In the past few years, crowdfunded real estate has become big business. And there are many companies vying for your investment dollars.
Crowdfunding platforms provide individual investors with an opportunity to invest in real estate. They use technology to streamline the process. That makes it less involved than buying a property outright. And they give you more control, choices and flexibility than buying shares of a traditional real estate investment trust (REIT). All transactions take place online. This saves time and money for all parties involved.
Realty Mogul and RealtyShares are two of the most popular crowdfunding platforms. Both companies are online real estate capital marketplaces that act as intermediaries between borrowers and investors and/or sponsors.
Realty Mogul and RealtyShares both offer a choice of equity and debt real estate opportunities. But there are a few differences between them.
About Realty Mogul
Realty Mogul specializes in commercial and residential real estate deals. Accredited investors can choose from a variety of debt and equity opportunities and make individual investments. The opportunities break down into two categories for retail investors:
- Investing in debt loans.
- Real estate crowdfunding for equity
The company’s selection criteria for equity investors include properties located in the U.S. that provide steady cash flow. It focuses on properties with existing cash flow. This most typically means apartment buildings, office buildings, retail shopping centers, self-storage facilities and mobile home park communities.
Realty Mogul does not invest in ground-up development, fix-and-flip residences, owner-occupied residences or raw land.
Debt investment choices include:
- Senior loans similar to a first mortgage.
- Subordinated debt with a second position.
- Preferred equity.
- Joint venture equity. This is riskier than the other three, as you’re financing the down payment on the property. But it allows you to benefit from property appreciation.
Realty Mogul also offers a REIT. This provides greater diversification with lower investment amounts. There is no need to be accredited to invest in a REIT. And there are decent target investment returns. Realty Mogul's first REIT distributed returns of 8% in late 2016.
RealtyShares’ offerings include large apartment buildings and commercial investments. Its focus is on small business investments and residential fix and flips.
Investors can purchase anything from a small piece of a larger investment to an entire investment. And like Realty Mogul, you can also choose to fund either equity investments or real estate loans. The platform will even allow you to introduce an investment of your choice to be funded through the website.
As with Realty Mogul, you must be an accredited investor to invest on RealtyShares. Once qualified, you have several options:
- Cash-flowing/value-add equity investments in commercial and residential properties. This includes apartments, retail, offices and single-family homes.
- Equity investments in fix and flips located in high-demand/low-supply markets.
- Loans secured by residential and commercial real estate.
Investors can choose to diversify their holdings on the platform in different types of properties and investment positions. They can also spread out their investments geographically. RealtyShares offers properties in 17 states.
But RealtyShares is different from other real estate investments. You have a choice to invest in groups of properties or a small piece of a larger property or to be the sole investor in a single specific property.
Jump down to the respective section to get the information you need.
- Features Both Offer
- Commissions & Fees
- Customer Service
- Ease of Use
- Amount of Deals
- Which Is Better?
|Browse for Free||Both platforms allow anyone free access to register and browse listings. This lets you become comfortable with the technology and allows you the opportunity to do your due diligence on a few deals before you commit your funds.|
|Pre-vetted Deals||Both companies offer only pre-vetted investment opportunities. The companies make an initial underwriting to determine the viability of each investment. Then they review pro-forma financial statements, title reports and property inspections. They also perform background and criminal checks on the principal executives of the real estate company or borrower. The results of the pre-vetting process are readily available on both companies’ platforms. This provides due diligence transparency.|
|Holding Periods||Real estate should always be viewed as a long-term investment. By nature, transaction fees are high on both the buy and sell sides. On both platforms, debt projects have a holding period of six to 12 months. Equity projects keep your money tied up for three to 10 years.|
|Regular Payout Distributions||Debt projects pay distributions monthly. Equity projects pay quarterly.|
|Company Size and Scope||On RealtyShares, investors have invested $300 million in 550 projects, and $59.7 million has been returned to investors. Realty Mogul reports $285 million invested in 350+ projects. $65 million has been returned to investors.|
|Accredited Investors Only||For either platform, you must be an accredited investor for most investments. Realty Mogul, though, offers a REIT open to any investor.|
Where Realty Mogul and RealtyShares Differ
- Investment Minimum — In general, RealtyMogul‘s individual products carry a minimum investment of $5,000. However, similar to Fundrise, the platform also offers a private REIT with a minimum investment of $1,000 and for which investors do not need to be accredited.
- Account Fees — Fees for Realty Mogul range from 0.30% to 0.50% per year.
- Private REIT — Realty Mogul's Income REIT allows non-accredited investors to take advantage of the platform with a minimum investment of only $1,000.
- No Capital Calls — The platform does not require investors to provide additional capital above their initial investment in the case that a need for additional funding for a product should arrive.
- Investment Minimum — Although RealtyShares occasionally offers deals with minimums as low as $1,000, the bulk of the company's deals carry a minimum of $5,000.
- Account Fees — Fees for RealtyShares are 1% for equity deals and as much as 2% for the interest rate spread on debt deals.
- Property Types — RealtyShares focuses on investments that are fix and flips.
- Cooling-off Period — The platform requires a 30-day waiting period from the point of registration to when you're able to invest.
- Accredited Investors Only — All deals on RealtyShares' platform are open to accredited investors only. (Unlike Realty Mogul, which offers a private REIT.)
How They Stack Up
Commissions & Fees
Realty Mogul's first REIT carries a 1% asset management fee. That's lower than you'll find with most REITs that you can purchase on the market. Their private placement deals assess most fees on the borrowers, but investors do pay fees that can vary widely by the individual deal and that are fully disclosed before investing.
RealtyShares's fees are 1% on equity and an interest rate spread of up to 2% on debt funding. This fee structure makes them very competitive with other real estate crowdfunding platforms. They're also very transparent about their fees (listing them prominently within each deal description).
With Realty Mogul, I reached a human every time I called. The phones are staffed from 8 a.m. until 6 p.m. Eastern by “marketplace operations” team members who are knowledgeable about all aspects. They are also quick to respond to emails and inquiries posted on Facebook.
With RealtyShares, I reached a human on first and subsequent attempts. Phones are manned from 8:30 a.m. until 5:30 p.m. Pacific by knowledgeable staffers. My email generated an automated “We received your request” reply, and a knowledgeable person quickly followed up with a response to my specific question.
Ease of Use
Realty Mogul's investment platform is extremely easy to use, and the site is optimized for mobile users. There isn't an app that you can download, but your account is easily viewed on the go as well as at your desk.
The RealtyShares platform is easy to use on your desktop, but only somewhat easy to use on your mobile device. The company is in the process of further optimizing mobile accessibility, and new capabilities will be released in mid-September. There's no app to download.
Realty Mogul offers two types of investments: REITs for non-accredited investors and private placement deals for investors who are accredited. The private placement deals are not single-family fix and flips but larger deals with real estate companies that have done at least $100 million in projects in the last five years.
RealtyShares is on of the most diversified platforms in terms of offerings: Investors can choose debt, equity or preferred equity in both commercial and residential properties. And there are all sizes of deals to choose from.
Amout of Deals
Realty Mogul is launching its second REIT. On average, there are five to 10 private placement deals on the site at any given time.
RealtyShares has, on average, 15 to 20 deals available each month.
Realty Mogul has a strict due diligence process. Fewer than 1% of deal requests meet its standards and are underwritten. They don't use the financial analysis submitted by the borrower, but instead do their own starting from scratch. They work through a registered broker/dealer, North Capital, to underwrite deals. And management physically visits each and every property.
Fewer than 5% of RealtyShares' deals come to them underwritten. The deals that make it through have passed a 30-point criteria acceptability scale. They also work through North Capital and with the same real estate borrowers who've already passed rigorous screening. Management occasionally visits properties.
Alternatives & Comparison
|Ease of Use||8.5/10||7/10|
|Amount of Deals||8.5/10||7.5/10|
|Promotions||$100 cash bonus when you enter "partner100"|
|Account Fees||%0.30- %0.50||%1- %2|
|Investment Length||6- 120||6- 120|
|Distributions||monthly: Monthly, quarterly: Quarterly||monthly: Monthly, quarterly: Quarterly|
|Regions Served||50 States||Not available in AK, NV, ND, SD, VT|
|Self Directed IRA|
Which Is Better?
Realty Mogul and RealtyShares are both dynamic and robust platforms. They provide unique real estate investing opportunities that didn’t exist until the passage of Title II of the Jumpstart Our Business Startups, or “JOBS,” Act in 2012. Both platforms use technology and innovation to make the processes more transparent. They also make it much easier to achieve diversification within the real estate segment.
That said, we find Realty Mogul to be a more comprehensive platform. With its REIT offerings in addition to private placement deals for the accredited investor, it presents a unique opportunity for investors of different ablities.
(Click here to see more comparisons of real estate crowdfunding platforms.)