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Home » Investing » Real Estate » Sharestates Review: Invest In Vetted Mortgage Loans

Sharestates Review: Invest In Vetted Mortgage Loans

Updated: February 17, 2021 By Robert Farrington

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Sharestates

Direct investing in real estate can be very time-consuming. That's why investors who want something more passive and liquid turn to REITs. 

But REITs aren’t all that different from investing in stocks. Is there a better option for those who want to stay closer to real estate investing?

One option is crowdfunded real estate investing platforms. Sharestates is a great example. They allow individual to investors to invest alongside institutional investors in quality mortgage loans. In this article, we’ll check out what Sharestates has to offer.


Sharestates logo

Quick Summary

  • Invest as little as $5,000 in real estate loans 
  • Must be an accredited investor to participate
  • Early redemption possible, but only at a discount

Sharestates Details

Product Name

Sharestates

Min Invesment

$5,000

Setup Fee

0-2%

Annual Fee

$0

Investor Requirements

Accredited Investors Only

Promotions

None

Table of Contents
Who Is Sharestates?
What Do They Offer?
Are There Any Fees?
How Do I Open An Account?
Is My Money Safe?
Is It Worth It?
Sharestates Features

Who Is Sharestates?

Sharestates is a real estate crowdfunding platform. It was created in February 2015. Its founders are Radni Davoodi & Raymond Y. Davoodi. Sharestates is located in Great Neck, NY.  It operates under the Reg D, Rule 506c legislative rules.

Since launching, the company has funded $2.52 Billion in U.S. private real estate loans in 35 states. There are only eight states where it doesn't currently conduct business. Those states are: Minnesota, Nevada, North Dakota, Oregon, South Dakota, Utah, Vermont and Washington.

What Do They Offer?

Sharestates provides both real estate investing and lending opportunities. For real estate investors who need to borrow money for projects, their funding comes from Sharestates’ investors.

Sharestates sits between direct real estate investing and purely passive investing. Investors don’t have to be involved in their investments' day-to-day operations, as is the case with direct real estate investing. But unlike investing in REITs, they'll still need to perform due diligence about which investments to choose.

Investors don't have to worry about their investments' daily operations since the investment's sponsor handles that. A sponsor is someone who sees deals through from start to finish. They find deals, put together financing, find investors for the deals, manage the properties, and finally sell them. The sponsor is compensated for this work.

Sharestates investors don’t hold title to any properties and, thus, can't take out loans against them. There's also no secondary market for reselling your shares at a profit. Instead, profits are earned as the loans are paid back with interest.

Vetting Process

Sharestates vets all investments that make it onto its marketplace. The team goes through a 34-point underwriting and risk assessment system. They say that only 2% of deal applicants actually make it into the marketplace.

Vetting is done by seasoned real estate investors who have experience analyzing commercial deals. This is certainly a plus for investors. Analyzing deals is a large part of real estate investing. Knowing that an experienced team has already done much of the heavy lifting could save investors a lot of time.

Some of the factors that Sharestates will analyze include:

  • Loan-to-Value Ratio
  • Lien Position
  • Location
  • Occupancy
  • Development Phase
  • Borrower Track Record
  • Borrow Experience
  • Borrower Credit Score
  • Personal Guaranty

Investing Process

To get in on an available loan deal, you'll need to invest at least $5,000. Typically, monthly interest payments begin immediately and a balloon interest payment is sent to investors at maturity. Sharestates says that investors should expect net annualized returns of 8-12% per year.

All investors on the Sharestates platform are required to be accredited. An accredited investor is someone who has a $1 million net worth, excluding their home, or a $200,000 income for the last two years.

Sharestates properties are commercial. Commercial real estate investing is often only accessible to large institutional investors. But Sharestates gives smaller investors the opportunity to invest in commercial deals right alongside the big players.

Moderate Liquidity

Crowdfunded real estate investing deals tends to be very illiquid and have long holding periods. But Sharestates stands out from the pack in two key ways. First, the typical maturity period on its loans is only 12 months (the maximum is 36 months).

Second, Sharestates offers a redemption program that allows you to access your investment principal during an emergency. While the redemption program provides additional liquidity, know that you won't be able to access 100% of your initial investment.

Depending on how early you redeem your shares, Sharestates will pay 94% - 96% of your purchase price (minus any prepayments you may have already received). Here is the full redemption schedule:

Days

Percentage of Purchase Price

1 - 90

94%

91 - 180

95%

181 - 270

96%

Note that there is no early redemption option after your investment has passed the 270-day mark. At that point, you'll need to wait for you investment to reach its maturity date (typically at 365 days) to access your capital.

Are There Any Fees?

There are no ongoing management fees. But investors may be charged an account setup fee of up to 2% of their investment amount.

Header
Sharestates logo
realty mogul logo
stREITwise Logo

Rating

Setup Fees

0-2%

Varies by investment

3%

AUM Fees

$0

1% to 1.25%

2%

Min Investment

$5,000

$1,000

$1,000

Open To Non-Accredited Investors?

Cell
Cell
READ THE REVIEW
READ THE REVIEW

How Do I Open An Account?

You can visit the Sharestates website to join. Sharestates has a three-step process:

  • Browse available investments in the marketplace
  • Invest at least $5,000
  • Cash flow begins immediately

Is My Money Safe?

Investors should understand that there is no FDIC or SIPC protection on crowdfunded investing deals. Although Sharestates does carefully vet deals, you could still lose 100% of your principal.

Is It Worth It?

For accredited investors who want more direct exposure and diversification into real estate, Sharestates is worth checking out. It offers immediate cash flow, solid annualized returns, and more liquidity than other real estate crowdfunding sites.

However, if you're not an accredited investor, you'll need to look at other real estate crowdfunding options. The good news is that several alternative platforms are open to both accredited and non-accredited investors, including DiversyFund, Streitwise, Realty Mogul, and Fundrise.

Sharestates Features

Investment Types

  • Payment dependent notes (Notes) and
  • LLC Membership Units

Investor Types

  • Individual
  • Institutional
  • NPL

Property Types

Commercial

Minimum Investment

$5,000


Account Setup Fees

0-2%

Management Fees

None

Target Annualized Net Return

8-12%

Investor Requirements

Accredited investors only

Transparency

Investment offerings are compliant with Reg D, Rule 506c


SEC filing not required

Investment Term

6, 12, 18, 24, 30, or 36 months

Share Redemption Program

Yes

Secondary Market

None

Auto-Invest Option

Yes

Customer Service Phone Number

212-201-0750

Customer Service Email Address

greetings@sharestates.com

Mobile App Availability

None

Promotions

None

Sharestates Review
  • Pricing & Fees
  • Ease of Use
  • Customer Service
  • Accessibility
  • Diversification
  • Liquidity
Overall
3.6

Summary

Sharestates is a real estate crowdfunding platform that enables accredited investors to invest as little as $5,000 in quality mortgage loans.

Pros

  • 34-point investment vetting process
  • Instant cash flow
  • Short maturity periods on loans
  • Early redemption program

Cons

  • Not available in all 50 states
  • Open to accredited investors only
Robert Farrington
Robert Farrington

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 towards anyone wanting to earn more, get out of debt, and start building wealth for the future.

He has been quoted in major publications including the New York Times, Washington Post, Fox, ABC, NBC, and more. He is also a regular contributor to Forbes.

Editorial Disclaimer: Opinions expressed here are author’s alone, not those of any bank, credit card issuer, airlines or hotel chain, or other advertiser and have not been reviewed, approved or otherwise endorsed by any of these entities.
Comment Policy: We invite readers to respond with questions or comments. Comments may be held for moderation and are subject to approval. Comments are solely the opinions of their authors'. The responses in the comments below are not provided or commissioned by any advertiser. Responses have not been reviewed, approved or otherwise endorsed by any company. It is not anyone's responsibility to ensure all posts and/or questions are answered.
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