Crowdfunding Site Suggestions?

Question

I am curious to what some of your favorite real estate crowdfunding sites are? I'm a non-accredited investor and am looking to diversify a little money. Probably in the 5k range. I would love to hear some positive and negative feedback about different sites. Thank you!

Andrew Postell · Answer

@Kenny Buyers you might get some responses here but try posting this in the "crowd funding" forum.  Bigger Pockets has an entire forum just for this topic alone.  Just a suggestion.

Jayman Petel · Answer

Speaking of crowd funding. Realty Shares recently went under! Found an interesting article on Realty Shares.

https://www.financialsamurai.com/the-sad-demise-of-realtyshares-whats-next-alternatives-and-lessons/

Very helpful important information under, "Some Learning Points"

Jayman Petel · Answer

Blackstone Real Estate Investment Trust, sound great. However, potential investors should be mindful of their fees which can be very high! Now I am not saying that fees by themselves, should or would be a deterrent. However, they are usually a significant factor when considering any type of investment!!

Just my 2c!

Thank you

John Fortes · Answer

I personally haven't dabbled in any of the crowdfunding platforms but I have a partner that has and he's just dipped his toe in it to test it out.

Ian Ippolito · Answer

@Jayman Petel,

>>In my previous reply, I referred to the BREIT I-class shares which are for accredited investors!

No, BREIT is not an accredited offering. It is a non-accredited offering. See suitability standards here: https://www.breit.com/about-breit>>Class I shares require a minimum of $1Million, which would imply that the investor would be an accredited investor or at least is being treated as such by BREIT at least for fee purposes!!

No. And as I said earlier there are ways to get access to the I Shares at far less. This is done by going through a broker or advisor who has accumulated $1million through other clients, because it counts in aggregate. So the one I know of, offers I-shares access for just $25k.>>The Advisor Fees, even for Class I shares look high to me!! If others don't think so, then more power to them!I look at more than a hundreds deals a month. In my experience, the average management fee on an accredited deal (which again have better terms for investors than non-accredited offerings like this one) is about 1-1.5%. This is 1.25% which is right in the average. The average split on accredited deals is about 15 - 25% to the sponsor, and this is 12.5%. Again right in the middle of average.The typical performance hurdle on accredited deals is 5% -8%. This is 5% which again is within average. Plus with more conservative investments, they don't have high returns, so typically the performance hurdle will be lower. This is a core plus investment, so it should not be compared to say value-added or opportunistic investment which would need to have a higher hurdle to compensate the investor for taking higher risk.

Jayman Petel · Answer

In my previous reply, I referred to the BREIT I-class shares which are for accredited investors! Having said that, the table below shows the fees for BREIT. The advisor fees apply to all classes of shares (correct me on this if I am wrong!!), including Class I. Class I shares require a minimum of $1Million, which would imply that the investor would be an accredited investor or at least is being treated as such by BREIT at least for fee purposes!!

The Advisor Fees, even for Class I shares look high to me!! If others don't think so, then more power to them!

Ian Ippolito · Answer

@Jayman Petel,  I’m not sure if you realize that management fees and/or performance splits are pretty standard on even (cheaper) accredited offerings, let alone a non-accredited offering (which tend to have higher costs).

If you are looking for a non-accredited offering that doesn’t have these things, you may be looking for a very, very long time.

Jayman Petel · Answer

Appreciate the offer. However, for me personally, there are too many numbers to crunch with BREIT. No doubt they seem to have an impressive management structure and a further impressive set of investments. The 1% per year, for I-class shares, does not appear to be the only fee associated with BREIT. They also seem to have the following which don't appear to be optional fees and may not have a workaround.

ADVISOR FEES

Management fee: 1.25% per annum of NAV, payable monthly

Performance participation allocation:

12.5% of the annual total return, subject to a 5% annual hurdle amount and a high water mark (Granted that it may not be 12.5% every year due to the 5% annual hurdle but this still seems high to me.)

Thank you

Ian Ippolito · Answer

@Jayman Petel, yes BREIT  can have very high fees if you purchase certain share classes. On the other hand  if you already are a member of an alternative investment platform through Fidelity or Schwab etc. they often will give you access to lower fee share classes.

Also, the I-class (institutional) shares have the very lowest fees.  True: typically they require a $1 million minimum, but there are other ways to access it. For example, I know of a broker who charges a modest fee of around 1% per year to access at only $25k minimum. If you’re interested, private message me and I will give you their contact info.

Crowdfunding Site Suggestions?

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