When most investors think about real estate, they consider single-family homes or some kind of commercial building. A few may think about land or self-storage facilities. But few people consider hotel real estate as a viable form of real estate investing.
EquityRoots is a crowdfunding company that’s looking to change that perception. By lowering barriers to entry, EquityRoots makes it possible for everyday people to invest in hotel ownership. Here’s what you should know about the company.
- Invest in hotel builds or renovations
- No annual management fees for investors
- Some investment options for non-accredited investors
- High investment minimums
Open To Non-Accredited Investors
What Is EquityRoots?
EquityRoots is a crowdfunding marketplace focused on democratizing hotel ownership. The platform was founded in February 2014, a few years after the JOBS Act opened up crowdfunding opportunities to everyday investors. Since hotels are large buildings, they typically require large amounts of financial capital for building or remodeling.
Sometimes, these loans are difficult to find from banks. So hoteliers may look for private funding from wealthy investors or private REITs. EquityRoots is aiming to change that. By allowing investors to pool smaller amounts of money, EquityRoots believes it can cut the cost of borrowing for hoteliers and create excellent investment opportunities for individuals.
EquityRoots focuses on a narrow niche of investment opportunities. All the investment options surround opportunities branded hotels such as Holiday Inn or IHG. Some investments involve loans to franchise owners looking to build or renovate. Other opportunities include buying equity in a specific franchise location or in a piece of land.
What Does It Offer?
EquityRoots makes it easy for investors to issue loans or buy equity stakes in branded hotel projects. Because EquityRoots focuses on the hotel niche, it only advertises a few investment opportunities at one time.
However, EquityRoots gives a ton of information on each opportunity, so investors can feel better equipped to make their investment decisions.
Pick And Choose How Your Money Is Invested
Investors can review and invest in individual hotel projects. EquityRoots shares the entire business plan, the expected internal rate of return, and the expected holding period for the project. Investors can do thorough research through EquityRoots before putting money into a project.
Highly Illiquid Investments
Investments in EquityRoots do not have a well-advertised secondary market. Depending on the terms listed in the Private Placement Memorandum of each deal, investors may be able to sell shares to other people or participate in some form of buy-back.
However, most equity investors will not see a return on their money until after a sale has been executed. Currently, the three deals that are listed on EquityRoots' site have holding periods of 28 months, 5 years, and 10 years.
Investors who issue loans should expect to see cash flow from their investments. But they may not be able to “cash-out” their part of the loan early.
$15,000 Minimum Investment
EquityRoots advertises investment minimums ranging from $15,000 to $25,000. Given the high investment minimums, it may be difficult for investors to maintain a well-diversified portfolio of hotel projects.
No Fees Charged To Investors
Investors do not pay fees to EquityRoots. Instead, the hotel owners who are seeking funding typically pay the issuance and other fees on the loans or equity projects. Each deal on EquityRoots is structured differently, so investors need to read the Private Placement Memorandum (PPM) before investing in anything.
Investments Qualify For 1031 Treatment
EquityRoots supports 1031 property exchanges for landlords looking to reinvest funds from a property sale without incurring capital gains taxes. Their team can help you find out if your investment in one of their offering would meet the "Same Taxpayer Requirement" to take advantage of this tax perk.
Are There Any Fees?
EquityRoots does not charge fees to its investors. Hotel owners looking to acquire capital will pay the fees associated with business loans or capital projects.
How Do I Contact EquityRoots?
Headquartered in Illinois, investors can send mail to EquityRoots HQ location:
3 Dani Ln
Schaumburg, IL 60173
Investors who want to get in touch with the EquityRoots team can also reach out using several different methods. The company’s "Our Team" page displays the email addresses of the entire executive team. For general inquires or support, investors can email firstname.lastname@example.org.
You can also call the company’s customer service team at 312-483-2200.
How Does EquityRoots Compare?
EquityRoots operates within a narrow niche (hotel debt and equity financing). This narrow focus gives EquityRoots an advantage when it evaluates specific investment opportunities to display on the site.
Since hotel financing is a relatively unknown marketplace, EquityRoots has a “first to market” advantage. And it does a great job showing investors how they can think about hotel investing. Because of this, EquityRoots compares positively against other crowdfunding real estate sites.
However, EquityRoots has one drawback compared to the competition. Given its narrow focus, it has a paltry deal flow compared to other crowdfunding sites. Most crowdfunding real estate sites have more investment opportunities. If you'd like more deal volume or a better variety of offerings, check out this quick comparison chart:
1% to 1.25%
Open To Non-Accredited Investors?
How Do I Open An Account?
Investors can register to open an account in just a few minutes. Opening up an account will allow you to browse deals according to your registered status. Before investors can fund a deal, the investor must pass initial screening processes to ensure that they have attested to the appropriate registration status.
After investors have a screened account, they may begin to fund deals. Before funding, investors will receive a PPM outlining the specific risks of each deal. They will also be required to sign several documents. Once those are signed, the investor can fund a deal using ACH transfers. Fund money goes into a secured escrow account until the deal is complete.
Is It Safe And Secure?
EquityRoots forms a unique LLC for every deal it supports. This keeps each deal legally separated from the overall performance of EquityRoots and the other deals on its site. Each LLC uses escrow accounts to hold the money until a deal is funded and money is released for the investment project. These precautions can protect investors and borrowers that use the EquityRoots site.
Despite the precautions, EquityRoots cannot guarantee the performance of any investment opportunity. Investors may lose money.
Additionally, the company, like all companies, stores personally identifiable information on its servers. This means your information could be stolen by hackers in the event of a security breach.
Is It Worth It?
The deals listed have excellent target rates of return and thorough business plans which can give confidence to investors seeking hotel exposure. The real issue seems to be with the small number of opportunities on the site.
At the time of this writing, only 3 potential deals were listed. One was already fully funded and the other two were marked as "coming soon." This means that there aren't actually any deals that you can invest in at this very moment.
Combining the low deal availability with the five-figure investment minimums, most investors will end up over-concentrated in a few deals. This can lead to under-performance if any of the deals go belly-up.
Given the limited number of active deals on the site, it's hard to recommend EquityRoots as a great investment platform. But if the platform continues to grow and mature, it may be worth considering again in the future. In the meantime, you might want to browse our list of top real estate crowdfunding sites to find a better option for today.
Varies by deal
Open To Non-Accredited Investors
Hotel building and land investments
High -- Essential financial information is provided upfront and investors receive ongoing quarterly interest statements, periodic updates from hotel operators, and annual K1's.
Varies - current deals offer terms of 28 months, 5 years, and 10 years
Supports 1031 Exchanges
Share Redemption Program
Customer Service Phone Number
Customer Service Email Address
Mobile App Availability
Pricing & Fees
Ease of Use
EquityRoots is a crowdfunding platform that allows individuals to invest in branded hotels by lending money or purchasing equity shares.
- Thorough business plans for each deal
- No investor fees
- Supports 1031 Exchanges
- Open to non-accredited investors
- Investment minimums of $15,000+
- Extremely limited deal flow
- Long investment terms (up to 10 years)
- Investors may be unable to resell shares
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.