In this article, I wanted to show you about this interesting website I discovered a few months ago called “RealtyShares”.
RealtyShares could be a really good option just in terms of making it very easy for people to invest smaller chunks of money in actual real estate investments. And again, I’m still getting acquainted with it, but from what I’ve seen of this site, it seems pretty legit.
I actually just signed up for an account a few days ago, and I’ve been looking at some of their investments and the way this site work is. There’s a team of underwriters who looks at a lot of different real estate projects across the country and they only accept about 2% of those projects and then of the projects that get approved and basically meet all the standards required to make up what they consider to be an excellent real estate investment (one that has a pretty reasonable likelihood of succeeding), they put them on here and essentially you can invest your money in increments of $5,000 or higher and in some cases you can even invest less than that, depending on the type of deal you want to invest in.
As I was looking through the site, it almost reminded me of a microlending platform, where you can just invest smaller amounts of money without putting up ALL the funds for the entire loan just kind of play a smaller part in that, and then in time, that loan gets paid back, you get your investment back and then you can reinvest it.
The difference is that this particular site is explicitly geared towards real estate investing and the types of these you can invest in are “debt deals”, “preferred equity deals” and “joint venture equity deals. The difference between those is with like debt deals and preferred equity deals you’re investing in a loan. So the funds that you put into the project are lent out to another real estate investor who buys a property, rehabs it, flips it or does some kind of improvement and then sells it for a higher amount and then you get paid interest during the term of that loan and when it’s all paid off, you get all your money back and you can then reinvest it (and that’s assuming everything goes according to plan). Whereas with a joint venture deal, you actually own a portion of that property.
RealtyShares shares will create a new, unique LLC for that property and then buy it. Then you have an ownership in that LLC through the investment of the property depending on whether you want to invest your money and get it back really quick (like within a year) or whether you want to just invest in park it and then get a higher return over that period and then get it back after like 5 years.
There are different pros and cons that come with the type of investment you want to do and what your long-term goals are. You actually have to be an Accredited Investor to even be allowed into this and to start seeing the deals and investing which basically means, you either have to have a really good income or a nest egg saved up and then you can get into this site and start investing.
Who can be involved and become an Accredited Investor with RealtyShares
Basically you either have to be an individual with an income of more than $200K per year for the past 2 years, or have a net worth exceeding a million dollars excluding your primary residence, or if you have a joint income with your spouse exceeding 300K for the past two years. That would also qualify you or if you invest on behalf of a business entity with at least five million in assets or business, in which all equity owners are accredited investors. So basically you can’t really get past this point unless one of these things applies to you.
When you sign up to the site, you have to fill out the suitability questionnaire. In this case, if you’ve got your own LLC or trust and you gonna be investing through that, you could signify that here.
In this case, I’m just going to say no, I’ll just be doing this personally. After that, you need to wait for the representative from RealtyShares to contact you and verify anything else they need to know before we can move forward.
I actually ended up getting a call from the representative at RealtyShares a few hours after I completed my questionnaire so it was really pretty quick process and the conversation we had was informing me of the risks and making sure I understood how everything worked. It was really a pretty easy conversation and they went ahead and approved my account and let me start browsing opportunities.
There is a cool feature of the website called market summary. It is the place where you can get some ideas for what the statistics are in the demographics of the area, management of the properties (who is going to be managing it all the way down to the individual principles who will be on the management team) and then the documents tab – it looks like we’ve got a track record, comparables analysis, investor package, financial summary so we can download this stuff and just get a better look at what everything is going to look like.
Take a look at the track record and see what that’s like, all the same stuff that bankers and underwriters look at when they’re deciding whether or not to lend money on a property. This is very standard, what you
would expect to see a big commercial bank looking at before jumping into any deal. So these guys seem to be the real deal and just from what I can see here, they seem like they’re looking at all the right stuff and analyzing the deal appropriately and developing a good understanding of what each project entails before they invest anybody’s money in it.
In terms of whether I’m going to be investing my own personal funds in any of these, I honestly don’t know yet. I’m certainly open to it, but I’ve got a number of projects on the table that I’m looking at this year so I may or may not, but if I do, I’ll certainly do a follow up blog post and just let you guys know how it’s going, what the experience was like, how the process went and if it’s earning the way that these guys were expecting it to earn. And for that matter, if YOU end up signing up for this site and becoming an accredited investor, by all means, be sure to leave a comment below and let us know how it’s going.
Let us know what the experience was like, how your investments doing – I’d just be curious to know from everybody else out there how it went and what the experience was like.
As you can see as time goes on, these investments will turn over and old ones will go away and new ones will come online and you can take a look at them as time goes on. I think there’s many different kinds of players who are on this site. There are probably people who have millions and are constantly putting money in and getting the money back and there are probably people who just put in $5,000 at a time and just kind of wait for it to see what happens.
When I was talking to the folks at RealtyShares I was told that there are somewhere around 20,000 accredited investors on this site right now, so it’s not really a tiny operation. There’s a lot of people who are involved with this, and the average investment size per investor is somewhere around $12,000 and I guess the average number of investors involved in each project is somewhere around 55. So that just gives you an idea of how that all works and the typical investor and project size and how many people are involved.
That’s really all there is to it. Again, I’m not saying this is the perfect fit for everybody, I think there are certainly people who would be better off running their own business and finding their own deals and kind of handling it all themselves. Some real estate deals can be extremely profitable and if you are willing to handle it all in-house, you can take all of that profit… Whereas this is more for the investor who wants to kind of sit back and not do all the hands-on work but just put their money in and let it work for them.
The returns may not necessarily be as big and they certainly won’t have the kind of control that they would if they were buying a property and managing everything themselves, but that’s kind of just the trade-off that comes with whether you’re looking for a hands-on investment or hands-off investment. So hopefully this article gives you a good idea of what RealtyShares is all about and how the site works.