Frequently Asked Investor Questions
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.
- How does it work?
- What is the difference between EquityMultiple and a REIT?
- How is EquityMultiple different from other platforms?
- What is the minimum investment?
- What kind of returns can I expect on my investment?
- What are the terms of each offering?
- What are your fees to investors?
- What kinds of properties can I expect on EquityMultiple?
- Where can I find sponsor track record & past performance information?
- Can I invest with a self-directed IRA?
- How do I get started investing?
- What’s the difference between Preferred equity and Equity?
- Can I invest with my entity (trust, LLC, etc.)?
- How do you perform due diligence on your investment offerings?
How does it work?
We offer access to frequent and varied opportunities across the country, with investment minimums as low as $10,000. Our focus is on commercial real estate: the core asset classes of multifamily, office, retail, and industrial, as well as emerging and alternative real estate asset classes like self-storage, manufactured home communities, and student housing.
- Each investment is sourced and diligenced by an experienced sponsor or lender before coming to EquityMultiple.
- We then vet the sponsor or lender before reviewing the details of the particular investment opportunity.
- For those offerings that survive this process, we present the relevant investment information clearly and transparently and are always available to answer questions. We offer opportunities across a variety of markets, asset types, and return profiles so you can better meet your investment goals and diversify the real estate portion of your portfolio.
- Once you decide to invest, you’ll be able to complete the entire process on our platform through your computer, tablet, or phone – providing personal information, electronically signing documents, and linking your bank account to send and receive funds. Once complete, you can monitor your portfolio and will receive earnings and updates as they come in.
What is the difference between EquityMultiple and a REIT?
There are several key differences:
1) REITs only allow you to invest in a pool of real estate assets, frequently without knowing what the underlying assets are or will be, while EquityMultiple offers transparency and control over each investment you make;
2) REIT fees can be particularly onerous, up to 15% for private REITs;
3) 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). Ultimately, REITs and offerings on EquityMultiple are very different financial products that both are tied to the real estate industry and there is room in many investor portfolios for both. For more on the topic, please review this article.
How is EquityMultiple different from other platforms?
While there are several established platforms for real estate investing, we offer a unique approach and a management team with far-reaching industry experience. We focus almost exclusively on institutional commercial real estate (whereas other platforms feature single-family and sub-institutional properties) and offer a range of opportunities across the country from experienced lenders and sponsors. We are also one of the few that offers equity, preferred equity, and senior debt investments, letting investors select the types of investments that fit their investment goals, and build a diversified real estate portfolio all within the EquityMultiple platform. Recently, EquityMultiple has also added tax-advantaged real estate investments (Opportunity Zone and 1031 Exchange) and Fund products, providing an even greater set of diversification options for our investors.
Investments on our platform are generally focused on strong cash flow and all payments and updates are centrally managed and administered by EquityMultiple.
What is the minimum investment?
The minimum is usually $10,000-$20,000 but will vary from offering to offering.
What kind of returns can I expect on my investment?
Anticipated returns will depend on the risk profile of each transaction and the terms of the offering. For our Real Estate Team to consider an investment for the platform, the forecasted returns must fall within our target ranges, which vary by investment structure. All annual rates of return and preferred returns presented on the platform are net of all fees. These targets are:
- Senior debt: 7-12% annual rate of return;
- Preferred equity: 7-12% current preferred return, 11-17% total preferred return;
- Common equity: IRRs (internal rate of return) of 14% or higher.
Tax-advantaged and Fund investment products may entail a more varied range of potential return objectives. To explore these options in-depth, please schedule a call with our Investor Relations Team.
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 are the terms of each offering?
The terms of each offering are specific to that investment, will depend on whether the offering is debt, preferred equity, common equity, a 1031 Exchange, an Opportunity Zone Fund, or another kind of Fund structure, and will vary based on the contractual terms negotiated with the Sponsor or Lender partner on the offering. Details of each offering’s structure can be found on the offering page for that investment, 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.
What are your fees to investors?
EquityMultiple presents all fees associated with each investment offering, in full transparency, within investor documents found at the bottom of each offering page.
Generally, EquityMultiple will take a small rate spread on preferred equity and debt investments and a small asset management fee for each common equity investment. For a detailed discussion of fees, please refer to this article.
What kinds of properties can I expect on EquityMultiple?
We offer commercial real estate investments managed by experienced companies and overseen by our in-house team.
We offer a range of property types, including (but not limited to):
- Car Wash
- Cannabis Facilities
- Opportunity Zones
- Senior Living Facilities
- Student Housing
- Data Centers
Along with these, we offer a range of investment structures, including debt, preferred equity, equity, fund investments, and tax-advantaged real estate investment offerings. Our core operating principal is to partner with quality real estate firms, then conduct extensive, rigorous diligence on each potential investment. This holds true across any property type or business plan that we may consider.
Where can I find sponsor track record & past performance information?
EquityMultiple conducts extensive due diligence on sponsors and lenders as part of our underwriting of each and every investment offering. We only partner with real estate firms that possess an extensive track record, particularly within the project type that is being considered. We typically will present background on the sponsor or lender’s past projects and realized returns in the ‘Sponsor’ or ‘Lender’ section of the offering page and/or within the Documents section. For information on the aggregate performance of the EquityMultiple portfolio, please refer to our Track Record.
Can I invest with a self-directed IRA?
Yes, the EquityMultiple platform allows for creating an IRA account to invest in our offerings. We are partnered with Millennium Trust and Alto to offer investments via self-directed IRAs. We are also able to work with certain other SDIRA custodians, as a growing set of self-directed IRA custodians continue to work towards making the process of accessing alternative investments smoother and more efficient. We will continue to partner with a growing set of IRA custodians.
How do I get started investing?
After initial signup and qualification on our platform, you will have the opportunity to create an investment account by linking a bank account. Once your investment account is set up and linked you can decide to invest in any of the live offerings on the platform. Review current offerings and decide what type of asset class, location, potential return, and position in the capital stack before making your first investment. Once you decide which investment to move forward with, you can initiate the process by indicating your desired investment amount, reserve your spot by signing investor documents, and fund your investment to finalize. Our Investor Relations team will provide updates and timelines to ensure that you know when to fund in order to finalize your investment. For more, please refer to our article on investment statuses.
What’s the difference between Preferred equity and Equity?
Preferred Equity is a class of ownership that has a higher claim on the assets and earnings of a property than common equity, but is subordinate to senior and junior debt. Preferred equity holders have a preferred right to payments over regular (common) equity holders. For preferred equity real estate investors, this capital structure provides the opportunity to capture a fixed rate return with priority of payment and some upside.
Common Equity is the riskiest and most profitable portion of the real estate capital stack. Typically the developer or sponsor will be required – by the lender and/or by other equity investors – to invest their own money as some portion of the equity to have “skin in the game”. Equity investments carry the greatest risk, because investment agreements entitle every other tranche of capital to be repaid before common equity holders. However, if the property does well equity investors usually have no cap on their potential returns. In real estate, equity is typically structured so that all investors earn a preferred return until they hit a certain annual return hurdle (i.e., 8%). For profits beyond this hurdle, the developer will earn a disproportionate share of the profits (i.e., 40% of all the remaining profit), while investors receive the rest of what’s left pro-rata.
To learn more about the positions in the capital stack, refer to this article.
Can I invest with my entity (trust, LLC, etc.)?
Yes, you can invest through a LLC, LP or Trust or with a joint beneficiary. 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 accredited in order to invest on EquityMultiple.
Setting up a joint account can also be easily completed all online 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.
How do you perform due diligence on your investment offerings?
At EquityMultiple, we believe our extensive underwriting measures to be an essential pillar of our value to investors. While some platforms merely act as posting marketplaces, we perform substantial diligence on potential investment opportunities, and on the real estate companies that brought us the investment. And, for each potential offering, we also examine the sponsor or lender’s own underwriting of the offering, verifying that it was done conservatively, thoroughly, and expertly. All of this amounts to a rigorous gauntlet of due diligence that you can imagine as a funnel; only a select few investment opportunities make it through these multiple layers of diligence, and ultimately get featured on the EquityMultiple platform.
Below is an abbreviated list of key underwriting items in our multi-layer diligence process:
Analyzing all of this information can take several weeks. Fortunately, a number of our partner real estate companies – with whom we’ve worked on several projects – are able to quickly furnish much of this information, streamlining the process.
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 email@example.com or schedule a call to talk more in-depth.
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