October 8, 2018

RealCrowd Review: Is It Good?

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Have you always thought investing in commercial real estate was out of your realm of possibilities? Enter RealCrowd, the commercial real estate crowdfunding platform. RealCrowd helps serious investors build relationships and invest in high quality commercial real estate investments.

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RealCrowd's mission is to connect real estate investors with high quality real estate companies. You don't invest in prefunded deals. You are in control of how and what you invest, while using RealCrowd as your marketplace to find the investments.

RealCrowd aims to provide investors with access to real estate "free of charge." You may find real estate investments from $30 million to $150 million and in a variety of real estate types, all of which are commercial. They don't fund single-family purchases or even house-flipping investments.

How Does RealCrowd Work?

RealCrowd appeals to two crowds - sponsors and investors. Sponsors are the real estate companies. They are the entities looking for the funding. The investors are people like you, looking for a diversified investment with a positive return.

You are free to browse the available offerings without setting up an account. But you'll have access to more information once you create your profile. Before you do so, RealCrowd encourages you to email their head of investor relations to request a phone call. During this phone call, you can get acclimated with RealCrowd and decide if it's right for you.

Once you are ready to invest, you must set up your free RealCrowd account by creating an investor profile, if you haven't done so already. This step includes certifying you as an investor through VerifyInvestor.com. The certification doesn't cost you anything and once you are approved, you'll sign electronic documents that RealCrowd sends directly to the sponsor. The sponsor then gets in contact with you to give you funding instructions, as you send your funds directly to their account.

Is RealCrowd Safe?
RealCrowd runs on the Azure environment, which the co-founder of RealCrowd was a part of during its creation with Microsoft. They offer secure encryption and continually monitor the security of their site.

What Are the Fees?

RealCrowd doesn't charge fees to investors. Instead, they charge the sponsors fees to list their real estate on RealCrowd. Sponsors pay a technology fee, licensing fee, and advertising fee.

Podcast: If you are looking for support or education on real estate investing, you may want to listen to RealCrowd's podcasts. These podcasts provide inside information on commercial real estate straight from the experts. They include talks from guests outside of RealCrowd that help you learn about the different types of commercial real estate investments, how to read real estate deals, how to vet sponsors, and even questions to ask your intended sponsor.

Risk Categories

When you browse RealCrowd's listings, you'll see an "asset profile." This profile gives you a better idea of the type of risk you take if you choose this investment. The four categories are:

  • Core: This is the equivalent of your conservative investment. Your risk of loss is lower than other categories, but so is your rate of return. These investments have a 90% - 100% occupancy rate and have a long holding period, sometimes up to 10 years.

  • Core Plus: This category contains slightly higher risk investments. They typically involve light renovations or a re-lease strategy. The occupancy rate is 80% - 95% and your annual rate of return is higher than a core category, but still considered low. The typical investment period is between 3 and 7 years.

  • Value Add: This category has a moderate risk of loss, but also has a higher annual rate of return. The projects typically include heavy renovations or a major overhaul on tenants. The typical investment period is between 2 and 6 years.

  • Opportunistic: You take the highest risk of loss with this category, but also stand to make the highest returns. The occupancy rate can be anywhere from 0% to 50%, as this category usually involves building developments from the ground up or complete renovation of an existing development. The standard investment period is between 1 and 3 years.

Reasons We Like RealCrowd

  • As an investor, you are given a lot of information to help you make your decision. RealCrowd provides you with access to all documents, financials, and key legal information about the sponsor after you setup your free account.

  • You won't pay middleman fees. Many crowdfunding companies charge a percentage of your assets under management for use of their platform. RealCrowd keeps the platform free of charge and also doesn't charge management or service fees.

  • You can diversify your investments. RealCrowd tries to have as many deals available for investors at one time as they can. The average is between 6 and 10 deals. They also offer nationwide deals and investments in different property types to further your diversification capabilities.

  • You don't have to wait 30 days to invest. SEC regulations changed recently, removing the 30-day cooling off period for investments that are offered to the general public (which RealCrowd's investments are), meaning you can invest right away.

  • RealCrowd does the legwork for you researching sponsors. RealCrowd does the hard work of vetting the sponsors. All you have to do is review the information RealCrowd has provided in order to make a decision. What could have taken weeks can take you a matter of a few hours.

  • You can talk directly with the deal sponsor rather than going through a middleman. RealCrowd provides direct contact information to each sponsor. You don't have to worry about passing your questions through the middleman, forcing you to wait days or even weeks for your answer. You can get your questions answered right from the horse's mouth.

  • RealCrowd only allows sponsors with experience. RealCrowd ensures that all sponsors are thoroughly experienced. This includes the number of years they have been in real estate as well as the number of transactions they have conducted. Typically, sponsors have at least 10 years of experience and at least $50 million in business conducted.

  • You can set up a taxable or retirement fund. RealCrowd offers accounts for both post-tax and pre-tax dollars to save for retirement in the form of self-directed IRAs.

  • You can have passive income while investing in real estate. RealCrowd gives you access to real estate investments without all of the legwork. You have the potential for annual cash flow by investing in the RealCrowd exclusive investments.

  • You aren't investing in a "last ditch effort investment." Many crowdfunding opportunities are a company's last ditch effort to secure funding. They generally have been turned down by traditional banks and are now looking elsewhere. RealCrowd sponsors can get traditional funding, in most cases - they just choose to open the opportunity up to accredited investors to build better relationships throughout the industry.

Reasons to Look Elsewhere

  • You must be an accredited investor. You are unable to invest with RealCrowd unless you have at least $1,000,000 in assets and have made at least $200,000 per year (income) for the last two years. This is a part of the verification process that RealCrowd requires before you can invest.

  • It's up to you to find the information you desire to make an investment decision. RealCrowd does provide a lot of paperwork and information about each project, but sometimes that's not enough. RealCrowd vets the sponsor, not the project. It's up to you to do the due diligence to determine if the project itself is a solid investment.

  • The investments are not liquid. You have to read the documents carefully before making an investment. There is no quick exit strategy. Once you invest, your money is untouchable for the duration of the investment. There is no secondary market willing to buy your investment and cash you out.

How It Compares

Fundrise: Fundrise is better suited for the "average investor." You don't have to be accredited and you only need a $500 minimum investment. Fundrise is a crowdfunding platform for residential and commercial properties that are undervalued and need renovations. Your investments are "illiquid" with both companies, though.

CrowdStreet: CrowdStreet investors must be accredited, but investors have the option of debt or equity investments. CrowdStreet offers investments in institutional quality commercial real estate investments similar to RealCrowd's offerings but with the chance to invest in equity rather than debt.

Bottom Line

If you are an accredited investor interested in real estate investments, RealCrowd offers a solid opportunity. As with any investment, make sure you do your own due diligence and ensure that the investment is something you can handle. Remember that your money can be tied up for many years until the project is complete, so keep that in mind as you make your decisions.

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More from CreditDonkey:

How to Invest $100k

How to Make Money Work for You

Best Robo Advisors

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