You have a real estate deal.
You need to get it funded.
But what if you have a few deals under your belt and you want to expand your funding sources?
Then I encourage you to consider a …
Real Estate Crowdfunding Platform
In this post, I'll share with you the nitty gritty of getting your deal listed on a real estate crowdfunding platform such as RealtyShares.com, FundRise.com or RealtyMogul.com.
I sat in on a RealtyShares.com webinar and got the low down on what it really takes to get your deal listed on the platform.
Now, for those of you not in the know, Realty Shares is a real estate funding platform. This means that they curate pre-vetted real estate investments – debt and equity – to individual investors just like you and me.
Full Disclosure: I'm a registered investor with RealtyShares.com, FundRise.com and RealtyMogul.com. I routinely invest in deals listed on the sites for several reasons…
- I can invest with as little as $10,000 and even as little as $2,000 on some deals.
- It's a truly passive investment. I spent many years managing real estate syndicates (group investments) and it's nice to just sit back and let someone else do all the work for a change.
- I'm making an average of 9% on multifamily investments and note funds. Yes, I said AVERAGE. $$$$
In this post, I'll share…
- What kind of deals get featured and funded on these platforms
- How they do due diligence on submitted deals – commercial and residential
- The fees charged
- How to get your deal on the platform
- What they look for in Sponsors and Borrowers
What Kind of Real Estate Deals?
On commercial deals (multifamily 5+ units, industrial, office, retail, etc) they focus on ‘small cap' transactions that are usually ignored by institutions.
Most conventional commercial funders don't even want to waste their time on deals less than a few million.
On residential deals, they focus on short-term residential debt deals – mainly fix & flip.
The Crowdfunding Advantages
The funding usually much faster than with conventional lenders. Residential sponsors can fund in just a few days.
The sponsor can make more money funding on a platform, typically, than with hard money lenders.
Sponsors can fund multiple deals at one time and larger loan sizes allow scale.
Your deal also gets exposure to thousands of investors – over 22,000 investors just on RealtyShares.com – looking for deals.
And, you get to offload investor communication and reporting functions to the platform. This is HUGE!
What Are the Fees?
The fees vary by platform, but here are the fees that RealtyShares charges…
- 5% origination
- $495 processing fee
- 1% title fee
- $895 draw fee
- 9-15% rates (typically 11-13%)
- 3% of equity raised placement fee
- $7,000 admin fees
- 1% annual management fee
- They are about ½ the cost of their competition
What Do They Look for in a Sponsor?
In a word? EXPERIENCE.
Sorry, newbies this isn't for you. Yet.
That's for residential deals… what about commercial?
Sponsor Criteria – Commercial
- No first time sponsors
- Track record – at least $20 million in transaction volume or 3 projects in the last 3 years
- Projects – significant completed projects in same geographic area and project type.
- Criminal and credit check
- Sponsor must contribute at least 10% of the equity required.
What About Due Diligence?
That's the thing I like most about investing in these deals… they are pre-vetted.
Not only does the platform conduct major due diligence (on the deal and the sponsor), but I also get to see those reports and conduct my OWN due diligence.
Here's a shot of the package on a deal I invested in a few years ago – Whispering Oaks Apartments…
Due Diligence – Property Level
- Market research
- Modeling and structuring (proforma, etc)
- Collecting info from 3rd parties such as appraisers, inspectors, environmental, etc.
Due Diligence – Sponsors
I always say that in investing, I look just as hard at the people involved in the deal as I do the deal itself. And the crowdfunding platforms obviously share that sentiment…
How Many Deals Get Submitted and Declined Monthly?
To say that getting your deal listed on a crowdfunding platform is competitive would be a major understatement! The competition can be fierce…
So, now you have a deeper understanding of what crowdfunding is and how you can benefit by getting your deals listed on the platforms.
Having your deal showcased to over 22,000 potential investors could be a major game changer!