With RealtyShares closing its doors to new investors on Nov 7, 2018, many real estate crowdfunding investors are wondering what's the best alternative that will stick around for the long run. In my opinion, RealtyMogul is a good alternative.
Although, Fundrise is the top real estate crowdfunding platform today. So you should really check out Fundrise as well and explore what they have to offer.
Real estate crowdfunding exploded onto the scene in 2012 after the JOBS Act was passed. The Jumpstart Our Business Startups Act, or JOBS Act, is a law intended to encourage funding of small businesses in the United States by easing many of the country's securities regulations.
In October 2012, RealtyMogul was founded to take advantage of this new law. As of today, over 170,000 registered investors have invested in over 350 properties so far, valued at over $2 billion. RealtyMogul has returned over $100+ million to investors so far.
Headquartered in Los Angeles, Realty Mogul has branched out to investment deals all across the country. For non-accredited investors and accredited investors, they have the MogulREIT I and MogulREIT II to participate in a portfolio of real estate crowdfunding deals. See our RealtyMogul Overview to learn more.
Why RealtyMogul Is The Emerging New Leader
Ever since I began working with RealtyShares in 2015, I noticed that there was plenty of overlap between RealtyShares and RealtyMogul.
Many of the real estate Sponsors would show up on RealtyShares one year and then show up with a new deal on RealtyMogul the next year. Further, I noticed a tremendous amount of employee poaching going on between the two firms.
While RealtyShares rapidly grew, and ultimately grew too fast by running out of money just 13 months after they raised $28 million in funding in 2017, RealtyMogul reigned in costs and focused on limiting the scope of their business dealings.
For example, RealtyMogul smartly got out of single family fix and flip investments in 2015 because too much time and money was spent on small deals that didn't scale. Single family residential ultimately became a huge burden for RealtyShares as they offloaded the business a little too late.
RealtyMogul once had a workforce of about 85, but now runs a lean operation with roughly 55 employees several years later. Given their last round of funding was in 2015, it's clear that RealtyMogul is much more focused on longevity and profitability, rather than growth at all costs from VC investors.
RealtyMogul Funding History
I spoke to Jilliene Helman, the CEO in November 2018 and she said she is focused on building a multi-decade business. Realty Mogul is her long term legacy and she is not interested in flipping the business. Her business philosophy is very much aligned with mine.
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). In other words, RealtyMogul focuses on commercial real estate investments.
RealtyMogul is also focused on investing opportunities in Gateway Cities.
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 RealtyMogul, serves as manager of the RealtyMogul 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.
Related: Rich Uncles (Modiv) Review
Benefits Of Investing With 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. They have a very stringent due diligence process.
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 RealtyMogul platform to gain exposure. Or, you can invest just $1,000 in one of their two REITs if you are a non-accredited investor.
RealtyMogul Is Here To Stay
Real estate crowdfunding is here to stay, and investing with a firm like RealtyMogul to invest in commercial properties in lower cost areas of the country that are booming is going to be a multi-decade trend in my opinion. The demographic shift will be strong.
No longer does one need to pay $1.5 million for a dumpy median priced home in San Francisco because that's where their job is. They could buy a home twice as large and nice for $500,000 in Austin, Texas because they can work remotely.
I personally own four physical properties that provide over $200,000 in annual gross rental income. I've currently invested $810,000 in real estate crowdfunding so far as of 2020. I'm bullish on investing in the heartland of America due to the following reasons:
- Heavy migration out of expensive coastal cities into the midwest and lower COLAs.
- The remote work trend will continue due to technology and a tight labor market.
- 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 started Financial Samurai in 2009 as a way to make sense of the financial crisis. He proceeded to spend the next 13 years after attending The College of William & Mary and UC Berkeley for b-school working at Goldman Sachs and Credit Suisse. He owns properties in San Francisco, Lake Tahoe, and Honolulu and has $810,000 invested in real estate crowdfunding.
In 2012, Sam was able to retire at the age of 34 largely due to his investments that now generate roughly $250,000 a year in passive income, partly thanks to his investments in real estate crowdfunding. He spends time playing tennis, hanging out with family, consulting for leading fintech companies and writing online to help others achieve financial freedom.