Have you ever considered investing in commercial real estate but been put off by the high costs it usually involves?
If you'd like to get into this potentially lucrative investment and have as little as $5,000 to devote, you'll want to check out Streitwise. It's a new investing service that lets users invest in commercial real estate for less.
In our Streitwise review, we'll take a close look at this real estate platform and all it has to offer investors. Ready? Let's dive in.
What Is Streitwise?
Streitwise is one of the newer commercial real estate investing companies that have used the combination of computer technology and the relaxed investing rules provided by the JOBS Act of 2012 to expand their business. Many real estate crowdfunding platforms grew out of that legislation. Most offer a marketplace where investors can shop real estate deals.
Streitwise isn't a real estate crowdfunding company or a marketplace. Instead, Streitwise offers a nontraded, private real estate investment trust (REIT) that currently owns several already-leased commercial real estate properties. Investors buy shares of 1st Street Office, Inc., a professionally managed portfolio of stabilized commercial office properties.
|Account Fees||2% annual management fee|
|Time Commitment||12 Months|
|Offering Types||Debt, Equity, Preferred Equity, Direct Ownership|
|Property Types||Commerical, Residential, Single Family, Foreign Investors|
|Regions Served||St. Louis and Indianapolis, plus targeted secondary markets|
What Are REITs?
REITs are nothing new. Publicly-traded REITs were created in 1960 as part of the Cigar Excise Tax Extension signed by President Eisenhower. Congress recognized that it was important to allow all investors to invest in large-scale diversified portfolios of income-producing real estate.
Historically, REITs have delivered competitive total returns consisting of high, steady dividend income and long-term capital appreciation. Today, managed investment portfolios typically have a real estate component. Owning shares of a publicly-traded REIT provides a stock-like option for many investors to add commercial real estate to their portfolios.
On the other hand, private REITs, which don't trade on the national stock exchanges, existed well before the ’60s. These were traditionally sold to institutional investors and wealthy family offices. In fact, before the passage of the JOBS Act, it was nearly impossible for individual investors to buy shares of REITs. You needed connections to know about the deals, accreditation to qualify, and deep pockets to afford the high minimum investment.
How Is Streitwise's REIT Different?
Unlike publicly-traded REITs that allow you to buy and sell shares on the market exchanges, Streitwise's REIT is a private fund. And unlike most private REITs, Streitwise's REIT is available to both accredited and non-accredited investors. Streitwise is one of several companies that is bringing the opportunity to invest in private, nontraded REITs to the masses.
As a private-REIT investor, you generally get:
- Tax incentives, including depreciation,
- Quarterly earnings in the form of dividends
- The benefit of lower long-term capital gains tax rates when properties are sold.
Thanks to the 2017 tax bill, many private REITs, including Streitwise's 1st Streit Office, Inc., also qualify for the new 20% deduction on pass-through income.
How Does Streitwise Work?
Streitwise's REIT is managed by Tryperion Partners, a well-established real estate company run by principals with 40-plus years of combined real estate investing experience. The company has transacted over $5.4 billion in business, spanning many real estate market cycles.
Streitwise's focus is on buying commercial real estate assets and owning them for the long term. The company looks for deals in secondary markets with solid economics where reliable tenants can be found and counted on to provide a steady cash flow from long-term leases.
Investors earn money in two ways:
- Quarterly dividends
- Participation in the capital appreciation realized upon the sale when/if a holding is sold while you're an active investor
When you invest in Streitwise, you become a co-owner of a REIT comprised of multiple office properties that are already acquired, stabilized, and producing positive cash flow from commercial tenants with leases in place.
The company seeks out commercial buildings that are strategically located close to transportation, nearby amenities, and a base of industries with established employee bases.
A key differentiating characteristic of Streitwise is it offers direct investment in a REIT that's completely managed in house. The company does not invest or administer investment properties managed by unaffiliated third parties. And to limit risk and ensure stability, Streitwise keeps debt leverage low with direct ownership equity of 55% (at the time of this writing).
While many REITs are riddled with extraneous investor fees, Streitwise's fee structure is transparent and fixed. You pay a 2% annual management fee, and Streitwise is the sponsor for deals.
The company is still young, and there's not much dividend history, but paid-out dividends since 2017 have been consistently higher than many other available REITs, coming in at an annualized 9.3% since its inception.
In fact, the company has had 20 straight quarters of 8% or higher dividends, which is why Streitwise is so popular for generating passive cash flow.
How to Get Started With Streitwise
It's easy to set up an investment account on Streitwise's platform. Both accredited and non-accredited investors will need to provide and confirm income and net-worth information before investing. That's because there's a limit on how much one can invest — your total investment must be less than 10% of your net worth (excluding your home) and less than 10% of your annual income.
Once your account is set-up, you need to complete an ACH authorization form to link your bank account so that you can invest. You can also invest funds with bitcoin or ethereum. It's relatively easy. All you need to do is submit your form, then Streitwise will send you details about sending either crypto using your digital wallet.
And you can invest directly and set up automatic dividend reinvestment via the Computershare Investor Center portal link on the site. The minimum investment is $5,000.
It's easy to get a representative on the phone or speak to one via an online chat if you have any questions. All investment documents are processed electronically on Streitwise's site using SEC-compliant stock transfer agent services provided by Computershare and FundAmerica.
Once you're set up with Streitwise, you can download their iOS app if you have an Apple product. This allows you to easily view your account holdings, access statements, and even add more funds to your account.
Liquidity & Selling Shares
One common downside of real estate crowdfunding platforms is a lack of liquidity. But with Streitwise, you can sell your shares after one year through its share redemption program. You don't pay any fees if you hold shares for at least five years. If you sell earlier than this period, you receive between 90% and 97.5% of net asset value (NAV).
Streitwise Pricing & Fees
For investors, Streitwise charges a 2% annual management fee that's ongoing. The ongoing annual fee is taken out of dividend payments typically, so you don't lose part of your investment.
Streitwise used to charge a 3% upfront sponsor fee as well but has removed this fee, which is a massive improvement for the platform.
We like Streitwise since there aren't any hidden fees that you have to worry about. Once you buy your shares, you know exactly what your costs are.
Fundrise vs Streitwise vs Realy Mogul Quick Comparison
If you want consistent dividend income from real estate, Streitwise is one of our favorite platforms. Its transparent fees and higher liquidity are also selling points.
However, it's not the best option if you want to invest in real estate with small amounts of money. And depending on the types of properties you want to invest in, certain alternatives might be superior.
|Account Fees||1%/year||1-1.25%/year asset management fee||2% annual management fee|
We like Fundrise since it only requires $10 to start investing and charges 1% in annual fees. There's also an early share redemption program like Streitwise to help improve liquidity, and you earn quarterly dividends as well.
As for RealtyMogul, it's an excellent choice if you want more control and to invest in individual properties. And it still has several REITs that are available to non-accredited investors as well.
Pros & Cons
Streitwise is neither a technology platform nor a marketplace where the crowd can invest in deals offered by outside sponsors or real estate groups. It is a real estate investment company that uses an online platform solely as a means of raising capital for internally managed properties within their REIT.
Unlike most REITs that focus on buying properties, improving them and reselling them, Streitwise focuses on acquiring properties located in prime market areas and owning them long term for the rental income generated by the businesses leasing their space.
Underwriting is done in house with a focus on downside risk protection through tenant vetting to ensure the ability to pay and efficient property management to maintain value to retain tenants and quickly backfill if there is a vacancy.
The three founding partners of Streitwise have serious “skin in the game,” with a total of more than 500,000 shares invested themselves. That means they have a huge personal stake in the selection, management, and profitability of the assets held in the REIT.
Since inception, Streitwise has delivered annualized dividends. Its target is 8% to 9% each quarter.
For the individual investor, Streitwise could be a great way to invest in commercial real estate without needing accreditation or many thousands of dollars to get started.