RealtyMogul was founded in 2012 and is one of the leading real estate crowdfunding platforms today. They have two private REITs and individual commercial real estate investments, including student housing investments on occasion.
I've eaten lunch with Jilliene Helman, the CEO and Co-Founder of RealtyMogul and was impressed with her focus on building a long-term, sustainable business focused on only the highest quality deals.
This article will focus on why Student Housing is an attractive real estate investment. We'll also look at what makes RealtyMogul a good platform to invest in Student Housing.
Why Student Housing Is An Attractive Investment
Once the economy and schools start opening up in full force again by 2021, student housing will be an attractive investment. Here are some reasons why.
1) Defensive in a downturn. With the stock market showing more volatility due to rising interest rates, geopolitical instability, and slowing corporate profits, investors are concerned about an impending downturn. However, student housing economics is quite resilient because of perpetually high occupancy rates.
Not only do student housing occupancy rates remain stable during economic booms, they may actually rise during downturns because of increased college attendance and graduate school attendance. During the 2008-2009 financial crisis, there was a 50% surge in applications to business schools because people lost their jobs and/or needed to bolster their skills.
Structurally, college attendance has increased in every recession since the 1960s. The percentage of Americans with college degrees is only about 35%. It will only rise over time given a college degree has become the default educational requirement in getting a decent job today.
2) Students are studying longer. Four years is no longer the standard for degree completion; in fact, roughly 56% of students now end up completing their degrees in six years as opposed to four years. This extended time for getting a college degree has been a boon for student housing real estate.
3) Increased occupancy rates and rental rates. With a higher college enrollment and a longer duration to graduate, it only makes sense that occupancy rates and rental rates will increase. American Campus Communities (NYSE: ACC), the nation's largest developer, owner and manager of student housing apartment communities, recently reported an average same property occupancy rate of 97.6%, with rents that grew 2.6% compared to the year before.
4) Increasing foreign capital demand. United States property is cheap compared to the rest of the world. And money flows from expensive regions to less expensive regions to capture economic arbitrage. Not only is expensive coastal city money buying property in the heartland of America, foreign investment managers are buying property in all of America due to the relative value.
For example, in January 2018, a joint venture between the Canada Pension Plan Investment Board, Singapore sovereign-wealth fund GIC, and Chicago-based student housing owner Scion Group announced that it acquired a portfolio of 22 student housing properties for $1 billion. All told, the venture has purchased more than $4 billion of student housing totaling 46,555 beds in 52 university markets since 2016.
Here are some key points about what makes RealtyMogul, one of the best real estate crowdfunding platforms out there for student housing and for real estate overall across the country.
1: RealtyMogul Does Good Due Diligence
Many critical pieces of information are reviewed before investment opportunities are approved and opened up to investors.
In real estate circles, this analysis is called due diligence.
RealtyMogul provides due diligence on behalf of their investors, and here are five core criteria they consider during the due diligence process.
A) The Real Estate Company
The first thing that one should look at when analyzing an investment is the real estate company involved in the project. This is also known as a sponsor, who is an individual or real estate company that will acquire the real estate and execute on a business plan.
B) The Market
The second thing we review when looking at a real estate investment is the market of the property. Realtors often say that the only thing that matters is “location, location, location” and not without good reason.
C) The Asset
While the real estate company and the market are both important, so too is the asset, or the property itself. It is important to review not just whether it is the right time in the real estate cycle, but also whether it is a good time to purchase the asset. The asset is so key to the investment that at RealtyMogul we do an in-person site visit for every investment.
D) Capital Structure
When investing in commercial real estate, the capital structure must be looked at closely as it directly impacts the return.
Moreover, real estate companies can further complicate the capital structure of a transaction by adding a combination of a second lien, preferred equity or mezzanine debt as a layer of capital in between the senior mortgage and the common equity. The terms of each of the slices of capital have material impacts on the others.
E) Risk and Return
The last, but not least (and arguably the most important), thing that an investor should look at when determining whether to invest in an opportunity is the risk/return of the project.
Once it is determined that each of the elements of a transaction are on point, on balance and strong enough to accomplish the stated investment goals, it is worth considering making an investment in the opportunity.
2: RealtyMogul Provides Strong Investor Benefits
Real estate investors all get solid benefits through RealtyMogul, which further makes these folks a reliable source of potential wealth.
For example, Realty Mogul offers:
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.
2) An Easy Process To Invest — 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) Opportunities That Are 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) A 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.
3: RealtyMogul Provides More Access
With RealtyMogul, investors can diversify their real estate investments through a wide range of opportunities available around the country, including commercial real estate projects that would normally set individual investors back 10s of millions of dollars.
Through the power of crowdsourcing, RealtyMogul provides more opportunities for more people, which brings potentially lucrative real estate investments within reach of the average investor.
Investment examples include:
- multi-family dwellings,
- office buildings,
- industrial sites,
- medical buildings, and
- hospitality establishments
RealtyMogul enables typical investors to invest in single-family properties that are bought for the purpose of rehabilitation and flipping. Just about any property can be invested in as long as it is not used as a primary home or as a secondary residence. RealtyMogul is also looking for opportunities in Gateway Cities.
4: RealtyMogul Simplifies The Investment Process
With RealtyMogul, investors typically purchase shares in a Realty Mogul limited liability company (LLC) that turns around and invests that money 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.
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.
5: RealtyMogul Has A Long Track Record
Since their founding in 2012, Realty Mogul has distributed over $100M, has 170K members, and has funded over $2B in property deals.
What’s interesting to note is that as of 2Q2019, Realty Mogul has not raised any additional venture capital money, yet they are still growing. This means to me that Realty Mogul has found a way to be more self-sustainable as they focus on quality, not quantity. Unlike other platforms, they are not growing at any price and are focused on the bottom line.
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.
Student Housing: Steady Income
Real estate is one of the best ways to build wealth over time. Real estate is easy to understand, provides utility, has a steady income stream, and rides the inflation wave. The original billionaires all were massive land owners.
Sign up for RealtyMogul for free and explore all they have to offer. Not only do they have occassional student housing investment opportunities, they've also got a couple REITs and many more innovative offerings to review.
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.