October 6, 2018

Rich Uncles Review: Is It Good?

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Investing in real estate can be complex and expensive. But Rich Uncles wants to make it easier. Does it succeed? Read on.

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Rich Uncles is a public non-traded REIT. In other words, the shares aren't traded in the public exchanges. They rely on crowdfunding to fund real estate projects.

Key Fact: Rich Uncles cuts out the broker or middleman because its REITs are not traded at exchanges.

This means a larger portion of your investment is placed in the REIT and less goes towards fees.

Property owners can secure financing more easily by crowdfunding the equity through Rich Uncles, rather than obtaining loans from banks and other institutions.

Rich Uncles secures funding for real estate projects, collects the returns, and distributes them via dividends to shareholders each month.

Is this the answer for the "little guy" to invest in real estate? Keep reading to find out more.

How Does Rich Uncles Work?

Rich Uncles is the opposite of a traded REIT. They are a non-traded REIT. Since the platform is not traded publicly, your shares are more illiquid - you can't sell it to other investors directly.

What Is a Traded REIT?
REITs are portfolios of properties that corporations or trusts purchase with funds from a pool of investors. You purchase shares of real estate, which the corporation or trust uses to buy deals in the portfolio.

Investors typically invest in office buildings, apartment complexes, and shopping malls. You don't get to pick and choose the real estate investments the REIT invests in - you provide the funds and the REIT underwrites and acquires assets that form the portfolio.

Unlike REITs available on Rich Uncles, you have to buy traded REITs at exchanges or from a broker. You can buy and sell the shares at any time. You can use any broker to purchase them too.

The company is public because they are registered with the SEC. In other words, any investor can view the offering. You can't buy shares on the stock market or through a traditional broker, though.

Instead, you buy shares from an in-house manager, aka Rich Uncles. The company markets the shares on the internet and then uses crowdfunding to sell the shares.

By cutting out the "middleman," Rich Uncles claims to invest 10% more of your funds directly into the investment rather than into fees.

Signing Up for Rich Uncles

Signing up for Rich Uncles is easy. You provide your:

  • Name
  • Phone number
  • Email address.

You'll then choose how you want to take ownership of the investment (individual, joint, trust, entity, or retirement). Next, pick the type of REIT - National or Student Housing.

National REITs vs Student Housing REITs:
National REITs are for completed commercial properties that have strong financials. They generally have long-term, triple net leases.

Student Housing REITs fund multi-family housing units within 1 mile of major universities. The units have at least 150 beds and above 90% occupancy rates.

Before you can decide this, you need to know the requirements:

To qualify for National REITs, you need a net worth of at least $70,000 AND minimum annual income of $70,000.

To qualify for Student Housing, you don't need a minimum net worth or income to invest in Student Housing. However, you must prove that the amount you invest doesn't total more than 10% of your total net worth.

Finally, choose the dollar amount you want to invest. The minimum is $500 minimum for National REITs and $5 minimum for Student Housing. You'll also choose
reinvest your dividends or deposit them into your bank account.

You Should Know: To complete your Rich Uncles sign-up, you must share your personal identifying information, including your Social Security number for tax reporting purposes.

You'll also provide your bank's routing information for the purchase of the shares.

    Real Estate Investing for Everyone

    Retirement Promo: 2% Contribution Match

    When you invest a minimum of $5,000 in a Rich Uncles sponsored offering with a self-directed IRA, Rich Uncles will give you an extra $100 in a new investment account. Rich Uncles will also match 2% of every additional dollar you contribute to your IRA

What Are the Fees?

Rich Uncles claims they invest 97% of the sale of shares. If you invest $10,000, they use $9,700 to invest in REITs.

The remaining 3% helps cover the costs to run Rich Uncles. Before you fund your account, make sure you read the prospectus provided so you have a clear understanding of your actual fees.

Reasons We Like Rich Uncles

  • You don't need to be an accredited investor. Many real estate investment companies have this requirement.

    Accreditation means you have an annual income of at least $200,000 for the last two years or a net worth of at least $1 million.

    Rich Uncles has more flexible rules regarding who can invest, opening up the Student Housing REITs to the "average investor."

  • You can start investing with just $500. If you meet the requirements for National REITs, you can invest with as little as $500 (at around $10 per share).

    If you invest in Student Housing, you can invest with as little as $5 per share.

  • You may pay less in dealer/broker fees. Rich Uncles doesn't have to cover broker commission costs.

    This enables them to charge you lower fees, putting more of your money directly in the investment.

    You Should Know: Rich Uncles tries to invest in reputable tenants. Their tenants include Walgreens, 3M, and Harley Davidson, just to name a few.

  • Rich Uncles does all of the work for you. Even as a beginning investor, you can invest in real estate and receive passive income.

    Rich Uncles acquires properties, finds tenants, and manages the properties for you. All you do is provide the funding and collect dividends.

  • Rich Uncles tries to purchase properties with 50% equity. This helps to lower the risk of default. The more the property is funded by equity, the smaller the loan. Therefore, the lower the risk.

  • Rich Uncles diversifies the portfolio geographically. Currently, Rich Uncles purchases properties throughout 24 states. This helps diversify your risk should one area experience a downturn.

    If you have money invested in properties in other parts of the country that aren't affected by the downturn, it may help minimize your losses.

  • Rich Uncles focuses on commercial real estate. Rich Uncles' commercial tenants have triple net lease terms. This means they are responsible for operating expenses such as property taxes, insurance, and maintenance.

    If expenses suddenly rise, tenants will pay for these additional costs out of their pockets. You are protected from operating cost escalations.

  • Rich Uncles offers a Share Repurchase Program. Generally, non-traded REITs are illiquid. You keep the shares until the designated time frame, which could be many years down the road.

    But Rich Uncles does offer a way out with their Repurchase Program.

    WARNING: The Repurchase Program is subject to certain fees. Make sure to read the disclosures carefully.

Reasons You May Want to Look Elsewhere

  • The investment period is long. You are in the REIT investment for the long haul, maybe as long as 7 years.

    If you want out, you will lose a portion of your investment. Your greatest return on investment often comes when the property sells.

    If you can't hang in there that long, you may lose out on many of the benefits of investing in a non-traded REIT.

  • Your monthly dividends aren't guaranteed. Many investments don't have a guaranteed return. That's a part of the risk of investing.

    The highlight of non-traded REITs, though, is the monthly dividends.

    WARNING: While Rich Uncles vets the properties carefully, there's no way to protect themselves from defaults and foreclosures 100% of the time.

  • You don't choose which properties your money gets invested in. The only choice you have is the type of REIT you invest in - National or Student Housing.

How It Compares

Fundrise: Both Fundrise and Rich Uncles don't require you to be an accredited investor.

Fundrise does require a minimum $500 investment. But that is in line with the Rich Uncles' National REIT offerings. Fundrise pays dividends quarterly versus Rich Uncles' monthly payouts.

Bottom Line

Before you decide to invest with Rich Uncles, read their prospectus. We also recommend discussing the option with your financial advisor.

Rich Uncles is registered with the SEC. But with non-public traded investments, there are no third parties overseeing the investments.

As with any investment, make sure to do thorough research to feel comfortable with any decisions you make.

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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