With the closing of RealtyShares to new investors in 2018, real estate crowdfunding investors have been looking for solid alternatives. RealtyMogul has always stood out as one of RealtyShares key competitors.
RealtyMogul has been much more focused on long-term growth and profitability, versus growth at any price that led to RealtyShares’ downfall.
RealtyMogul Business Outlook
So far, they have distributed over $100M, have 180K members, and have funded over $2.3B over 330 property deals.
I spoke to their CEO, Jilliene Helman at length at the end of 2019 and she mentioned how she wants to build a multi-decade long business not a flip. Her firm is extremely focused on the underwriting process, uses technology to automate more cumbersome areas of the business, and has higher origination fees for sponsors to account for the costs of doing business. They also focus on investments larger than $1M, whereas, RealtyShares did much smaller deals that were of lower quality.
Realty Mogul has raised $45 million in VC funding, but their last raise was in 2015 according to Crunchbase. Given they are still around, I’m assuming they have found a way to be more self-sustaining by focusing more on quality than on quantity for growth. They have a much smaller team at ~55 people. They also stopped investing in hotels and single family flips in 2015 because they viewed them as more risky and/or cumbersome to manage. 65% of their deals are in bread and butter multi-unit residential property.
Given they have higher barriers for whom they do business with, it feels like they really are focused on hitting singles and doubles instead of home runs, which is more in line with how I like to operate my own business.
RealtyMogul Company Overview
Founded: October, 2012
Founders: Jilliene Hellman, Justin Hughes
Address: 10780 California Route 2 #140, Los Angeles, CA 90025
Number of employees: 51 – 100
Contact info: firstname.lastname@example.org | (310) 907-7129
Sign-up page: RealtyMogul
RealtyMogul Management Team
How Does RealtyMogul Work?
RealtyMogul enables investors to participate in a wide range of real estate investments across the country, many of which are commercial deals that are often times in the 10s of millions of dollars range and traditionally out of reach for the average investor.
Some deal examples include multi-family dwellings, office buildings, industrial sites, self storage, retail, medical buildings and hospitality establishments (see picture below). RealtyMogul will even enable you to participate in single-family properties that are bought for the purpose of being rehabilitated and flipped. Just about any property can be invested in, as long as it is not used as a primary home or as a secondary residence.
When you invest, you typically do so by purchasing shares in a RealtyMogul limited liability company (LLC) that in turn invests into an LLC or Limited Partnership (LP) that holds title to the real property. Investing in this way minimizes overhead for the investment sponsors and provides access to more investment opportunities, as well as streamlined reporting of distributions through the platform.
RM Manager, LLC, which is a wholly owned subsidiary of Realty Mogul, serves as manager of the Realty Mogul LLCs.
The term of specific investments depends upon whether it is a debt or equity investment. Loan investments are generally 6-12 months, while equity investments are anywhere from three years up to 10 years. Equity investments generally pay distributions on a quarterly basis, while debt investments pay monthly. These are just general rules, and it’s important to understand the distributions on any investment are never guaranteed.
Benefits Of RealtyMogul
1) Pre-Vetted Investments — Less than 10% of the deals first shown on the Realty Mogul make it through to their platform for their investors. The vetting goes through the sponsors history, track record, and individual backgrounds to ensure deals have the highest chance of providing a positive return. See: How Does RealtyMogul Select Their Deals?
2) Simple Investment Process — Real estate crowdfunding is taking off largely due to its ease of investing. Realty Mogul’s platform allows investors to thoroughly analyze a deal with the research provided. An investor can view pictures, videos, and even ask the sponsors questions before making an investment.
3) More Focused Than REITs — A publicly traded REIT generally has dozens, if not hundreds of properties in its portfolio. It’s harder to invest in specific areas of the country, such as the heartland, or the east coast, or the west coast with a REIT. Real estate crowdfunding with Realty Mogul allows you to be much more surgical in your investments.
4) Low Investment Minimum – Instead of coming up with a $200,000 downpayment for a median priced San Francisco or NYC property and borrowing $1,000,000, you can invest as little as $10,000 in a property on the Realty Mogul platform to gain exposure.
Real Estate Is My Favorite Investment Class
Real estate is one of the best ways to build long term wealth due to inflation, leverage, utility, and tax benefits. Unlike P2P lending, there’s actually a physical asset behind real estate crowdfunding. In case of a downturn, investors can always work something out with the sponsor. Whereas in P2P lending, the borrower can just stop paying and disappear.
I personally own three physical properties that provide over $200,000 in annual gross rental income. I’ve currently invested $800,000 in real estate crowdfunding so far in 2020. I’m bullish on investing in the heartland of America through real estate crowdfunding due to the following reasons:
- A Republican president will give back to the people who got him there through the theme, “Hire American, Buy American.”
- There will be a net migration out of Blue states into Red states as more people realize it’s a great deal living in Texas if you can get 3X as much for 1/3rd the price.
- As our country gets older, more retirees will move out of Blue states to stretch their retirement dollar.
- The remote work trend will continue due to technology and a tight labor market.
- Sanctuary cities are at risk of seeing their federal funding pulled and reallocated to Red cities.
- Income growth should be higher in Red states due to demographic shifts.
- Now that investing in real estate is more efficient, Red State 10%+ cap rates compared to <4% cap rates in Blue cities are too hard to ignore. The spread should narrow.
- A potential expansion of who can invest in real estate crowdsourcing will lead to an increase in demand and prices.
- The rise of real estate crowdsourcing platforms such as RealtyMogul increases the supply of capital, thereby increasing the demand and prices of previously hard to tap investments.
About the Author: Sam began investing his own money ever since he opened an online brokerage account in 1995. Sam loved investing so much that he decided to make a career out of investing by spending the next 13 years after college working at two of the leading financial service firms in the world. During this time, Sam received his MBA from UC Berkeley with a focus on finance and real estate.
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