture capital funding drought, and raised an impressive $20 million.
At the same time, most of the investor feedback on them was not positive with several said they would not use the company again. There were complaints about claimed irregularities with tax reporting. Others complained about alleged inadequate management oversight when investments went wrong. There were also complaints about alleged slow or nonexistent responses to email questions and communications.
@Ian Ippolito Thank you
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Lender Arizona (#103522), Colorado (#103522), New Jersey (#103522), Florida (#103522), Wisconsin (#103522), Minnesota (#103522), Tennessee (#103522), and Texas (#103522)
@Ian Ippolito, awesome info! Not to re-direct the thread, but which company(ies) do you recommend based on your research?
@Frankie Woods, In my opinion it really depends on your risk situation, whether you are accredited/nonaccredited and how much you are putting in. A young investor with an aggressive risk profile will prefer very different offerings than an older investor or one who has a conservative risk profile. And if you are an non-accredited investor with $1000, the choices and best options are a lot different than an accredited investor with $500,000. If you want to share that information here, I'm happy to give you my opinion. Of if you want to p.m. me, that's fine too.
@Gabriela Chenoweth I think it really depends on the client. In my opinion, evaluating crowdfunding deals are a bit more complex. And you also need to repeat the process for multiple deals to a) diversify and b) reinvest (most deals are 3-10ish years). So if you're investing in multiple deals, you'll need to gain some understanding of the markets, review sponsor track records, verify their financials projections make sense and that they're using reasonable assumptions, make sure the fees aren't excessive (fees vary for each deal). I'm not sure it's significantly more passive than a rental property with a property manager.
The other thing to keep in mind is that crowdfunding sites haven't been around that long and have not experienced a downturn. They're all about 5-6 year old. During this time, the markets have been pretty favorable and probably have covered up mistakes that would eliminate (or created negative) returns in a down or flat market.
Really depends on the investor.
@Matt S., I have both single-family homes that I own directly, and also investments in crowdfunding/syndication. You brought up some legitimate downsides to crowdfunding (it takes time to vet the deals, and that there is in the marketplace online that has experienced a full real estate cycle and a downturn yet). At the same time, in my opinion there are some things that mitigate them.
1) Time requirements: while it does take time to vet the deals, purchasing a rental property and hiring a property manager are generally not truly passive/time-free experiences either. Purchasing involves combing through perhaps hundreds of candidates over a period of months, creating a short list, visiting properties in person, bidding, hopefully winning one, then managing a rehab, and then interviewing property managers, and then hiring one. This is much more work than vetting a crowdfunding/syndication deal.
The one exception would be if the investor purchases a turnkey property from a turnkey operator. In that case, it is truly passive because the turnkey company does all of that. I am a very conservative investor, and have seen firsthand how many shortcuts can be taken on the process, if a turnkey operator wanted to, and would not be caught for years or more by the investor. So they are not a good fit for me. But others with the different risk profile might find them acceptable.
But for non-turnkey investors, I would say it's actually much easier/less work to invest in crowdfunding/syndications.
2) lack of full cycle experience: some platforms originate their own deals and are the managers of their own funds. In this case I completely agree that they do not have full cycle experience, and it's completely unknown how well they will do when the next downturn comes. However, not every platform is like this. Many of them such as crowdstreet, simply connect investors with existing sponsors. While most have the exact same issue with lack of full cycle experience, it is possible to find a few jewels that have full cycle, or multiple cycle experience.
@Matt S.undefined
@Ian Ippolito Very good points.
Originally posted by @Gabriela Chenoweth:
I am a Residential Real Estate Agent in the state of Minnesota and have been looking into realtyshares as a possible recommendation to break into the RE investment world. Those who have experience or have heard of RealtyShares - What are your thoughts?
I have heard some pretty good things so far.
From the perspective of someone who has investments with Realtyshares, my experience has not been great. I have invested into 4 different investments with Realtyshares. All 4 investments ran into trouble, namely the borrower has stopped paying and gone into default. One of the investments finally paid out and return the principle with over 10% ROI (more than the projected 10%). The remaining 3 investments are now going through the process of foreclosure.
The foreclosure process can take many months. 2 of the investments are over 9 months past their projected Maturity/Exit date.
I would say that if you don't need the money, are extremely flexible as to when your principle investment will be returned, do not rely on monthly interest payments and are OK if your principle is never returned at all, than this might be an OK option.
For me, every time I listen to a BP podcast (I listen to all of them) and I hear that Realtyshares is sponsoring the show, I cringe, because it reminds me of the 3 nonperforming investments I still have remaining with them.
The story is not over of course. And I will be happy to update you as to the outcome of the remaining 3 investments....I just have no idea when this will be. I have found the updates that Realtyshares makes regarding these loans are sparse.
Don't do it!!! I have multiple investments with RS. I invested $20,000 in one "investment" The sponsor defaulted 5 mos into the project. It was pitched as an 18 month hold. That was 2 years ago. The sponsor claimed his CFO quit so he could not provide any financial info.They have not officially told me my investment is gone...but that is just a matter of time. I am a big boy and don't blame anyone but myself. But when you give $2 Mill to a sponsor and he defaults 4-5 months into project. Someone did not do enough research into the sponsor or project. As an investor with RS you only have a very limited time to do your due diligence and you have to rely on the data RS provides.
Bottom line...As an investor you have Zero control when investment goes south! You have to rely on their lame updates. RS is the only entity that actually makes money on some of their "investments". You are much, much better putting your money in a Bond fund that pays 4%. At least you will have most of your capital at the end of the day!
Don't do it!!!!!!!!