Modiv Review 2023

What Is Modiv?

Modiv began operations in 2012 as the popular Rich Uncles real estate crowdfunding platform, changing the name in 2021. It's available only to accredited investors. This requires having a certain professional certification or a high level of income or net worth.

The company is a real estate investment trust, or REIT. Modiv says it has $400 million in assets under management and 10,000 individual investors.

To understand Modiv's product offerings, it's important to understand what is crowdfunding, what's the difference between a publicly-traded REIT and a public non-traded REIT, with Modiv being a public non-traded REIT.

What is Crowdfunding?

Crowdfunding makes property funding easier and faster than going through the traditional routes of finding bank financing or investors with large amounts of capital who are interested in specific opportunities. It also opens up real estate investing to people who prefer investing only small amounts of money. More information about real estate crowdfunding can be found here.

How REITs Work

A REIT is a company that takes capital from many different investors and uses it to buy income-producing real estate. In general, a REIT is an entity that:

1. combines the capital of many investors to acquire or provide financing for real estate investments;
2. allows individual investors to invest in a professionally managed, large-scale diversified portfolio of real estate;
3. pays distributions to investors of at least 90% of its annual REIT taxable income; and
4. avoids the “double taxation” treatment of investment income, because a REIT is not generally subject to federal corporate income taxes on the portion of income distributed to its stockholders.

Shares in public REITs are available to any investor through the stock market. You purchase shares from any registered investment broker, and the shares are considered to be liquid. This means the shares trade on the stock market exchanges and therefore can be bought and sold quickly. There are hundreds of public REITs available from Vanguard, Fidelity, Schwab and other brokerage houses.

Modiv's offerings are classified as public non-traded REITs. Modiv is “public” to the extent that it is registered with the SEC. The public can view its offerings and regulatory filings. But the offerings do not trade on the open market as do the public REIT shares you purchase from an investment broker.

What Does Modiv Offer?

Instead of using the typical broker-dealer distribution channel and paying advisory fees, Modiv uses crowdfunding and the internet to market its REIT directly to investors.

Modiv believes that by offering its REIT through the internet, the company can deliver roughly 10% more profit than through a publicly traded REIT. Being non-traded saves the amount being paid to others in the form of commissions and reimbursements.

Modiv's platform provides photos and details about the properties in each REIT it offers. Modiv is currently structured as one REIT that holds all its properties. And you invest in the REIT itself rather than individual properties. But you can get a good feel for the portfolio holdings by reviewing the details of the individual properties online.

Main Features

• Liquidity: Modiv offers a share repurchase program that can be accessed through your shareholder dashboard. You have the option of selling your shares back to Modiv if at least six months have passed since your initial investment. This feature is uncommon among real estate crowdfunding platforms.
• Long-term Investment: When you invest, you are committing to being part owner of many commercial real estate properties. Real estate is a long-term investment. When the fund reaches its cap of investor capital — typically in 4–7 years — a fund liquidation event takes place and investment proceeds are distributed. You get your value back — what your shares are worth at the time, including profits from the proceeds of the sale of all the buildings owned by the fund. Modiv is considered an “open-ended” fund, meaning there is no set liquidation date. It is up to the principals to determine the appropriate time and circumstances for portfolio liquidation. During the company’s Q1 2021 earnings call, Modiv’s CEO noted that a liquidity event, most typically realized by the way of an IPO, could happen over the next 24-48 months.
• 50% Cash Equity Ownership in All Owned Properties: Modiv limits the mortgage debt for the REIT by buying properties with 50% cash down payments. This means it carries 50% cash equity ownership in its entire real estate portfolio. That lowers the leverage risk inherent in real estate investing.
• Dividend Reinvestment Option: You can choose to have your monthly dividends automatically reinvested to increase your ownership.
• No Broker Commissions and No Investor Fees: Because Modiv doesn't use brokers, it pays no commissions. Instead it uses crowdfunding to find investors. This reduces overhead and increases the percentage of returns it can distribute to its members.

How Does Modiv Work?

Modiv currently offers only one REIT, though the platform has offered multiple REITs in the past and will likely offer more in the future.

The current REIT consists of 38 individual properties located across 14 states, with the heaviest concentrations in California and Texas. The properties feature 100% occupancy by a total of 31 tenants. Leverage on the properties is at 49%. This represents conservative exposure.

• Share price: As of May 5, 2021, the net asset value (NAV) per share was $24.61. This represents a 17% increase since April 2020 when the NAV was $21.01.
• Dividend yield: The current dividend is $1.05 per share per year, with an annualized distribution rate of 4.3%.
• Minimum investment: $1,000.

Key portfolio metrics are as follows:

This is an active REIT. This means properties are acquired and disposed of periodically. The company provides descriptions on the website of the individual properties held in the REIT. That gives you an opportunity to take a look at what the trust invests in. And it provides important metrics on each property. These include the estimated cap rate and rental increase potential.

Click on each property to get even more information, including multiple photos of the property, a full description and the reason the property was selected for the REIT.

13th Dividend

Modiv pays out an extra dividend at the end of the year — the 13th dividend after 12 months — based on company performance. This provides each investor with an opportunity to earn more than the typical return of 12 regular monthly distributions.

This dividend rewards investors in years when investment performance exceeds the projected dividend coverage ratio, but it isn't guaranteed every year.

Modiv Share Repurchase Program

Modiv offers something unique in the real estate crowdfunding space, and that's the potential to have your shares repurchased after making your investment. With most real estate crowdfunding platforms, there's no liquidity whatsoever. Once you make your investment, you need to hold on until the investment pays out. This is the basic nature of public non-traded REITs.

But Modiv offers a Share Repurchase Program. This provides at least a limited ability to redeem your shares after purchase. Currently, shares must be held for a minimum of six months to be eligible for repurchase. The program is also subject to repurchase limitations on both a monthly and quarterly basis. And Modiv charges certain fees for shares held less than two years. In addition, the company has discretion to repurchase fewer shares than have been requested to be repurchased.

The program may not offer 100% liquidity at all times, but it does provide an opportunity for at least partial liquidation of your Modiv investment position.

Self-directed IRA

Modiv REITs can be held in an IRA. However, since the Modiv REIT is not publicly traded, it cannot be held in IRA accounts held with popular brokers.

Instead, it must be held in a self-directed IRA, or SDIRA. These are IRA accounts held with specialized investment firms that can accommodate non-publicly traded assets.

For this purpose, Modiv partners with Forge Trust Company to provide Modiv investors with a no-custodial-cost SDIRA.

This tie-in with Forge Trust Co. is a major advantage with Modiv, since most real estate crowdfunding platforms require that you establish an SDIRA with a custodian of your own choosing. And since the investment services available in this area are not exactly household names, that can be a confusing process. Modiv removes that dilemma by partnering with a dedicated SDIRA provider.

Who Is Modiv For?

Investing in Modiv offers an opportunity for larger investors who are looking to diversify part of their portfolio into commercial real estate. While real estate, in general, can be a winning investment, commercial real estate has even greater potential with its combination of both rental income and capital appreciation. Modiv offers an opportunity to add commercial real estate to your portfolio as an alternative investment.

To be eligible to invest with Modiv, you must be an accredited investor. Accredited investor status requires one of the following qualifications:

• Earned income that exceeded $200,000 (or $300,000 together with a spouse or spousal equivalent) in each of the prior two years and is reasonably expected for the current year, or
• A net worth (excluding the value of the person's primary residence) of over $1 million either alone or together with a spouse or spousal equivalent, or
• Holding in good standing a Series 7, 65 or 82 license.

Fees & Limits

Modiv charges no fees for your investment,  although there are expenses related to operating a public company.

The minimum investment for the available Modiv REIT is $1,000. And you can increase your investments in increments of $100. No maximum investment amount is indicated.

How Do I Open an Account?

You open an account directly from the Modiv website by clicking the “Sign Up” button at the top right-hand edge of the page. You're then presented with an input screen to begin the process.

1. Provide Basic Information

That starts with providing your email address and your full name and creating a password. You also need to provide your country and state of residence, as well as your phone number. Then agree to the “Terms of Use” and click the “Sign Up” button at the bottom of the screen.

On the next screen, you indicate if your account will be an individual, joint, trust, entity or retirement account. You then enter the dollar amount you want to invest and indicate if you want to reinvest your dividend or have it paid directly to you in cash.

From there, you enter your personal information, including your date of birth, citizenship, marital status, occupation, physical address and other basic information.

2. Confirm Accredited Investor Status

The “Financial Questionnaire” determines your status as an accredited investor, requesting relevant information such as your net worth. Other questions asked include your knowledge of investments, your investment objectives, need for liquidity and risk tolerance. These are similar to the questions asked when you open an account with a robo advisor.

After supplying the information above, Modiv displays a review screen showing the information you provided. Edit any information if needed.

3. Final Steps

After that, upload a copy of a government-issued photo ID, as well as copies of documents required to verify your status as an accredited investor. Agree to sign documents electronically, after which a copy will open for you to review.

If all documents are correct, provide an electronic signature. Then connect a bank account for funding purposes. You do this either by entering your bank information through Plaid or by providing your personal account and bank routing numbers directly to Modiv.

Modiv sends a security code to your phone for verification purposes. Enter that in the Security Code Input screen and the process is complete.

How's the Customer Service?

Contact Modiv by phone or email. The company doesn't indicate specific days and hours available, but regular business hours, from Monday through Friday, seem likely. Since the company is based in California, expect those hours to be based on Pacific Time.

Is It Safe?

Modiv investments involve risk and are not guaranteed with regard to the principal, performance or the payment of dividends. Furthermore, the investment does not offer insurance from either FDIC or SIPC. This is in large part why Modiv requires accredited investor status for participation.

The service does not provide specific details on security measures, except to say:

We take reasonable measures to protect the information you provide to us against loss, theft, unauthorized use, disclosure or modification. However, we cannot guarantee or warrant the security of any information you transmit to us and you do so at your own risk.

Pros & Cons

Modiv's Competitors and Alternatives

Highlights
Rating	9/10	8/10	7/10
Minimum Investment	$10	$25,000	$5,000
Account Fees	1%/year	None	2% annual management fee
Private REIT
	Sign UpRead Review	Sign UpRead Review	Sign Up Streitwise Review

Bottom Line — Is Modiv Worth It?

Modiv offers investors the ability to move at least some of their portfolios away from paper assets like stocks and bonds. Real estate is, after all, the ultimate “hard asset.”

And commercial real estate is a special real estate class traditionally reserved for institutions and wealthy investors. You have to be an accredited investor to participate in Modiv. But it provides an opportunity to diversify into commercial real estate with a very small investment.

Real estate crowdfunding opens an opportunity for investors to participate in this lucrative but unique asset class with a small amount of money. Modiv has one of the lowest minimum initial investment requirements at just $1,000. What's more, your investment includes retail, office and industrial property. And this gives you exposure to a broad cross-section of commercial real estate, as well as geographic diversification.

Perhaps best of all, it's an opportunity to take advantage of commercial real estate with completely passive investment. Once you invest your money, Modiv handles all the investment details for you, including the distribution of dividends and property liquidations.

We also like the quality standards Modiv uses in selecting properties for investment. It chooses strong commercial real estate markets, limits leverage to 50% of property value, and maintains occupancy at 100% with very creditworthy tenants. Though there's never a guarantee that any investment will be successful, Modiv's investment strategy certainly stacks the odds in your favor.

If you're an accredited investor who's been looking to diversify into commercial real estate, you should consider giving Modiv a try.