Real Crowd - Real Esate Crowdfunding Platform Answers Investors Questions

1.      Do you use 506b or 506C regulations and why that one over the other?

All of the investments on the RealCrowd platform are currently structured as a 506(c) offering. This is due to the fact that we do not act as the issuer of the securities being offered – the real estate operator themselves are the issuers and the investors are investing directly in the assets with the real estate operators. We feel this is the most efficient way to make direct investing in real estate accessible to retail investors. Creating intermediary entities introduces unnecessary weight and complexity to the private capital raising process that we feel is inefficient.

2.     What fees do you charge the investors and sponsors? (% ranges for up front and annual fees)

We do not charge the investors anything to invest through our platform. We charge the real estate operators a flat fee (ranging depending on what level of services they choose) to utilize our platform and manage their investors.

3.     What is your due diligence process for investments that are listed on your portal?

Our process is focused primarily on the operating partners themselves. We run a screening process which includes review of their track record, prior operating history, review of any prior foreclosures/bankruptcy’s/litigations etc. They must all meet our minimum required standards of 10 years of principal level experience and a minimum of $50M of assets under management. Our current operating partners have an average of $690M of real estate assets under management and a combined average experience of 56 years.

4.     How much VC capital have your raised to date?

We have raised a $1.6M seed round after exiting the YCombinator program in August ’13.

5.     What safeguards are in place for your investor’s money if your platform is forced to shut down?

One of the main benefits of how RealCrowd operates as a platform is that there would be no disruption to investors’ money if we were to shut down. When you invest through RealCrowd, you are investing directly with the real estate operator – not in a startup fund of funds manager. We feel that is an unnecessary risk and investors should have access directly into ownership of the assets, not in a fund that is controlled by a crowdfunding company.

6.     Is your platform associated with a registered broker? (why or why not)

We are not affiliated with a registered broker/dealer as there is an exemption to register as a broker dealer for portals as defined in the JOBS Act. We feel this is the most efficient way for us to operate at this stage.

7.     How do you verify if an investor is accredited?

Part of the difference from a 506(b) and a 506(c) offering is the higher standard for determining accreditation for investors. We take this very seriously and have a multi step process in place to verify the accredited nature of the investor.

As a first step before any investor can view the full offering materials or make a commitment to a project, they have to complete a self-certification. Once an investors makes a commitment to a project, if they have not previously verified with us before, we take one of the following steps:

·       Third party certification – here a broker/dealer, Registered Investment Advisor (RIA), a Certified Public Accountant or attorney can sign a letter, on behalf of the investor, that they have taken “reasonable steps” to verify that the investor is accredited.

·       Income – we will collect appropriate tax documentation (1099’s, W-2’s, K-1’s etc) along with a certification from the investor that all information is accurate and complete

·       Net Worth – we will collect appropriate statements of net worth (bank balance statements, brokerage account statements etc) and have the investor either provide a credit report or authorize us to pull a credit report as well as a certification that all information is accurate and complete.

Once we have performed one of those methods of accreditation we will provide a certificate to the real estate operator outlining the investors in the project and which method we utilized to accredit them. Ultimately the decision falls upon the issuer as to whether or not the reasonable steps have been taken, so we do provide them with all of the back up documentation.

We take the accreditation process very seriously as we fully understand the ramifications if errors are made in the process. As stated earlier, when a general solicitation is made, a self-certification alone does not qualify as a sufficient process to determine accreditation status.

8.     What is the investment minimum for your platform?

This varies by project and is determined by the real estate operator. Minimums have ranged from $10k to $50k, but most have been around $25k.

9.     How often are updates on investments?

This also varies by operator, but at minimum most are updated quarterly with distributions occurring either monthly or quarterly as well.

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Top 5 by Overall Rating


CrowdStreet

Website - CrowdStreet

Phone888 432-7693

SEC REG - USES 506(c) - Open Investments can be advertised and publicly discussed

CrowdStreet allows accredited investors to purchase real estate investments through their platform. Investors can from a wide variety of choices, sign legal documents online and maintain their portfolio. Unlike many sites, CrowdStreet features both debt investment and equity opportunities. These include a wide variety of projects including retail, office, industrial and land.

CrowdStreet reviews every potential opportunity and rejects those that do not meet their strict standards. At this time only accredited investors can look at the investments on CrowdStreet.

Usually, these are wealthy individuals interested in real estate investments, but are interested in combining their resources with other investors. The site benefits accredited investors because now they can see opportunities that were potentially only available to institutional investors were private individuals.

Because they provide wide access to new opportunities, a larger pool of real estate options becomes available. Investors can put their money into a variety of properties across a wide geographic range with a small capital outlay.

Investors see a return on their investment when CrowdStreet distributes the money. Distributions depend on whether the investor has selected equity, debt or a form of hybrid investment. Investors receive distributions in the form of a share of profits for equity investors. Debt investors receive their distribution at a previously agreed-upon interest rate. Both investors would also receive distributions when a property is sold.

There is no fee to join the platform and get involved with investment opportunities. There is a minimum investment for individual opportunities, and some are very low-- in the area of $10,000.

CrowdStreet may open their platform to nonaccredited investors in the future depending on the outcome of the Security and Exchange commission's decision on updating regulations of the JOBS Act.

 

CrowdStreet announced in September of 2014 and they had received $800,000 in seed funding from a group including Green Visor Capital and Seven Peaks Ventures with additional participation from the Portland Seed Fund. They have posted real estate properties worth more than $100 million.

 

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Real Crowd

WebsiteReal Crowd

Fees - NONE

Phone800-286-1602

SEC REG - USES 506(c) - Open Investments can be advertised and publicly discussed

Real Crowd is a private, secure, and simple-to-use online platform for accredited investors to assess, review, and invest in commercial real estate opportunities across the nation. It gives investors the tools to browse, compare, and invest with real estate companies. The company was founded by four real estate experts in Silicon Valley. Adam Hooper, Roman Rosario, JD Conley, and Andy Norburg started the company in February 2013. It was built on the Founders' collective capital which was obtained from quality underwriting and transaction experience. Because of their years in working with the best real estate operators, the founders bring consistent and attractive deal flow to their customers.


This company is ideal for accredited investors seeking to diversify their investment portfolio with real estate. RealCrowd is free for investors. By simply creating an account on their website, investors can be connected to the best private real estate companies that are looking for new partners. These private real estate companies pay RealCrowd in order to use the company's platform while investors are not charged.

RealCrowd has been involved in the successful funding of over $110M in deals throughout its platform. What sets this website apart from others is that it is one of the most active institutional-quality commercial real estate investment platforms in the United States. RealCrowd provides access to industrial, retail, cashflow, and multi-family investments from coast to coast. Deals are done from San Francisco to Colorado, Arizona to Washington. RealCrowd’s platform is built around SEC Rule 506(c). To date, RealCrowd has raised over $1.6M in the real estate industry. Investors include Y Combinator, DCVC, Initialized Ventures, Andreessen Horowitz, and General Catalyst.

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Fund That Flip

URL - Fund That Flip

Fees - 2% to 4% loan points as an origination fee deducted from loan funds at loan closing, plus 1% to 3% interest rate spread taken from loan repayments over the course of the loan. There is no cost for investors to sign up and review deals.

Phone - (646) 895-6090

SEC REG - USES 506(c) Open Investments can be advertised and publicly discussed

Fund That Flip specializes in funding the rehabilitation of homes by re-developers. All funding is by debt, not equity investment. Investors are secured with a first-position lien on the underlying real estate.

Loans are given only to qualified re-developers with a minimum of six successfully completed previous projects. The minimum equity investment required of the re-developers seeking the loan funds is 20% of the real estate property's acquisition cost. In some cases, this requirement may be higher. Up to 100% of the construction costs are financed, with holdbacks that are released upon successful achievement of construction milestones, subject to physical inspection. Loan-to-value must be less than 65% of the value of the property after repairs are made.

Investors invest in a Borrower Dependent Note (BPN). This is a security issued by Fund That Flip, which represents a debt investment in the fund. The proceeds less the transaction fees of 2-4% are used to invest in a first-position mortgage note on the property. Investors invest in a specific loan on a specific piece of real estate for a specific borrower. The performance of the investment is directly correlated with the performance of the underlying borrower note (mortgage). Annual returns for investors are in the range of 8% to 14%. There is no indication of how much they have raised so far. The minimum investment is US$5,000.

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Equity Multiple

Website - EquityMultiple.com

Fees - .5% annual asset management fee on equity + 10% carry

Phone - (646)-844-9943

SEC REG - USES 506(c) - Open Investments can be advertised and publicly discussed

EQUITYMULTIPLE is the only online investing platform backed by an established real estate company - Mission Capital, a leading national real estate capital markets firm. Since 2002 the firm has advised and managed transactions across commercial and residential loan sales and arranged project financing.
Our national network of real estate companies is constantly seeking opportunities across the country and across property types. They diligence each project and invest with their own funds, aligning their interests with EQUITYMULTIPLE investors and providing a first layer of diligence. 
For projects that survive initial due diligence, we stress test underwriting assumptions, review key legal documents and third party reports and consider transaction structure. A select few are presented on our platform.

We strive to:

Offer a highly curated set of deals, presented comprehensively and transparently
Collaborate with the sponsor or lender to optimize risk-adjusted returns for our investors
Ensure that all investor questions get answered by our dedicated team of investment specialists

Once an equity investment has been made, EQUITYMULTIPLE charges investors a small annual fee — typically 0.5% of the aggregate amount invested — that is paid periodically to cover ongoing investor reporting, tax preparation and communications relating to the investment. EQUITYMULTIPLE also receives 10% of investor profits after investors have received all of their initial investment back.


For preferred equity and debt investments, EQUITYMULTIPLE typically takes a servicing fee in the form of a “spread” between the interest rate being paid by the sponsor or originating lender and that being paid to investors. EQUITYMULTIPLE also generally charges the lender an origination fee and other charges typically associated with initiating a real estate loan or preferred equity investment. In the event of default, extension or other special circumstances, certain fees and charges payable by a borrower or Sponsor will be shared among EQUITYMULTIPLE and investors, as such situations involve increased servicing duties on the part of EQUITYMULTIPLE. Details as to such fees and sharing arrangements can be reviewed in the applicable investment documentation.

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Yieldstreet

Website - Yieldstreet.com

Fees - 1-4% annual management fee

Phone844-943-5378

SEC REG - USES 506(c) - Open Investments can be advertised and publicly discussed

YieldStreet’s technology connects investors to asset-based opportunities presented by best-in-class originators. And, its as easy as buying stocks.

YieldStreet investments are debt based alternative investments. YieldStreet Originators take out a loan for a project or need that is collaterized by an underlying asset the originator has, such as a real estate property or legal settlement.

Our offerings currently concentrate in three primary alternative asset classes; real estate, litigation finance and commercial finance. You can learn more about each of our asset classes on YieldStreet University. YieldStreet seeks investment opportunities that provide investors with low correlation to the broader stock market, and target annual yields between 8-20%.

As originators make principal and interest payments during the term of their loan, distributions are paid out directly to investors in the offering.

All YieldStreet offerings are asset-based, meaning your investment is backed by strong collateral such as vehicles or real estate. This collateral acts like insurance in the rare case a borrower defaults.

Our team does an initial review of the opportunity according to the five criteria set in our Investment Philosophy:
Asset-based with strong collateral
Low market correlation
Established asset managers
Short duration (1-3 years)
Attractive yield (8-20% annual target returns)

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