Frequently Asked Investor Questions

February 14, 2020
By EQUITYMULTIPLE Staff

EquityMultiple provides the tools and resources to help you make informed decisions, and take an active role in your alternative asset portfolio allocation. While EquityMultiple streamlines the investing process for accredited individuals, investors may still have questions regarding the platform, the types of real estate investments we present, and commercial real estate investing in general. 

Please have a look through our frequently asked investor questions, compiled from discussions with thousands of investors all across the U.S. As always, we welcome any further questions you may have.

What is EquityMultiple, and why should I use it to invest in real estate?

EquityMultiple is a commercial real estate investment and technology firm that provides accredited investors access to professionally managed, private real estate transactions across property types and risk profiles. EquityMultiple’s mission is to make real estate investing simple, accessible, and transparent. To date, EquityMultiple’s investors have participated in over $3 billion in commercial real estate transactions through its online investing platform. The firm pairs innovative technology with real estate experience and industry-leading investor services to offer an unparalleled investing experience.

We help self-directed investors build a more diversified portfolio, offering rigorously vetted, passive real estate investments for as little as $5,000.

How it Works: We offer robust in-house underwriting and a seamless investing process, which allow accredited investors to participate in direct real estate transactions and real estate funds alongside experienced sponsors and lenders. Our offerings span a variety of markets, asset types, and return profiles so you can meet your investment goals.

For more on the landscape of modern real estate investing, and where EquityMultiple fits in, please consult our learning series. More information regarding the historical performance of EquityMultiple investments can be found on our Track Record page.

How does EquityMultiple compare to other real estate investing platforms?

Diverse offerings: We are one of the few platforms that offers equity, preferred equity, and senior debt investments, letting investors select the type(s) of assets that fit their investment goals. We generally focus on the mid-market, commercial real estate space, with investments reflecting a diverse array of multi-tenant properties. Investments on our platform are generally focused on strong cash flow and all payments and updates are centrally managed and administered by EquityMultiple.

Experienced team: We offer a unique approach and a management team with far-reaching industry experience.

Industry-leading customer service: We are committed to transparency, attentive customer service, and thorough asset management updates throughout the life of investments.

For more on how we’re different, please see this article.

What’s the difference between investing through EquityMultiple and investing in a public REIT?

Public REITs are publicly traded and thus offer some liquidity that EquityMultiple investments do not. The downside of this exposure to the public markets is that the value of REIT shares is less associated with the underlying real estate because it is subject to market sentiment fluctuations. This market correlation limits the effectiveness of public REITs as a hedge against other public market investments (i.e., stocks).

EquityMultiple partners with leading real estate investment management companies to offer access to non-traded REITs and other real estate funds. This can be a great choice for investors seeking the instant diversification and flexible redemption options REITs typically offer. For more on the topic, please review this article.

EquityMultiple also offers the opportunity to invest directly in distinct properties, each with its own investment thesis and return profile. With low minimums and diverse deal flow, this approach allows investors to pursue the passive diversification of a REIT while benefiting from the transparency and control of direct real estate investment.

EquityMultiple and REIT's Comparison Chart

What kinds of offerings can I expect on EquityMultiple?

Apartment Building   Apartment Complex   Office Space

EquityMultiple offers a diverse mix of direct, fund, and tax-deferred commercial real estate investments from different property types and locations. Our offerings span the full capital stack and a variety of risk/return profiles. All investments are managed by experienced companies and overseen by our in-house Asset Management Team.

Does EquityMultiple offer tax-deferred investments?

EquityMultiple constantly updates our offerings page with the latest investment opportunities, including tax-deferred investments. Tax-deferred offerings generally carry a higher minimum investment and may not always be available, though our Investments Team is privy to tax-deferred opportunities on a regular basis. If you are curious about tax-deferred opportunities, please reach out to ir@equitymultiple.com.

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How long will it take to sign up on EquityMultiple?

Setting up an account with EquityMultiple is fast and easy. To get started, click here to sign up and you will be able to access your investor portal in 5 minutes or less. Once your account has been qualified, you can immediately begin browsing current offerings or set up an investment account. You can review diligence information, ask questions and, if you decide to invest, complete your funding online.

Creating an account does not obligate you to any further action, and provides you exclusive access to EquityMultiple’s investment opportunities.

Can I invest through my IRA?

We are able to accept funding from several self-directed IRA custodians. To invest with an IRA, you can complete an IRA investment account from the “My Accounts” section of your investor portal. To see the list of IRA custodians we are able to accommodate, please refer to the IRA account sign up page.

Can I invest through my LLC, LP or Trust, or with a joint account?

Investing with an LLC, LP or Trust:

Once you sign up for EquityMultiple, you’ll be able to create an account for your entity or trust by providing us with appropriate information and documentation through the platform. Once you’ve completed account setup, you’ll have the option of investing through your entity or trust each time you make an investment. Like individual investors, an entity or trust must be an accredited investor in order to invest on EquityMultiple. Generally speaking, each owner of an entity, or each beneficiary of a trust, must themselves be an accredited investor, or else the entity must have total assets in excess of $5,000,000.

Investing with a joint account:

Setting up a joint account can also be easily completed through the platform. We’ll need to collect information about you as the primary account holder and certain additional information about the joint account holder. The joint account holder will need to electronically sign a limited power of attorney authorizing you to make all decisions regarding your EquityMultiple joint account. This can all be done online via the platform.

What is the minimum investment amount for projects offered on EquityMultiple?

The minimum will start as low as $5,000 but will vary from offering to offering. The investment minimum typically ranges between $10,000 – $30,000. Additional shares are typically offered in increments of $5,000 above the minimum.

What fees are associated with my investment?

Common equity: For common equity investments, there is an annual monitoring and reporting fee on the amount of your investment. This fee is generally between 0.5% and 1.5% of invested capital. Typically, we also hold a profit participation, but only after you’ve received a full return of your invested principal and the IRR hurdle is achieved. This backend compensation helps align our interests with our investors.

Debt and preferred equity: For debt and preferred equity investments, we typically charge a Servicing Fee which is typically 1% but may be more or less. Please note that the Preferred Return displayed on the offering materials are generally net of the servicing fee.

Funds: Our fund offerings typically entail an Origination Fee as well, which is typically paid upfront, and is specified with each offering.

For all offerings, EquityMultiple is entitled to deduct an Administrative Expense to cover tax document creation, annual filings, and entity formation. This fee is split between all investors, and typically ranges from $30-$70 per investor annually.

Please refer to the Financials and Structure section of the Offering Summary page, and Investment Summary section of the Investor Packet for more comprehensive information on fees. For more on the topic, please refer to this article.

What value does EquityMultiple bring to justify its fees?

We vet lenders and sponsors, in addition to performing deal-specific diligence on each investment from select lenders and sponsors, thus providing investors multiple layers of diligence.

We then provide vigilant asset management services throughout the lifetime of each investment, including asset monitoring; delivery of distributions; preparation of tax documents; and the management of any workouts or asset restructurings that may become necessary in certain cases. In short, EquityMultiple works to protect your principal, maximize your returns, and simplify your real estate investing experience.

Our secure platform offers investors an easy, closed-loop investing process and asset monitoring throughout the lifetime of projects.

What returns should I expect, and where can I find return information?

Anticipated returns will depend on the risk profile of each transaction and the terms of the offering. In order to consider an investment for the platform, the forecasted returns must fall within our target ranges, which vary by investment structure. These targets are:

  • Debt: 7-12% annual rate of return;
  • Preferred equity: 6-12% current preferred return, 10-18% total preferred return;
  • Common equity: IRRs (internal rate of return) of 10% – 24%+
  • Funds: Depends on the fund strategy (core, core-plus, value-add, optimistic, distressed). We typically seek to source fund investments that offer predictable, near-term cash flow.

All annual rates of return and preferred returns presented on the platform are net of all fees. While we model returns conservatively, and do extensive underwriting on each offering before putting it on the platform, it’s important to note that all investments carry risk. Be sure to review the specific set of risk factors for each offering you consider.

Investor Packet – Offering Summary Page – Pro Forma

Disclosure: Actual returns will vary and there can be no assurance that an investment’s actual performance will lead to the targeted results or perform in any predictable manner. Past performance is no guarantee of future results, and any target may not reflect actual performance.

What is the difference between a current return and accrued return?

Preferred equity investments often feature both a current and accrued return. While current returns are expected to be paid monthly from the onset of the investment, accrued returns accumulate over time and are paid at exit. Please see this glossary article for further information about accrued interest.

I don’t see any return projections. Where can I find out more? 

The details of each offering’s structure can be found on the offering page for that deal, as well as in the Offering Listing Summary, which is at the beginning of the Investor Packet, found via the “Documents” button at the top of each offering page. In the case of a common equity investment, details of how profits are split between investors, the project Sponsor, and EquityMultiple can also be found in this documentation.

When can I expect a return on my investment?

Distribution schedules vary by deal and are typically either monthly or quarterly. Debt investments typically offer a fixed monthly rate of return throughout the loan’s term and a return of principal at maturity of the loan. Similarly, preferred equity investments offer a fixed quarterly or monthly rate of return throughout the term of the investment and may provide for an additional accrued return when the investment is paid off and principal is returned. Common equity investment  cash flows are generally not fixed and their frequency and amount will vary based on the performance of the underlying investment.

The timing of distributions from Fund investments will vary by offering, but most often be quarterly.

While we hope you have found this abbreviated set of investor frequently asked questions valuable, we encourage you to review our full FAQ section for any other remaining questions you might have and explore our Investor Resource Center for more articles on Investing in the CRE space.

Our Investor Relations Team is also standing by to answer any questions. Please feel free to send us an email at ir@equitymultiple.com or schedule a call to talk more in-depth. 

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