When it comes to crowdfunding, the focus has generally been on investing in early-stage startups, but there are emerging platforms that are moving into other asset classes. An example is real estate, which is definitely a massive category and offers the potential for standout returns. And a leader in the space is Realty Mogul.
Founded in 2013, the company has gone on to build a membership base of 197,000. There has also been about $160 million paid out to investors since inception. So how does the company operate? What are the main functions? Well, let’s take a look, with a Realty Mogul review.
The founders include Jilliene Helman and Justin Hughes. Helman is a veteran of the real estate world, having underwritten over $5 billion in real estate transactions while she was a vice president at Union Bank. As for Hughes, he is a licensed real estate professional and managed his own web consulting business.
Yet the main inspiration for Realty Mogul came from Helman. Based on her experience, she noticed three factors in investment success: the wealthiest clients were in real estate, their income was not based on the time spent working, and the focus was on creating passive cash flows.
Yes, all this is spot-on, but of course, she saw a big issue: Private real estate investments were usually not available to the average investor.
Helman and Hughes knew that the Internet could be the way to democratize the asset class and to transform the market.
Realty Mogul reviews many real estate deals, which involves a painstaking due diligence process and data-driven approaches. The investments include both individual properties and REITs (Real Estate Investment Trusts) that can be for offices, retail outlets and apartments.
Here’s a look at the key steps in the process:
- Well-Managed Properties: Realty Mogul does not invest in construction projects or raw land. A property must have a set of solid leases that generate durable cash flows. To find such opportunities, there is a reliance on a set of trusted partners.
- Inspection: Next in the Realty Mogul review process is for a visit to the property. This involves an in depth scrutiny of the condition of the building and the surrounding area (yes, real estate is about “location, location, location”). After this, there are background searches, reviews of any litigation or potential litigation, reference checks and analysis of the property’s track record as well as comparable transactions.
- The Decision: While Realty Mogul certainly uses traditional methods, it has also created its own data-driven metrics. Note that only one deal out of 1,000 meets the firm’s standards.
Once a property is selected and listed, it is available for investors to participate. There is also access to the due diligence materials and legal documents (which can be signed securely). Since the founding, the marketplace has facilitated more than $500 million in financing for over 400 properties.
Next, Realty Mogul also has a service that allows real estate companies to use the online system to raise their own equity for transactions.
Takeaways: Realty Mogul Review
Unfortunately, with the novel coronavirus, there has been an adverse impact on the real estate market.
Nonpayments for rents have been spiking across many sectors and the sales of properties have plummeted, as it is difficult to arrange transactions. There also has been a freezing of much of the equity and debt financing sources.
In other words, at least in the near-term, the market is likely to be challenging.
Then again, this points out why it is important to have diversification and experienced managers when it comes to real estate investing. And there should also be compelling opportunities for investors, especially as valuation will be under pressure and the terms less restrictive.
Tom Taulli (@ttaulli) is an advisor and author of various books and online courses about technology, including Artificial Intelligence Basics, The Robotic Process Automation Handbook and Learn Python Super Fast. He is also the founder of WebIPO, which was one of the first platforms for public offerings during the 1990s. As of this writing, he did not hold a position in any of the aforementioned securities.