Updated March 5, 2019

Rich Uncles Review: Is It Good?

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Investing in real estate can be complex and expensive. Rich Uncles lets anyone invest with as little as $5. Is it right for you? Read on.

Real estate investing is no longer only for the wealthy.

With real estate crowdfunding platforms, such Rich Uncles, the average person can now invest with just a tiny amount of money.

It's a great way to make passive income as Rich Uncles does all the work for you in procuring and managing properties.

Rich Uncles offers real estate investing for everyone with just $5. But there are some limitations.

Keep reading to see if it's right for you.

What Is Rich Uncles?

Rich Uncles is a crowdfunding platform for commercial real estate. It is a real estate investment trust (REIT) that acquires and manages properties through crowdfunding.

In a nutshell, this is how Rich Uncles works:

  • Little investors, like you and me, provide the capital to fund real estate projects.
  • Rich Uncles purchases properties and collects rent from the tenants.
  • It's then distributed to investors in the form of monthly dividends.

Rich Uncle's offerings are public non-traded REITS (unlike traditional REITS). This means they're registered with the SEC and anyone can view them, but the shares aren't traded on the public exchanges. You can't buy shares on the stock market or through a traditional broker. And you can't sell to other investors directly.

What's the difference between non-traded and traded REITs?
Traded REITs are available to buy at exchanges or from a broker. They're available at any brokerage, such as Vanguard, Schwab, etc. You can buy and sell the shares at any time, so your investment is liquid.

Non-traded REITs, like Rich Uncle's, are not open for trading on the public market. Typically, this means the product is not liquid, so they're meant to be long-term investments. However, Rich Uncles has a program that allows you to sell your shares back to them.

Instead, you buy shares directly from the Rich Uncles platform. This cuts out the broker or middleman, because there are no commission costs. By cutting out the "middleman," Rich Uncles claims to invest 10% more of your funds directly into the investment rather than into fees.

Rich Uncles is a Better Business Bureau Accredited Business with an A+ rating.

Two Investment Options

Rich Uncles offers two REITs:

  1. National REIT (NNN REIT): This portfolio focuses on single-tenant office, industrial and retail properties. Rich Uncles buys completed commercial properties that have strong financials. They're generally with long-term recognizable tenants such as Costco, Walgreens, and 24-Hr Fitness.

    The minimum investment is $500.

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

    This offering is only available to residents of CA, CO, CT, FL, GA, HI, ID, IL, IN, KY, LA, MO, MT, NH, NV, NY, SC, SD, TX, UT, VA, VT, WI, and WY.

  2. Student Housing REIT (BRIX REIT): This portfolio consists of student housing properties within 1 mile of major universities. The units have at least 150 beds and above 90% occupancy rates.

    The minimum investment is only $5 for this option. And it's available to residents in all states and worldwide.

    The Student Housing REIT doesn't require a minimum net worth or income. However, you must prove that your total investment isn't more than 10% of your total net worth.

How Does Rich Uncles Work?

Signing up for Rich Uncles is easy. Here's how it works:

  • Create an account. First, you'll open an account and provide your name, address, email, and phone number.

    Choose which kind of account you want to open (individual, joint, trust, entity, or retirement).

    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.

  • Choose the investment. Next, pick the type of REIT - National or Student Housing. And choose the dollar amount you want to invest ($500 minimum for National REITs and $5 minimum for Student Housing).

    You can deposit additional money at any time or set up automatic transfers.

  • Earn returns. You'll receive monthly dividends based on the generated rental income of the properties.

And that's basically it. You don't have to select the properties or deal with managing them.

Rich Uncles log in: Already have an account? You can log in right on the upper right of the home page or at www.richuncles.com/auth/login.

What Are the Fees?

Rich Uncles charges no broker/dealer commissions and fees.

It 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.

However, each REIT has fees within it, such as an acquisition fee, asset management fee, disposition fee, etc. 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

  • No accreditation needed. Many real estate investment companies are only open to accredited investors.

    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 requirements, opening up the Student Housing REITs to anyone with $5 to invest.

  • Start 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.

  • No brokerage fees. Rich Uncles does not charge broker/dealer costs. This enables them to put more of your money directly into the investment.

  • Completely passive investing. 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.

  • High-quality tenants. Rich Uncles is very selective about their tenants. They purchase properties with a 50% or more cash down payment. 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.

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

  • Geographically diversified portfolio. 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.

  • Triple net lease terms. 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.

  • Option to reinvest dividends. You can have your monthly dividends automatically reinvested, which will compound your earnings even more.

  • 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 Share Repurchase Program for the National REIT. You can sell shares each month, but there are limitations and fees.

    WARNING: The Share Repurchase Program is subject to certain fees. Make sure to read the disclosures carefully. The administrative fees are:
    • 3% if shares are owned for less than one year
    • 2% if shares are owned 1 - 2 years
    • 1% if shares are owned 2 -3 years
    • None for shares held for at least three years

Reasons You May Want to Look Elsewhere

  • Long investment period. 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.

  • 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.

  • No choice of properties. You don't get to pick and choose which properties to invest in. The only choice you have is the type of REIT you invest in - National or Student Housing.

  • Unknown future. Rich Uncles is a start up and thus has risks that established real estate investment trusts don't have, such as no prior operating history or established financing sources.

  • NNN REIT not available to everyone. The NNN REIT is only available to residents of certain states. The Student Housing REIT, however, is available in all 50 states and worldwide.

How It Compares

Fundrise: Both Fundrise and Rich Uncles don't require you to be an accredited investor. But Fundrise does not have an income or net worth requirement for their portfolios.

Fundrise does require a minimum $10 investment. But that is in line with the Rich Uncles' National REIT offerings. Fundrise pays dividends quarterly versus Rich Uncles' monthly payouts.

Rich Uncles seems to be a bit more selective in their projects. They only choose commercial projects with 50% equity and recognizable tenants. Fundrise has a lot of developing projects.

Rich Uncles focuses more on collecting rent and paying monthly dividends. Fundrise has a few portfolio options, so you can choose the one that best fits your goal. It has a Growth Portfolio option that focuses more on properties expected to increase in value over time. This option is meant to provide more long-term growth and returns.

Bottom Line

Real estate investing is a good option to diversify your investments. Rich Uncles provides an easy way to do this, especially since you can start with just $5.

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.


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