Before the pandemic, I had the opportunity to have lunch with Jilliene Helman, CEO and co-founder of RealtyMogul in San Francisco. During the lunch, I was impressed with Jilliene's focus on long-term profitability. Instead of chasing the most number of deals to boost revenue, Jilliene said she and her team focused on quality over quantity.
What I also liked about her business philosophy was her desire to build a legacy that would hopefully last for years to come. As someone who wants to keep Financial Samurai going for at least another decade, I could relate.
Given it's been a while since we last connected, I thought it would be good to provide an update.
RealtyMogul Overview 2022
RealtyMogul is one of the largest, most recognizable brands in online real estate having been in operations since 2012. RealtyMogul’s platform offers standalone commercial real estate deals for accredited investors. They also offer two diversified non-traded public real estate investment trusts (REITs) for both accredited and non-accredited investors.
RealtyMogul focuses on institutional real estate deals with specific emphasis on “value add” commercial real estate deals, especially multifamily opportunities. This approach has earned RealtyMogul a strong reputation as a thoughtful player that provides Members with an online platform to seek real estate deals with the potential for strong risk adjusted returns.
So far, the Platform has provided over 300 investment opportunities to its Members. The opportunities include over 100 multifamily apartment communities, resulting in excess of $3 billion in total deal capitalization.
The Platform currently has over 220,000 members. Due to strong product market fit, the community is growing rapidly. RealtyMogul has made recent investments in its real estate, marketing, product, and technology teams to continue to increase the number of deals on the Platform and enhance its Members’ experience.
The firm is bullish on the real estate market coming out of the pandemic. So far in 2022, they have connected investors to over $800 million of real estate deals. Here are some of RealtyMogul's new initiatives.
RealtyMogul REITs
In addition to the standalone commercial real estate opportunities, RealtyMogul also offers investments in two REITs for all investors. From June 2020 through May 2021, 26% of RealtyMogul originated investments were allocated in whole or part to the REITs.
MogulREIT I
The RealtyMogul Income REIT is a public, non-traded REIT making debt and equity investments in commercial real estate properties diversified by investment, geography, and property type. This REIT’s primary focus is providing monthly income to investors by rigorously evaluating numerous investment opportunities to find those that can support the REIT’s distribution target.
It currently comprises 11 investments across 11 MSAs with a property value of over $270mm based on the 3/31/2021 internal valuation. It has made 55 consecutive monthly distributions. Further, distributions have been between 6.0% and 8.0% annualized based on purchase price.
For the most recent quarter, Q1, 2021, the NAV also increased to $10.22 per share, a 2% increase over Q4 2020.
MogulREIT II
The RealtyMogul Apartment Growth REIT (MogulREIT II) is also a public, non-traded REIT investing in apartment buildings. It currently comprises nine multifamily investments across 7 MSAs with property value of over $210mm based on the 3/31/2021 internal valuation.
While the REIT has paid income equating to a 4.5% annualized distribution for 13 consecutive quarters, the focus is also on long-term capital appreciation from the renovation and repositioning of the multifamily properties.
For the most recent quarter, Q1, 2021, MogulREIT II’s NAV was $10.65 per share. This represents an increase of 4.8% over Q4 2020.
How RealtyMogul Evaluates Commercial Real Estate Deals
Every deal on the RealtyMogul Platform has been thoroughly vetted. RealtyMogul lives and breathes its core values. The top two values of ‘sleep well at night’ and ‘protect the investor‘ have translated into a comprehensive due diligence approach.
Less than 1% of deals make it onto the Platform. They have a proven track record with members’ investments to date including 17,493 multifamily units, 3621 self-storage units and 6.9 million square feet of commercial – office/industrial/retail properties.
Here is a RealtyMogul case study for a value-add property. It shows how RealtyMogul thinks before acquiring a property and what they do to add value for shareholders.
Questions RealtyMogul Ponders Before Investing
The sponsor: It all starts with working with a great real estate partner. You need to ask whether they have a proven track record in the local market. Then you must determine whether they truly have ‘boots on the ground’ knowledge with experience executing the business plan they are proposing for the property
The market: What are the demographics of the market? What are the trends? Are people moving to or from the local market? What about schools and major employers? What are the comparables in the market, vacancy rates and more?
The specific location: The old adage of location, location, location is still true. But you have to dig deeper. What is the physical condition of the property, quality of the tenants, length of their leases and longer term infrastructure plans around the site?
The asset class: How risky is the asset class and are you comfortable with the level of risk? RealtyMogul has stayed away from hospitality in recent years which served them well during the pandemic. They focus more on multifamily and industrial, which are lower risk asset classes. You need to ensure that the risk profile works for you and your portfolio.
Projected Returns: How well scrubbed are the proforma numbers? Has a downside case been run? What is most important to you – equity upside or passive income? RealtyMogul shares the numbers very transparently so you can evaluate what makes sense for your personal financial situation.
Just as important, RealtyMogul is also transparent about past performance on every investment. Investors can see the IRR of each individual deal that has gone full-cycle on the past investment page.
Commercial Real Estate Outlook Post COVID-19
With strong product-market fit, RealtyMogul is bullish about the future. They are seeing strong demand from investors to diversify their portfolios into institutional quality real estate investments. Further, they are also seeing strong demand from real estate sponsors looking for a robust Platform to raise equity for value add and development opportunities.
The Platform continues to be extremely picky about the deals it places on its website. RealtyMogul’s conservative DNA means they have stayed away from hospitality. Instead, they’ve focused on multifamily and industrial, where they have the strongest belief these asset classes are well poised for the future.
RealtyMogul is also seeing its investor base reduce the time to make their first investment on the Platform and return multiple times to make subsequent investments. These are further indicators the Platform is meeting the needs of investors.
Geographic Areas Of Focus: Gateway Cities
RealtyMogul has teams across the country looking for the right opportunities with robust projected risk-adjusted returns. They are specifically focused on high growth Southern markets like Atlanta, Charlotte and Dallas and select opportunities in the Midwest. The heartland of America is where they are focused.
RealtyMogul is also always searching for the right opportunities in the large gateway cities. They look for the sub-markets within these cities that are experiencing attractive dynamics such as high rent growth and favorable demographic shifts. These cities, such as Miami and Los Angeles also attract global investors which may increase the likelihood of a successful exit.
Gateway cities are urban metro areas that act as the foundation and hub for the economic industry for the state, region, or country. Originally these cities were seen as a “gateway” into the American dream, especially for immigrant families, because of access to reliable work and housing for residents.
Below is a map highlighting the investment opportunities on the RealtyMogul Platform.
RealtyMogul And The Future
RealtyMogul believes real estate is an important part of a diversified portfolio and aims to make real estate investing as simple as a few clicks of a button. With a nine-year track record of running RealtyMogul.com, they’ve accomplished this and look forward to offering even more investments in the future to their Members.
As a long-term driver of wealth creation, real estate should be thought of as a long term investment – with investments typically having a hold period of 3-10 years. For investors, it starts with determining the right allocation into real estate. Then evaluate whether you want to invest in a REIT or individual property and take the time to do your own due diligence.
RealtyMogul also has an investor relations team standing by as they pride themselves on white-glove service – a unique differentiator from other platforms. As an investor, you should ask the tough questions and get comfortable with the opportunities before making an investment.
Ultimately, RealtyMogul wants investors to invest with confidence and be able to live RealtyMogul’s #1 value of sleeping well at night. Sign up and explore what RealtyMogul has to offer.
At the time of this post, there are multifamily offerings in Atlanta (GA), Austin (TX), Creve Coeor (MO), Marietta (GA), and Los Angeles (CA). There is also an industrial opportunity in North Las Vegas (NV) as well as the two REITs.
This article is for informational purposes only. It should not be regarded as a recommendation, an offer to sell, or a solicitation of an offer to buy any security. Any investment information contained herein has been secured from sources RealtyMogul believes are reliable. But we make no representations or warranties as to the accuracy of such information and accept no liability therefor. No part of this email is intended to be binding on RealtyMogul or to supersede any issuer offering materials.
Investment opportunities on the RealtyMogul Platform are speculative and involve substantial risk. You should not invest unless you can sustain the risk of loss of capital, including the risk of total loss of capital. Past performance is not necessarily indicative of future results. For additional information on risks and disclosures visit https://www.realtymogul.com/investment-disclosure.
Hi Sam, Thanks much for publishing your blog. It’s great information and much appreciated!
May I ask why you stopped promoting Crowdstreet? You promoted them for a very long time and now you seem to talk to RealtyMogul.
I still like CrowdStreet. They launched a Build-To-Rent Fund which I’m considering investing in. I like funds because I don’t have time to try an analyze every deal. Further, build-to-rent is an attractive asset class. I think rents will continue to rise for years.
Great review. I wonder if they’ll expand their reach into more cities.
I would just caution people that non publicly traded means that you cannot get your money out anytime and easily like you could from a publicly traded mutual fund. That is something to remember.
True. If you want to trade in and out of a private eREIT or need liquidity shortly, these type of investments are not for you. You should invest with a 3-5 year time horizon with such investments.
Personally, my goal is to always try and invest in anything with a 5+-year time horizon. The longer, the better. If you can manage your finances properly, the need for liquidity is not as high as you think.
Related:
The Need For Liquidity Is Overrated
The Illiquidity Premium And Patient Capital
I have read your reviews about Fundrise, CrowdStreet and now this Mogul. How would you compare these 3 platforms?
There are hundreds of platforms out there. These are the main three I’ve focused on. CrowdStreet is 100% for accredited and focus mainly on 18-hour cities. But they also have new funds now, like the Build To Rent Fund. Fundrise is 100% on eREITs. And RealtyMogul is a combination.
As an investor, your goal is to screen as many promising deals as possible and invest in the ones you think are best. In order to see the most promising opportunities, you need to see a lot of deals.
I personally like investing in multifamily offerings and diversifying across the country. Great chart and article on gateway cities btw. I like that RealtyMogul is looking at sub markets within gateway cities. Good opportunities pop up if you have the patience, persistence, and man power to look for them.
Thanks for the review. What are some of your favorite gateway cities post pandemic?
Charleston, Memphis, Salt Lake City.
Related: The 20 Best Cities To Invest In Real Estate Today
What’s the advantage of this platform over the previously recommended Fundrise?
Having invested in both MogulREITs as well as several private placement deals, I have only good things to say about the platform. The project plans are transparent, the deals are attractive and the IR team has been super helpful.
4.5 percent yield. 1 to 1.5 percent fees. Income taxed at ordinary rates. Non trade able. What am I missing?
It’s relative to risk, for example: 4.5% yield vs. 1.4% 10-year bond yield. So the risk premium is 3.1%. 4.5% yield vs 2% for a Munin bond. 4.5% vs. 3% cap rate in an expensive coastal city etc.
Although they did say they are looking for capital appreciation opportunities, and that will likely happen as the economy comes out of the pandemic.
Different risk, goals, objectives for everyone.
That’s a good question. With a 4.5% yield and 1% to 1.5% fees the effective yield is 3% to 3.5%. I’m curious what advantage this investment would have over a publicly traded REIT stock such as OHI (7.92% yield), or REIT ETF such as VNQ (expense ratio 0.12%) or FREL (expense ratio .085%)? Is it de-correlation you’re after?