Author Topic: Crowdfunding Real estate - Realtyshares?  (Read 3625 times)

flyersman

  • 5 O'Clock Shadow
  • *
  • Posts: 86
Crowdfunding Real estate - Realtyshares?
« on: August 01, 2016, 09:18:01 AM »
My wife and I were thinking of investing in Rental Properties in Houston area but the more I read, I see we can get exposure to Real Estate elsewhere and not have to worry about property management, repairs, tenants etc.

One idea I had and posted on was purchasing REIT's in my Taxable Portfolio but the general consensus was not to, due to capital gains it would through off for taxes. (Didnt have room in tax advantaged)

The alternative was crouwdfunding real estate investments such as Realtyshares.

Do anyone have opinions or experience with this type of investment? Seems like it could be a good place to park 20-40K for 6mo-2yrs

http://www.financialsamurai.com/realtyshares-review-real-estate-investing/

retiringearly

  • Bristles
  • ***
  • Posts: 341
Re: Crowdfunding Real estate - Realtyshares?
« Reply #1 on: August 01, 2016, 09:38:07 AM »
Here is a post I made on another thread:

I have money invested through five sites: RealtyMogul.com, Fundrise.com, RealtyShares.com, PatchofLand.com, and PeerStreet.com.  I have been very, very happy with the performance.

The majority of my investments have been in debt deals - lending money to people that are doing "fix and flips".  I only invest in deals where 1) I have first position lien on the property - meaning if the borrower does not pay us back we take the property (not what you want to do but it provides security), and 2) the borrower has put in a significant amount of his own money in to the deal (this means there is a financial cushion that will help soften the blow of having to take the property, and it means the borrower has a vested interest in making good on the loan).  The loans I participate in are usually no longer than 12 months, with a couple being 18 months.   

I have my investments spread out over a few dozen investments - I keep each investment relatively small so I can't get burned too badly by one bad loan.

All of my loans have been paid back prior to the maturity date.

I have not used any "automatic investing" feature.  I want to hand pick each investment on my own.  There have been some loans that didn't make sense to me so I did not participate in them.

I can't inspect every property myself but I do look up each property on Zillow, Redfin, and other sites.  I will put money in if I feel comfortable that the property isn't grossly overvalued (I don't want to be part of a $500K loan on a property that is only worth $250K).

Most interest rates have been between 9% and 10.75%.

I have invested in a few preferred equity deals as well as a couple straight equity deals.   The nice thing about the equity deals is the depreciation on the property is passed out to the investors which helps at tax time. 

I only invest in preferred equity deals if 1) the sponsor has a significant amount of money invested in the deal and 2) I get paid out before the sponsor receives his payout.

I have only had one "negative" experience so far - a borrower was late on the first payment, clearly not what you want.  He ended up refinancing with another lender and we were paid back in full in two months - the bonus was the loan required a minimum of three months interest to be paid so we got an extra month of interest payment.

I have increased my investments in this area and plan to continue maintaining a decent amount of money in this area until something radically changes (the real estate market starts to drop, etc).   

I have money in 5 different online platforms because 1) I want to be able to pick and choose investments, 2) each platform is a bit different and offers different types of investments, and 3) I want to be diversified (I don't want a ton of money in any one platform in such a new industry, who knows who will be left standing in 5 years).
« Last Edit: August 01, 2016, 09:39:53 AM by retiringearly »

flyersman

  • 5 O'Clock Shadow
  • *
  • Posts: 86
Re: Crowdfunding Real estate - Realtyshares?
« Reply #2 on: August 01, 2016, 09:45:03 AM »
Here is a post I made on another thread:

I have money invested through five sites: RealtyMogul.com, Fundrise.com, RealtyShares.com, PatchofLand.com, and PeerStreet.com.  I have been very, very happy with the performance.

The majority of my investments have been in debt deals - lending money to people that are doing "fix and flips".  I only invest in deals where 1) I have first position lien on the property - meaning if the borrower does not pay us back we take the property (not what you want to do but it provides security), and 2) the borrower has put in a significant amount of his own money in to the deal (this means there is a financial cushion that will help soften the blow of having to take the property, and it means the borrower has a vested interest in making good on the loan).  The loans I participate in are usually no longer than 12 months, with a couple being 18 months.   

I have my investments spread out over a few dozen investments - I keep each investment relatively small so I can't get burned too badly by one bad loan.

All of my loans have been paid back prior to the maturity date.

I have not used any "automatic investing" feature.  I want to hand pick each investment on my own.  There have been some loans that didn't make sense to me so I did not participate in them.

I can't inspect every property myself but I do look up each property on Zillow, Redfin, and other sites.  I will put money in if I feel comfortable that the property isn't grossly overvalued (I don't want to be part of a $500K loan on a property that is only worth $250K).

Most interest rates have been between 9% and 10.75%.

I have invested in a few preferred equity deals as well as a couple straight equity deals.   The nice thing about the equity deals is the depreciation on the property is passed out to the investors which helps at tax time. 

I only invest in preferred equity deals if 1) the sponsor has a significant amount of money invested in the deal and 2) I get paid out before the sponsor receives his payout.

I have only had one "negative" experience so far - a borrower was late on the first payment, clearly not what you want.  He ended up refinancing with another lender and we were paid back in full in two months - the bonus was the loan required a minimum of three months interest to be paid so we got an extra month of interest payment.

I have increased my investments in this area and plan to continue maintaining a decent amount of money in this area until something radically changes (the real estate market starts to drop, etc).   

I have money in 5 different online platforms because 1) I want to be able to pick and choose investments, 2) each platform is a bit different and offers different types of investments, and 3) I want to be diversified (I don't want a ton of money in any one platform in such a new industry, who knows who will be left standing in 5 years).

Do you know if I could invest in these being from PA? I know there were regulations being in this Quaker state especially around lendingtree and prosper (couldnt invest)

flyersman

  • 5 O'Clock Shadow
  • *
  • Posts: 86
Re: Crowdfunding Real estate - Realtyshares?
« Reply #3 on: August 01, 2016, 09:55:01 AM »
Here is a post I made on another thread:

I have money invested through five sites: RealtyMogul.com, Fundrise.com, RealtyShares.com, PatchofLand.com, and PeerStreet.com.  I have been very, very happy with the performance.

The majority of my investments have been in debt deals - lending money to people that are doing "fix and flips".  I only invest in deals where 1) I have first position lien on the property - meaning if the borrower does not pay us back we take the property (not what you want to do but it provides security), and 2) the borrower has put in a significant amount of his own money in to the deal (this means there is a financial cushion that will help soften the blow of having to take the property, and it means the borrower has a vested interest in making good on the loan).  The loans I participate in are usually no longer than 12 months, with a couple being 18 months.   

I have my investments spread out over a few dozen investments - I keep each investment relatively small so I can't get burned too badly by one bad loan.

All of my loans have been paid back prior to the maturity date.

I have not used any "automatic investing" feature.  I want to hand pick each investment on my own.  There have been some loans that didn't make sense to me so I did not participate in them.

I can't inspect every property myself but I do look up each property on Zillow, Redfin, and other sites.  I will put money in if I feel comfortable that the property isn't grossly overvalued (I don't want to be part of a $500K loan on a property that is only worth $250K).

Most interest rates have been between 9% and 10.75%.

I have invested in a few preferred equity deals as well as a couple straight equity deals.   The nice thing about the equity deals is the depreciation on the property is passed out to the investors which helps at tax time. 

I only invest in preferred equity deals if 1) the sponsor has a significant amount of money invested in the deal and 2) I get paid out before the sponsor receives his payout.

I have only had one "negative" experience so far - a borrower was late on the first payment, clearly not what you want.  He ended up refinancing with another lender and we were paid back in full in two months - the bonus was the loan required a minimum of three months interest to be paid so we got an extra month of interest payment.

I have increased my investments in this area and plan to continue maintaining a decent amount of money in this area until something radically changes (the real estate market starts to drop, etc).   

I have money in 5 different online platforms because 1) I want to be able to pick and choose investments, 2) each platform is a bit different and offers different types of investments, and 3) I want to be diversified (I don't want a ton of money in any one platform in such a new industry, who knows who will be left standing in 5 years).

Lets say you have 20 loans, how much would you have put towards each $1K, 5K, etc?

Do you have loans spread out to multiple sites or generally use one?
« Last Edit: August 01, 2016, 10:12:21 AM by flyersman »

retiringearly

  • Bristles
  • ***
  • Posts: 341
Re: Crowdfunding Real estate - Realtyshares?
« Reply #4 on: August 01, 2016, 10:23:07 AM »
Regarding your  about being from PA, you need to be an accredited investor on these platforms, it is different than LendingTree in that regards.  You can invest from any state as far as I know as long as you are accredited.

I have money in all 5 sites.  I am able to cherry pick the loans I want that way.

The different sites have different investment minimums, some even have different minimums based on the size of the deal.  I can't tell you how much to invest because I don't know your overall portfolio. 



flyersman

  • 5 O'Clock Shadow
  • *
  • Posts: 86
Re: Crowdfunding Real estate - Realtyshares?
« Reply #5 on: August 01, 2016, 10:35:54 AM »
Regarding your  about being from PA, you need to be an accredited investor on these platforms, it is different than LendingTree in that regards.  You can invest from any state as far as I know as long as you are accredited.

I have money in all 5 sites.  I am able to cherry pick the loans I want that way.

The different sites have different investment minimums, some even have different minimums based on the size of the deal.  I can't tell you how much to invest because I don't know your overall portfolio.

Thanks I will read what is required to be an accredited investor. I just wanted a ball park of how much you typically might invest on a fix and flip project.

Also what amount would you consider significant that the borrower puts into the deal. Can you give me an example? 

For instance

$500K project
Loan $150K
Borrower put in $50K of the $150K

retiringearly

  • Bristles
  • ***
  • Posts: 341
Re: Crowdfunding Real estate - Realtyshares?
« Reply #6 on: August 01, 2016, 10:50:02 AM »
If it is a fix and flip for a $500K house, the loan will likely be in the neighborhood of $400K.  The borrower would put in $100K, the loan makes up the rest.  The $100K of equity that he puts in provides you with some downside protection if he defaults on the loan.  Having to go through the legal process to foreclose, then to take over, finish, and sell the property is not inexpensive.  You need the borrower to have some skin in the game that will help keep him from defaulting.

flyersman

  • 5 O'Clock Shadow
  • *
  • Posts: 86
Re: Crowdfunding Real estate - Realtyshares?
« Reply #7 on: August 01, 2016, 12:06:00 PM »
If it is a fix and flip for a $500K house, the loan will likely be in the neighborhood of $400K.  The borrower would put in $100K, the loan makes up the rest.  The $100K of equity that he puts in provides you with some downside protection if he defaults on the loan.  Having to go through the legal process to foreclose, then to take over, finish, and sell the property is not inexpensive.  You need the borrower to have some skin in the game that will help keep him from defaulting.

Do you know much about filing of Taxes for this type of investment? Lets say I put $20K on a place giving me 10% return, do I file a tax return in my particular state (PA) or the state where the loan goes out.

Just figuring out if I should do this or go the REIT route as both would be taxable at this point.

My thought process is should I just keep putting money into Index funds that have been getting 4-5% yr and not throwing off much taxable events (until i sell) or do I do a Crowdfund for lets say 9-10% but need to pay taxes at end of year (28% tax bracket). With my tax bracket, my 9-10% return on this would be closer to 6-7%? Right?
« Last Edit: August 01, 2016, 12:30:52 PM by flyersman »

Mr.GrowingMustache

  • 5 O'Clock Shadow
  • *
  • Posts: 86
Re: Crowdfunding Real estate - Realtyshares?
« Reply #8 on: August 01, 2016, 03:17:11 PM »
.... accredited investor :(


I just love how I am "protected" by the U.S. Securities and Exchange Commission from investing my money.

flyersman if you haven't already, here is what an accredited investor is.

https://www.investor.gov/news-alerts/investor-bulletins/investor-bulletin-accredited-investors

Basically over $1mil in assets and income of $200k/yr if single ($300k/yr married).


Thanks for the information btw, I did not know about this type of investment! It is similar to those Angel Investor websites, but I guess more "secure" of an investment.

arebelspy

  • Administrator
  • Senior Mustachian
  • *****
  • Posts: 28287
  • Age: -999
  • Location: Seattle, WA
Re: Crowdfunding Real estate - Realtyshares?
« Reply #9 on: August 01, 2016, 03:47:48 PM »
Many of us think crowdfunded real estate is a terrible investment.  The risk adjusted returns are quite poor (perhaps, time may even tell, negative) because there's much more risk than you'd think.  There's a reason why projects go the crowdfunded route, and it's not because they're stellar investments.  ;)

Search the forums for previous topics and you'll find a lot of reasons why you should run, and fast.  :)

I'm not a huge fan of REITs either (I don't think they accomplish what most people are adding them to their portfolio to do, so there are usually better ways to get whatever effect they're looking for), but I'd recommend them one thousand times more than a crowdfunded investment.
We are two former teachers who accumulated a bunch of real estate, retired at 29, spent some time traveling the world full time and are now settled with three kids.
If you want to know more about us, or how we did that, or see lots of pictures, this Business Insider profile tells our story pretty well.
We (rarely) blog at AdventuringAlong.com. Check out our Now page to see what we're up to currently.

arebelspy

  • Administrator
  • Senior Mustachian
  • *****
  • Posts: 28287
  • Age: -999
  • Location: Seattle, WA
Re: Crowdfunding Real estate - Realtyshares?
« Reply #10 on: August 03, 2016, 02:57:59 PM »
>I'm not a huge fan of REITs either (I don't think they accomplish what most people are adding them to their portfolio to do, so there are usually better ways to get whatever effect they're looking for)

arebelspy, Can you provide some details of other ways to get this type of exposure.

It depends on what effect you're looking for in your portfolio (how you want your portfolio to perform, what conditions you want to hedge or at least be uncorrelated with, etc.).

Quote
I really want to try going into real estate in small partnerships to share risk but still get good returns.  Any ideas?

Definitely.  That's not a bad way to go for a small percentage of your capital.  What's stopping you?  Might be worth starting a separate thread in the real estate section of the forums for discussion around RE partnerships.  :)
We are two former teachers who accumulated a bunch of real estate, retired at 29, spent some time traveling the world full time and are now settled with three kids.
If you want to know more about us, or how we did that, or see lots of pictures, this Business Insider profile tells our story pretty well.
We (rarely) blog at AdventuringAlong.com. Check out our Now page to see what we're up to currently.