October 3, 2018

Realty Mogul Review: Is It Good?

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Real estate investments aren't just for the rich and famous. You too can invest in real estate through the crowdfunding platform RealtyMogul.com.

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If you are looking for a way to diversify your investments, create an income stream, and take advantage of the lucrative commercial real estate market, you can with a crowdfunding platform like RealtyMogul.com. With RealtyMogul.com, you don't invest directly in the real estate. Instead, you invest with other investors to pool your funds and fund a commercial real estate property.

You may invest in office sites, retail facilities, medical buildings, multifamily homes, or industrial sites. A few investments even offer the opportunity to fund "fix-and-flip" single-family homes. Generally, you have to be an accredited investor to invest with RealtyMogul.com, but they recently started the Mogul REIT, which is open to non-accredited investors as well.

Keep reading to learn the ins and outs of RealtyMogul.com to see if it's the right investment vehicle for you.

What's the Minimum Investment Required?

Let's start with how much you need to invest with RealtyMogul.com, as this could make a big difference in whether you look into it or not.

Before you worry about money, though, you have to determine if you are an accredited or non-accredited investor. Accredited investors have a minimum net worth (excluding their home) of $1,000,000. They also can prove they made at least $200,000 per year for the last two years in income.

If you don't meet those requirements, don't worry, there are still options at RealtyMogul.com for you. Your focus will be on the Mogul REIT I and Mogul REIT II, rather than private real estate investments.

No matter which category you fall under, you need a minimum investment of $1,000.

How Does RealtyMogul.com Work?

RealtyMogul.com operates as an online platform. It's similar to other crowdfunding or peer-to-peer platforms. In other words, it's a virtual place for investors and real estate companies to "hook up." The investors provide the funds and the real estate companies provide the returns.

Investors have the option to invest in equity or debt investments. All investors must go through the accreditation verification process prior to investing. RealtyMogul.com then approves or denies the request based on the findings.

Once approved, you'll see the real estate investment opportunities on RealtyMogul.com after logging into your account.

Once you decide to invest, you invest in one of the following ways:

  • Purchase shares in a RealtyMogul.com LLC: The LLC invests in the LLC that has possession of the title to the property.

  • Purchase debt equity: You can purchase the entire loan yourself or pool your funds with other investors and own a piece of the debt.

  • Invest in Mogul REIT I: You invest in a portfolio of properties along with other investors with the REIT. You don't pick and choose the real estate investments made with the proceeds - RealtyMogul.com makes those decisions.

  • Invest in Mogul REIT II: You invest in multifamily apartment buildings throughout the United States that have high occupancy rates and value-added opportunities.

Understanding Liquidity: Real estate isn't a liquid asset. Keep this in mind as you look at the opportunities on RealtyMogul.com. If you invest directly as an accredited investor, your money is tied up until the loan is paid off or the equity position matures.

If you invest in either of the Mogul REIT offerings, you have a little more liquidity, as RealtyMogul.com offers the Share Repurchase Program, which occurs quarterly. RealtyMogul.com may purchase your shares back if there is adequate capital to do so at the time.

What Are the Fees?

RealtyMogul.com isn't very transparent with their fees until you invest. You are free to browse the available listings for no charge (after creating an account). Once you find an investment that interests you, make sure you read the fine print to understand the designated fees. The fees may include administrative, legal, reporting, and communication costs in addition to the typical acquisition, refinancing, and construction fees.

How Are the Returns?

While the properties offered on the RealtyMogul.com platform are pre-vetted, there's no guarantee of return. No one can properly predict how the market will react or how a borrower will handle his or her debt. Each investment within RealtyMogul.com has a different rate of return, which you can decipher when reading the provided documents.

Reasons We Like RealtyMogul.com

  • RealtyMogul.com does the legwork for you. You don't have to do the "due diligence" research determining if a piece of real estate is worth investing in because RealtyMogul.com does it for you. Each investment is "pre-vetted." In other words, the RealtyMogul.com professionals did an initial review of the property, the borrower, and the location.

  • You can invest in debt or equity. As a debt investor, you often hold "senior position" in the hierarchy of payouts. In other words, you'll receive your payments first. This also means a lower rate of return. As an equity investor, you may be one of the last investors paid, but you'll generally earn a higher rate of return in exchange for the risk.

  • You won't have capital calls. Some crowdfunding platforms call for more capital (in other words, ask investors to come up with more funds). RealtyMogul.com doesn't do this, with the exception of single investors on a loan who are wholly responsible for the foreclosure costs, should the borrower default.

  • You can invest in real estate without being a landlord. Becoming a landlord requires a lot of risk, responsibility, and capital. RealtyMogul.com makes it possible to invest without a large amount of capital, no responsibility, and a lower risk.

  • You can invest in MogulREIT I and MogulREIT II as a non-accredited investor. If you don't have the net worth or income to be considered accredited - you still have options to invest in real estate. The non-publicly traded REITs offer a diversified portfolio in real estate investments, giving you the opportunity to invest in real estate without the large capital expenditure.

  • You can see real-time updates on your dashboard. You can log into your RealtyMogul.com account 24/7 to see real-time updates on the status of your real estate investment. You can check on current, upcoming, and past distributions, upcoming milestones, or review your rate of return on an investment.

  • RealtyMogul.com sticks to properties that will provide cash flow quickly. While they can't avoid all uncertainty, their due diligence process does eliminate any ground-up developments or properties that aren't currently profitable.

  • You may receive cash flow distributions regularly. Investors who invest in debts usually receive monthly distributions (interest) and equity investors usually receive quarterly distributions.

  • You can conduct the entire transaction online. RealtyMogul.com sends electronic legal documents securely to you and you transfer funds via ACH transfer or wire transfer. This helps streamline the process, getting your money invested faster and your returns starting sooner.

  • Aside from the REITs available, you'll know almost everything there is to know about the investment project. This allows you to make the right decision given your risk tolerance and financial capabilities.

Reasons You May Want to Look Elsewhere

  • You must be an accredited investor. With the exception of the REIT offerings, only accredited investors can invest in actual real estate. This may make it harder for many investors to enjoy the benefits of real estate investing outside of the REIT portfolio options.

  • Your investments aren't liquid. You can't sell your part in the real estate crowdfunding to the secondary market because there isn't a secondary market. The only exception is for REITs, which participate in the Share Repurchase Program.

  • Equity investments could tie up your assets for up to 10 years. They are also the last asset class to get paid, which may leave you without a return on your investment if the investment falls through.

How It Compares

Fundrise: Investors interested in real estate but who don't have the net worth to be an accredited investor can invest with Fundrise. This investment vehicle offers REIT investments, diversifying your funds into a variety of real estate markets. This diversifies your risk and only requires a minimum $500 deposit.

RealtyShares: Just like RealtyMogul.com, you must be an accredited investor to invest in RealtyShares. You can choose debt (1st and 2nd lien loans) as well as equity positions. A majority of the crowdfunding funds real estate properties, but they do offer the occasional investment in a single-family home being fixed and flipped.

Bottom Line

If you are an accredited investor and don't want the responsibility of direct real estate investments, RealtyMogul.com may provide the resource that you need. It costs nothing to set up an account and browse the available investments. You can compare this option with others, such as Fundrise that invests only in REITs rather than providing funds directly for specific real estate opportunities.

As always, read the fine print and look at the bottom line. Don't get lured in by high rates of return without understanding the full impact of the fees charged upfront as well as on an annual basis throughout the investment period.

Disclaimer: Opinions expressed here are author's alone. Please support CreditDonkey on our mission to help you make savvy decisions. Our free online service is made possible through financial relationships with some of the products and services mentioned on this site. We may receive compensation if you shop through links in our content.

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