On April 5th, 2012 Congress passed the JOBS act of 2012. With the stroke of a pen everyday people gained access to private investment markets that had once been the domain of “accredited investors,” people with incomes greater than $200K or assets greater than $1Million. Since the new law has been signed into place, real estate crowdfunding platforms flooded the online marketplace.
EquityMultiple conceptually follows the "crowdfunding" model introduced by the JOBS Act, but with some "institutional" twists. They are on a mission to guide investors towards a stronger, more diversified portfolio through curated and tenaciously managed private-market real estate investing opportunities.
By providing streamlined and simple real estate investing, and a focus on asset management, EquityMultiple is empowering investors like us to reach our goals. In essence, they are working to change the way investors think about real estate investing at large.
Anyone with the money to invest can profit from EquityMultiple’s commitment to rigorous underwriting and deal selection. As an investor in EquityMultiple’s platform, you have the potential for outsized returns. But is the risk worth the reward? Only you can determine that, but here’s what you need to know.
- Invest in commercial real estate across different positions in the capital stack, property types, and markets across the U.S.
- High quality deal flow and great information
- Higher minimums and only open to accredited investors
Fund Investing: $5,000
Direct Investing: $10,000
Savings Alternative: $5,000
Equity Investments: Generally 0.5% to 1.5% AUM + 10% Profits On Exit
Taxable and SDIRA
How To Invest On EquityMultiple
Anyone in the United States can sign up for an account on EquityMultiple. The sign-up process takes just a few minutes. Once you have an account you can browse deals that meet the EquityMultiple team’s standards. There are three different investing approaches to choose from:
- Fund Investing
- Direct Investing
- Savings Alternative
The table below details the options that EquityMultiple provides for each investing approach:
EquityMultiple Investing Approaches
1.5 to 10+ years
6 months to 5+ years
3 to 9 months
Varies, but generally income focus of 10%+ annual return
Equity Investments: Total return (net IRR) of 18%+
APY of 5.85%-7.4% with option to "roll over" into the next series of note for additional compounding
If you find a deal that meets your investing criteria you can invest in that deal in just a few minutes via EquityMultiple's streamlined payments system. Each deal spells out when you can expect to see returns, how the returns will be structured, and other important financial information. If you’re familiar with real estate terminology, these “listings” are easy to understand. If you’re not, you can make use of the EquityMultiple glossary.
EquityMultiple also prides itself on dedicated customer service - and an Investor Relations rep should be accessible at all times via a chat feature to answer questions.
EquityMultiple receives a fee of 10% of all profits for most JV equity investments. They do not recoup their 10% profit until all investors have received their principal payment back. They also collect an annual asset management fee, which is most often 1%.
Big Protection For Smaller Investors
If you’re used to dealing with mutual funds, EquityMultiple’s fees may seem high. However, they offer big time protection for small investors. Not only is their underwriting top of the line, they offer legal protection and experience.
A lot of people lose their shirts in real estate investing. EquityMultiple has the systems in place that protect you and your credit even if a deal completely implodes. It’s impossible to overstate how valuable this protection is. In general, deals that use leverage (debt) require you to risk your credit and your assets. Not so with these investments. The most you can lose is the amount you invest. You’ll never be asked to add more capital, and you do not personally guarantee the investments.
EquityMultiple's SPV structure means that investors are pooled together into a single entity that has legal power, but that does not expose individual investors to liability.
EquityMultiple Has A Mover’s Advantage
EquityMultiple’s team of experienced real estate professionals have distributed over $298 million back to investors across over 150 projects totalling over $4 billion in capitalization.
EquityMultiple targets a net cash-on-cash return of 6%-12% to investors for equity deals, and net IRR to investors in the mid-teens. They will accept lower returns in some major markets.
Understanding The Risks Of Real Estate Investments
Still, these returns are partially due to the risk associated with investing in EquityMultiple. Real estate crowdfunding as a concept is still new. You don’t have control over the investment, and you can’t alter the terms of the agreement if something goes wrong.
But that’s not your only risk. EquityMultiple is a startup in a startup industry. There’s simply no saying how your investments will fare during the next real estate downturn.
Real estate investments are illiquid, so you can’t sell the investment if you need the money for personal reasons. This can be a benefit to you (so you won’t lose returns due to poor behavior), but it’s also a risk.
Not only do you need to face these risks, you face the risk that you’ll invest in the wrong deals on the EquityMultiple platform. Investing in the platform requires a commitment to research and a willingness to outsource control. If you can’t commit to these, EquityMultiple isn’t the right platform.
Access Your Principal Faster With Short Term Notes
EquityMultiple's new Short Term Note investments come with 3- to 9-month terms. These can be a great option if you aren't comfortable with having your money tied up for 6 months to 10+ years as is required with EquityMultiple's Fund Investing and Direct Investing options.
These Short Term Notes are diversified and send distribution payouts on a monthly basis. And EquityMultiple says that the rates they pay should be significantly higher than you could typically get from a savings account or even a CD.
Unlike with EquityMultiple's other offerings, you won't pay any fees to invest in Short Term Notes on the platform. The minimum investment is also lower. While you need at least $20k to get started with Fund Investing and $10k to participate in a Direct Investment, the investment minimum for Short Term Notes is $5,000.
How Does EquityMutliple Compare?
EquityMultiple is no longer the only online real estate investing site, though it does have some differentiators on the platform.
Here is a quick comparison of EquityMultiple to other popular platforms like Fundrise and RealtyMogul.
0.50% to 1.50%
0.30% to 0.50%
Open To Non-Accredited Investors?
EquityMultiple’s Biggest Asset
In an effort to learn about EquityMultiple's platform, I had the opportunity to chat with the company’s executive team. They even reached out with some clarifying emails.
Great customer service and a great team may be EquityMultiple’s biggest asset. I can’t quantify the value of the EquityMultiple team, but I certainly won’t overlook it when I compare real estate crowdfunding platforms.
What do you think of real estate crowdfunding sites like EquityMultiple?
Equity Multiple Review
Commission And Fees
Ease Of Use
Risk Mitigation And Due Diligence
Equity Multiple is a real estate crowd funding platform that allows investors to take advantage of real estate deals that they might not normally been able to take advantage of.
- High-quality deal flow
- Great customer service
- Solid information on the deal pages
- Higher minimum investment than other platforms
- Only open to accredited investors
Robert Farrington is America’s Millennial Money Expert® and America’s Student Loan Debt Expert™, and the founder of The College Investor, a personal finance site dedicated to helping millennials escape student loan debt to start investing and building wealth for the future. You can learn more about him on the About Page or on his personal site RobertFarrington.com.
He regularly writes about investing, student loan debt, and general personal finance topics geared toward anyone wanting to earn more, get out of debt, and start building wealth for the future.
Editor: Clint Proctor Reviewed by: Claire Tak