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Disclaimer: All of the crowdfunding reviews are based on an unbiased matrix of criteria, each weighted based on what we deem important for a crowdfunding platform. We generated the ratings and then sought out the top platforms to affiliate with. If you click on any links on this page or website and then sign up for their service, we may be compensated slightly at absolutely no expense to you.
There are 80+ crowdfunding websites, and the majority of them aren’t really that good. But, most review sites simply pick the ones with the highest affiliate payout and rank them.
So, we’ve created one of the most stringent sets of grading criteria on the web for crowdfunding platforms and we review as many crowdfunding sites as we can.
This strict and well-documented methodology helps us avoid any potential conflicts of interest, and you can see the methodology with the link above. We have 11 overall categories and rank every company based on the information we have and weight the responses based on what we believe is most important.
So, check out the criteria and read the review below about the company and how it stacks up against its competition.
Realty Shares is an investment service that allows you to invest directly into institutional and sub-institutional quality real estate investments. In their marketplace, they offer both equity and debt investments with the goal of allowing average investors to invest alongside institutional money. Their goal is to provide the highest quality commercial real estate from around the country while making it simple and transparent for investors.
RealtyShares offers investments from coast to coast. Most other platforms are focused only in a few areas, but RealtyShares offers a geographically diverse investment platform. The image displays the deal volume in each geographic area.
Most crowdfunding platforms are focused on just one type of real estate such as fix and flip residential, commercial debt, or others. RealtyShares is one of the few platforms that allows an investor to broadly diversify their portfolio using only one platform. On their platform, you can invest in both equity and debt, and diversify across property types such as commercial, retail, residential and others.
RealtyShares is one of the few platforms that allows an investor to broadly diversify their portfolio using only one platform. On their platform, you can invest in both equity and debt. You can also diversify across property types such as commercial, retail, residential and others.
Overall RealtyShares touches upon almost every category that we believe is important. Specifically, though, their combination of low fees, diverse investment options in debt and equity as well as across a broad spectrum of property types is what gives them a high score.
The quickest way they could improve their score in our matrix would be to have some investment options for non-accredited investors. We understand that there are regulations and crowdfunding is a virgin area of real estate, but a couple of platforms do have options for non-accredited investors.
We sent an email requesting comment from RealtyShares. Their response was that one of their goals for 2017 is to provide a product for the non-accredited investors out there. It is now April 2018 and I haven’t seen this product yet.
One of the most important parts of a review of RealtyShares is to go over their investment screening and due diligence process.
The first step is the actual application for financing. They make the application process very quick, taking about 10 minutes or so. The reason the process is so simple is that it encourages companies to apply to the platform.
The more deals to choose from the better.
The applicants are then screened and prequalified. They have a number of criteria, but track record, financial strength, and expertise are key.
We run background and criminal checks on the principals of the sponsoring real estate company (or, for loans on the borrower / guarantor). “Bad actor” checks against SEC / FINRA databases are also run, and we generally review a sponsor’s track record of previous real estate transactions. Oftentimes there are minor blemishes on people’s records, but where there are material issues we demand letters of explanation to see if the issue merits heightened disclosure.
Probably the most important part of the due diligence is the review of the project. The image gives a rough idea of all the different things that need to be analyzed that aren’t obvious at first glance.
Generally, we look for certain minimum loan-to-cost (LTC) or loan-to-after-repair-value (ARV) criteria.
We review the sponsor’s offering memorandum (if applicable) and its renovation budget and timeline for the project. Also, we generally look at broker price opinions or comparable market analyses (if applicable), and review the lender application (for equity deals), along with property details and photos. We also look at the property’s purchase contract (or HUD statement, if the investment is to occur post-closing), and review a preliminary title report where available. If any of these items indicate material issues, we inquire further.
Detailed underwriting includes a review of investment strategy, financials, legal standing, and property condition/location
This is the last step. Only 5% of all deals make it through the steps and get listed for funding on the RealtyShares.com platform.
The fee structure of RealtyShares is pretty straightforward compared to some other platforms. For equity, RealtyShares usually takes 1% of the deal. For debt, they generally take a 2% fee from the interest spread (the difference between what you get and what the borrower pays).
Once an equity or preferred equity investment has been made, RealtyShares will usually charge investors an annual fee — typically 1% of the aggregate invested amount — paid periodically to cover ongoing investor reporting and communications relating to the investment. In addition, the funds raised will typically include a slight “over-raise” amount to cover initial legal fees related to the particular investment vehicle and other immediate transaction-specific expenses. Please review the applicable investor package and the operating agreement for the investment vehicle for details on such fees.
On debt investments, RealtyShares typically takes a servicing fee in the form of a “spread” between the interest rate being paid by a borrower and that being paid to investors. Certain fees and charges payable by a borrower in the event of default or other special circumstances will be shared among RealtyShares and investors, as such situations involve increased servicing duties on the part of RealtyShares. Details as to such fees and sharing arrangements can be reviewed in the applicable private placement memorandum and/or series note listing for a particular offering.
Their low fees are average to low for what other crowdfunding sites are charging.
Generally, payments from equity investments are paid quarterly while payments on loans are paid monthly.
Opening an account is very straightforward and takes about 2 minutes.
Although the signup is very quick and easy, you will immediately find out that you need to finish your investor profile and speak to a representative. If you don’t, you’ll have to wait 30 days before you can view the majority of their listed offerings.
It looks something like this:
Before you get through the cooling off period, you’ll only have access to some of the deals. After the 30 days or completion of your profile, you’ll be able to access all the deals and unlock the full potential of RealtyShares.
Taking a look at the deals, there is a good balance between equity, preferred equity, and debt deals. Also, there is everything from single-family to multifamily, self-storage to franchise development. Obviously, not every kind of deal is available at all times, but with 500 deals under their belts, you can bet that there is a good deal-flow.
As you can see, investing in the deal is barred because the account we used to review RealtyShares.com is still in the “cool off” period. But, we can still access all the deal details.
When you click on each deal, you’ll be brought to an overview page. You can also find the financials, info about the property and market. Also, there will be info about the management team and any documents that are pertinent (such as comps or the investor package).
You will receive quarterly distributions if the project has any profits to distribute. All you need to do is input your bank account information and you’ll receive your payments.
A more important question is, “when will I receive my money back”?
In any real estate deal, your investment is not liquid. The same is true here and I want to make sure I point out in this RealtyShares review that once you invest, you cannot receive your principal back until the deal sells.
It’s also important to point out that if the deal doesn’t do well, you may not receive your entire principal back (or any at all).
We won’t go into more detail on any one individual deal. If you want to learn more, go sign up!
How does RealtyShares compare in this review against others?
Well, at the time of writing there are 11 categories we rank them by. Here they are:
Our rule is the top 5% of sites will get a 5-star ranking, so RealtyShares is one of the best crowdfunding platforms that we review.
There are plenty of pros and cons to any crowdfunding platform, but RealtyShares does a good job balancing it all.
From equity to debt, residential to commercial, you can find just about anything you want on RealtyShares. Also, the platform has an amazingly large number of deals to choose from, meaning you can diversify into a broad range of investments, minimizing your overall risk.
Go and check out RealtyShares and set up your free account. It’s free and you can check out the platform even if you decide not to invest.
An investor that reached financial independence at the age of 30, Eric has been seen on Forbes, Trulia, WiseBread, TheStreet, and other financial publications.
I started out as a full-time student, over $60,000 in debt, and didn't even have a full-time job (two part-time jobs).
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