Crowdfunding Real Estate Investments
Below is our review of RealtyShares as it was in 2015.
|Account Fees||None||0.50% or $500||1-1.25%/year asset management fee|
Commissions & Fees - 7.5
Customer Service - 8
Ease of Use - 7
Diversification - 8
Amount of Deals - 7.5
Due Diligence - 8
RealtyShares is a real estate crowdfunding platform offering a broad range of opportunities, including single-family house flips. However, you must be an accredited investor to participate, and its investments are illiquid by nature.
|Account Fees||1% on equity; up to 2% interest rate spread on debt|
|Time Commitment||6 Months|
|Offering Types||Debt, Equity, Preferred Equity, Direct Ownership|
|Property Types||Commerical, Residential, Single Family, Foreign Investors|
|Regions Served||Not available in AK, NV, ND, SD, VT|
RealtyShares is an online investment platform that specializes in real estate investments. It brings together investors, borrowers, and sponsors, and allows the entire transaction to take place through the website.
Unlike larger online real estate investment platforms, RealtyShares focuses on business smaller investments, including single-family house flips, rather than exclusively on large apartment buildings and commercial investments.
In 2014 RealtyShares investments covered $300 million in real estate property value via more than 200 properties across dozens of cities in 17 different states.
One of the characteristics that make RealtyShares different from real estate investment trusts (REITs) and other real estate investments is that you have a choice to invest in groups of properties or to invest in a single very specific property.
RealtyShares reviews investment opportunities to make sure they meet the threshold criteria for the platform. If it does, the investment is listed on the site and will include everything from general information about the deal to legal documents that specify risk factors connected with the transaction.
Investors can purchase anything from a small piece of a larger investment to an entire investment. The site dashboard tracks the earnings history of the investment and also provides year-end investor tax information.
Investors can choose to fund either equity investments or real estate loans. Investments can be in commercial property. The platform will even allow you to introduce an investment of your choice, to be funded through the website.
There is a simple five-step process in order to invest on RealtyShares:
- Sign up for the platform
- Browse real estate investments (you must wait first a 30 day SEC “cooling off” period)
- View and finalize your investments
- Wait for the funding goal to be met for the investment (100% funding)
- Manage your real estate investments online
Certainly, preferred equity investments invest in debt obligations of RealtyShares subsidiaries, known as payment dependent notes. These notes are tied to the performance of the underlying loans. In order to limit counter-party risk to investors, RealtyShares maintains a third-party trustee in these transactions.
Return on investment. Equity investors typically receive distributions on a monthly basis, while debt investments pay out quarterly. Distributions are transferred directly into your linked bank account, and with equity investments, investors will also participate in any net appreciation upon the sale of a property.
Benefits of Investing Through RealtyShares
RealtyShares offers real estate investors an opportunity to create a portfolio of real estate investments, rather than to have all of their capital tied up in a very small number of investments. Investors can choose from a variety of deals to participate in, either by funding loans or private equity positions. This gives investors an opportunity to participate in larger investments that may have only been available to very large investors.
Investors can choose to diversify their holdings on the platform in different types of properties and investment positions, as well as to diversify geographically.
The investments are also passive in nature, very similar to financial assets, in that the investor does not have to get involved in the day-to-day management of a property.
The service is proving to be a benefit to both investors and real estate concerns that need capital.
“This gap has been left by banks that now crowdfunding platforms, like RealtyShares, are able to fill,” said Nav Athwal, CEO of RealtyShares. “They are able to provide quicker, more efficient capital that helps meet the needs of these investors who are looking for speed of execution and the ability to be flexible with their terms as well as with the underwriting standards. Banks just aren't meeting that need.”
RealtyShares does the investigative legwork. The site reviews each opportunity and then does a background check on the principal executives of the sponsoring real estate company or borrower. They also review proforma financial statements, title reports, and property inspections, as well as comparable sales data and other necessary information.
The results of their investigation are available to you on the platform or can be sent via by email. In this way, risk factors about the each investment are known up front. RealtyShares does all of the investigative work for you.
If for any reason the investment does not go to closing, any funds that you've invested in the transaction will be fully returned to.
Pricing. There are no fees for registering on RealtyShares, and once registered you may browse investment listings freely. For equity investments, RealtyShares charges a 1% annual fee to manage the investment. They may also charge an “over-raise” fee to cover initial legal fees related to the investment and other specific expenses.
For debt investments, RealtyShares is compensated by taking a servicing fee that is represented by the spread between the interest rate charged to the borrower and the net interest being paid to the investors.
Security. RealtyShares uses SSL with 128-bit encryption, comparable to that used by banks. The platform is also regularly reviewed the by third-party security firms to ensure that security standards are being maintained. In addition, the platform does not store your banking information on their servers, and you will be automatically logged out after 15 minutes of inactivity.
If you are investing in debt securities, funds will be deposited into an FDIC insured account (up to $250,000) with Wells Fargo, N.A. Equity and preferred equity investments are deposited in a tri-party escrow account involving both the broker-dealer partner and a third-party bank.
Clearing agency. RealtyShares uses North Capital Private Securities Corporation to provide execution services in connection with equity and preferred equity investments. North Capital also provides compliance and regulatory oversight for RealtyShares. North Capital is a registered broker-dealer and a member of both FINRA and SIPC.
Keeping you informed. RealtyShares provides periodic updates on equity and preferred equity investments, typically on a quarterly basis. However, additional updates will be issued when significant information becomes available. Information is available online and by email sent directly to you.
Tax reporting. The platform will also provide you with the necessary tax documents (IRS Schedule K-1 and/or 1099-INT) related your investments, prior to April 15th.
Holding period. Each investment you make through RealtyShares has a holding period that can be anywhere from under six months to more than five years, though it is entirely possible that they will extend beyond the original production.
Minimum initial investment. The general minimum for any single investment is $5,000, but there are some investments that may be available for as little as $1,000.
RealtyShares Pros & Cons[table “proscons” not found /]
Being able to diversify into real estate for a crowdfunding platform — particularly one that permits small real estate investments – is an excellent reason to use the services of a site like RealtyShares. Fees are low, and the site provides all of the technical information you need.
There are various pluses and minuses with the service, but RealtyShares would work better if it didn't have the requirement for accredited investors. Crowdfunding generally democratizes investing, making it available to even the smallest investors. The accredited investor requirement limits the platform to use by high income and high net worth individuals.
BIG WARNING! YOU CAN’T TAKE YOUR MONEY BACK! THIS IS A SCAM COMPANY!
I invested $5,000 two years ago, per agreement, I can exit after 48 months, now they don’t let me take money back because they changed the rules a month ago! How can this website gave it such a high rating???
I must share my bad experience with Realtyshares as well. I invested $25K in a debt offering in July , 2017 for 12 months @ 9% per annum. This was for developing Checkers and Taco Johns franchises in Tennessee. The interest distribution didn’t start until October, 2017. Three interest payments were delayed and then the term extended by three months to December, 2018. I am sorry to share that the principal was not returned in December, 2018 and it still remains unpaid including no interest since December, 2018 thru Date (June, 2019). Now the Realtyshares says the franchise has declared bankruptcy and all investors will lose most of the funds invested…..This has left a very bad taste in my mouth regarding crowdfunding. I believe Realtyshares was involved in this fraudulent deal and has now closed their doors claiming they have been taken over by “iintoo”…….what a SCAM!
I should add that I still will have 5 investments for $55,000 left after the $5000 write-off. I did try to call the sponser directly but, not surprisingly, was only able to leave a voice mail.
This is a further update from 5 months ago. On a letter scale Realtyshare is now a F. On the numerical scale, a 1 on a 1-10 scale. Simply put, they are going out of business. All my worst fears are coming to pass. They won’t even take phone calls now. Further, one of my investments, the Lofttech Fund has declared itself insolvent and cannot pay investors back. Funny how they waited to the due date for the complete repayment of principle to inform investors of that fact. This was after they paid every distribution due for more than 2 years (on a monthly basis) through December of 18. RS said they were never told if any problems until they received the current update.
This smells of fraud on the sponser end. It would be nice to speak with someone at RS. That, sadly isn’t possible. Investing is not risk free. I completely understand that. However, when the platform is going out of business and you literally cannot speak with anyone about a write off, then a grade of F/1 is earned. I would suggest this site update it’s information. Fortunately, further investments on this platform is not possible.
I had 5 investments and out of those 2 investments have been defaulted. After the foreclosure and all, I was informed that i will be getting 0.10$ on the dollar that i have invested and that too they will hold that money to decide what next need to be done, so my 20K is gone under water. They dont do the right due diligence and put your investment at Risk. Iam planning to see how i can serve them a notice to find what has been done on my lost investment and they should return whatever is held back.
Did you all see the news on Realty shares not taking in any more investments nor offering any new ones. This is a sign of huge trouble at RealtyShares. Anyone concerned with their current investments thru RealtyShares ?
We haven’t been able to reach anyone at realtyshares on phone or email lately. We didn’t receive interest payments in December on one project. We didn’t receive any updates or notifications regarding the missing payments. We are very concerned and like to connect with other investors of Realtyshares.
Yes. See my most recent comments. Preparing myself for a complete loss.
Very disappointed after two RealtyShares deals. Still not sure why but I lost half of my principal on one of the two. Like another investor mentioned, equity deals seem to be far more speculative than is implied. Buyer beware.
Grade: D. I started investing with RS 1.5 years ago and still have 5 investments open with RS. 4 debt and 1 preferred equity. Each ranging from $5,000-$10,000. I have been very disappointed. So far, all my investments that were supposed to have matured have been extended without explanation. 1 property has not made a payment in over a year and is in default and is not expected to finish foreclosure for another 4-6 months. I just got notified that two of my other investments are now defaulting. That means 3/5, or 60% of my investments are in trouble. That is way too high of a risk for the meager 8.5-11% return I am getting. RS is not a company that seems it can be depended on. Beware. Invest elsewhere.
I have invested in RS for about a year and half, and so far it has been a huge disappointment. 20+ investments and more than half of them are questionable or not meeting expectations. Frankly, at this point, I feel like I would be lucky if I get half of my investment back.
I have 6 investments with RS. I had 1 that was completed. Of my current investments, I would say 4 are performing at or near expectations. 1 is clearly underperforming and 1 is pretty much a disaster and will probably ensure that I lose money with RS. What I have learned the hard way is that RS is essentially a broker. The quality of their equity deals is not great, at least it wasn’t when I was funding. I learned to stick with preferred equity and debt. I won’t place any more $ with RS. They don’t meet my standards to warrant further investment.
I invested with Realty Shares and expected distributions immediately, but they delayed distributions for “due diligence” they were doing on the investment. Then, when due diligence was over, they started to question my status as an accredited investor. Now 6 weeks since they debited my account and I have nothing to show for it. I am trying to get my money back but they don’t communicate with me. Be warned.
I was in the similar situation as you. Finally they distributed the interest payments to my account after I consistently calling and questioning them about it early last summer. Now, we haven’t been able to reach anyone at realtyshares on phone or email. We didn’t receive interest payments in December on one project. We didn’t receive any updates or notifications regarding the missing payments. We are very concerned and like to connect with other investors of Realtyshares.
Time for an update from 4 months ago. What I have learned with RS is to NOT invest in equity deals. They are much more speculative than I thought they were. I have 1 that is simply not paying any distributions and another that is lumpy. The one that is not paying claims it is due to issues they should have known before the sale. I have 4 other deals – 3 preferred equity and 1 debt that are all paying pretty much as expected.
Here is what investors need to understand. After a period of significant price contraction, there is always a period of time when there is easy money to be made. This is true of pretty much any true asset class (not cryptos!). The easy money is gone from RE for the time being. That doesn’t mean RE isn’t a good investment anymore. It just means that investors need to focus on cash flow, not price appreciation. The market for cash flow deals should remain strong given the good economy. Be more conservative. I already have enough non-liquid investments. I am not looking to add anymore. I am lucky in that I can wait many years for some of my investments to pay off. If you cannot do that, do NOT invest in this manner. Stay liquid and look towards publicly traded vehicles.
I still grade RS as a C+. Not an awful investment but I do question some of their partnerships or arrangements. The customer service is just OK. Not on a par with Fundrise who is excellent in that regard (although I have concerns about them as well). Just a note – the K1’s are taking forever to get. RS is the only vendor I have left that has not provided me everything I need to complete my taxes.
I have been an investor of realty shares for almost 2 years on a significant level with over 30 investments ranging from equity to dept at close to 1.6 million. More than 25% of the deals i have in place appear to be having questionable outcomes meaning they could result in a partial or total loss. They definately did not vet these deals well enough or they would not be happening in this volume or for the reasons at hand.
Now these are just the deals i have in place where i did my own due diligence and backgrond checks. Who knows how many other deals are failing right now. I would stear clear of this company for now. First lien debt seems to be the best options these days. If you are equity or preferred equity you are second in line at best.
If and when things improve i will post an update but i just got off the phone with them and i did not walk away with any more confidence. Buyer beware.
I agree with this assessment. It is best to only do debt deals and maybe a preferred equity deal. I just question their due diligence. I have 2 right now that are questionable – both equity deals. No more of that. The one is extremely upsetting. All of the problems listed should have been known before RS solicited it’s members to invest. In reality, they are more of a broker. I have quite a bit invested still but won’t invest anymore. Same is true for the other real estate platforms.
An update from my previous from 8 months ago. I have invested in more RS projects but now limit myself to preferred equity or debt deals only. I have learned the hard way that RS is really more of a broker than partner. That differentiates RS from a platform like Fundrise. I have had issues with a couple of equity investments. I understand things happen. However, in at least once instance, the problems should have been apparent before purchase.
Also, I have an issue with the transparency of the platform. They have gone backwards in this regard. No more updates on the sponsors and no more anticipated pay dates. You really have to 100% trust a deal before entering into it on RS because I don’t feel I can trust RS to do proper due diligence.
I have been investing in the platform for almost a year and a half. On the whole, it certainly isn’t the worst investment I have ever made. Not by a long shot. However, I can only grade them as a 6 out of 10 at this time. I sincerely hope that improves especially with Fundrise no longer offering private investments.
Realtyshares used to be a good platform to invest. They are very incompetent now. I have a considerable amount invested with them but have stopped investing with them now. They do not distribute the correct amount. They conveniently do not notify you if a payment is missed. I have been talking to Customer service for a month now and have not had my issues resolved. Investors Beware!
I currently have 4 active investments on the RealtyShares site. My experience has been quite poor. One investment is in active default and going through litigation. Two others are well behind on payments and significantly delayed. Neither of these two have exited at the anticipated maturity date. One of these two I suspect will default based on the updates received. Only 1 of my 4 appears to be doing well.
I invested as an “experiment” looking to diversify my portfolio. Fortunately, I kept my initial investments to a minimum. I have to say that RealtyShares has been an absolute failure in every regard.
I may have to file additional state taxes in the state where the investment is made?? Deal killer
I have investments with Realty Shares, Fundrise and Peer Street. My Peer Street investments are only a couple of months old. So, it is too early to tell. It is a much different strategy than RS or Fundrise. Fundrise no longer offers private deals so I am not certain how to compare them anymore. I began investing with Fundrise 2 years ago and was very happy. Not sure what direction they are headed.
I have been investing with Realty Shares since October. I have invested in 5 deals. I won’t go into the details on any 1 deal. So far, I would have to give RS a C+. Not a great grade but it is early yet with time to improve. I invested in 5 different properties with minimums of $5,000 to $15,000. 2 of the deals have worked exactly as planned. 1 was delayed a bit but is now distributing. Another one announced “unexpected delays” with distributions (things they should have known) and will not begin to pay out until April or May. This was disappointing. OK, things happen.
The last investment is one that really has me upset. I invested in October. The deal was supposed to close in November and distributions would begin in the end of December. The deal, although fully financed, did not close until mid December. OK, again unforeseen things do happen. However, RS states that the sponsors will provide an update 45 days after the close of a quarter. It is now March and no update from the sponsor. No distribution either. I called and was told that the message on the RS site for the deal is a “typo” and that the sponsor doesn’t have to provide an update until mid May! That was last week. I just checked and the sentence indicating that investors will receive an update by mid-February is still there! If the sentence was a “typo” wouldn’t that have been changed? This leads me to question the professionalism of RS and, frankly has me wondering about their process in selecting which sponsors to work with on their platform.
I was accustomed to Fundrise where you began earning the day you invested. I had more than 20 deals and never had an issue. The only reason I tried another platform was that Fundrise seems to be committed to only EREITS these days. 2 out of 5 RS Investments have met my standards so far. Perhaps this is just normal and that will smooth out over time. Thus, I leave open the possibility of increasing my grade.
I have been using realtyshares for about 3 years. I am very happy with the results and the customer service. In general most of the Debt deals tend to be as low 1000 to 5000 dollars minimum. Most of the equity preferred deals generally are any where between 10k to 25k minimum investments, probably due to trying to have no more than a set amount of investors, because those deals tend to raise a total of 1 million or higher. Customer service is fast at responding to any questions when pertaining to the platform, or questions about any single deal on the platform.
I invested around $100K in RealtyShares.com for last 2 years. Half of my investments are now in Bankruptcy. Always getting standard update message saying that there is no much would be done as Bankruptcy is lengthy process and lawyer involved. I am almost lost $50K now. Just got only $15K still today. Not sure about remaining investment. so 90% money that I lost. Is there anything legally to recover anything from realtyshares.com?