Sharestates Review: Invest In Vetted Mortgage Loans

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 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.

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.

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.

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.