RealtyMogul is one of the oldest, most established real estate crowdfunding platforms today.
Real estate has long provided generations of investors with wealth. That is the good news.
The bad news, however, is real estate has also historically been reserved for those with specialized knowledge, the right connections, and access to great amounts of capital.
This has kept investing in commercial real estate out of reach for most – until several years ago. Thanks to the passage of the 2012 JOBS Act, we now have real estate crowdfunding platforms that provide access commercial real estate deals.
These platforms pre-screen the deals, source the deals, provide the research and documentation, and act as the intermediary between the real estate sponsor and the investor for a fee.
Let's have a detailed look at why LA-based RealtyMogul, founded in 2012, is worth investing through.
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.
Examples include multi-family dwellings, office buildings, industrial sites, self-storage, retail, medical buildings
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.
Why Invest In Real Estate With RealtyMogul
Investing with RealtyMogul minimizes overhead for the investment sponsors and provides access to more investment opportunities, as well as streamlined reporting of distributions through the platform.
Given they have higher barriers for whom they do business, 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.
Benefits of RealtyMogul include:
1) All Investments Are Pre-Vetted — Less than 5% of the deals first shown on the Realty Mogul make it through to their platform for their investors. The vetting goes through the
3) More Focused & Less Volatile 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 RealtyMogul allows you to be much more surgical in your investments. Publicly traded REITs are also more volatile, as we saw during the March 2020 stock market crash.
4) Lower Investment Minimum – Instead of coming up with a $300,000 downpayment for a median-priced San Francisco or NYC property and borrowing $1,200,000, you can invest as little as $10,000 in a property on the RealtyMogul platform to gain exposure.
5) Better Diversification – Because you only have to invest $10,000 in a property, you could literally invest in 30 different properties with higher cap rates and lower valuations compared to investing in just one median-priced rental property in an expensive city.
Why Real Estate Is My Favorite Investment Class
Real estate remains one of the best ways to build long term wealth due to inflation, leverage, utility, and tax benefits. Unlike P2P lending, there’s a physical asset behind real estate crowdfunding. In case of a downturn, investors can always work something out with the sponsor.
I own three physical properties that provide over $200,000 in annual gross rental income. I’ve also currently invested $800,000 in real estate crowdfunding so far in 2019. Real estate is simple to understand and is one of the most proven ways to build long-term wealth.
Here are the main reasons why I think real estate crowdfunding is here to stay for the next couple of decades.
- 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 and CrowdStreet increases the supply of capital, thereby increasing the demand and prices of previously hard to tap investments.
Real estate crowdfunding is a long-term trend that I think everyone should be aware of. Technology is allowing real estate arbitrage and there is certainly a demographic shift towards lower cost areas of the country.
If Google is spending $13 billion dollars to expand into the heartland of America, other companies will too. Focusing on long-term trends is one of the best and easiest ways to get rich over time.
About the Author: Sam worked in investing banking at Goldman Sachs and Credit Suisse for 13 years. He received his undergraduate degree in Economics from The College of William & Mary and got his MBA from UC Berkeley. 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. He spends time playing tennis, taking care of his family, and writing online to help others achieve financial freedom too. Here is a detailed RealtyMogul overview as well.