If you’re here, you’re probably aware that we’re not the only company seeking to make real estate investing more accessible via technology in the wake of the JOBS Act of 2012. Depending on your definition, there are anywhere from 15 to 100+ such sites transacting business online. If you’re here, you’re likely aware of, if not investing through, more than one of these platforms.
We’re not writing today to argue that EQUITYMULTIPLE is the only such platform worth a look. A number of companies in the space have built well-earned track records and, depending on the investor, there may be room in a portfolio for deals from several or many platforms. The aim of this article is to break down the major ways EQUITYMULTIPLE differs from other platforms.
What’s Distinct About EQUITYMULTIPLE?
Debt Syndication: A number of platforms offer individual debt deals that yield fixed, flat-rate returns. However, EQUITYMULTIPLE is one of only two established platforms that offers “syndicated” debt, meaning that we offer a portion of a loan, that was originated and funded by a third party lender, to our investors. We are the only platform that practices this approach while maintaining a focus on institutional-grade commercial real estate, rather than single-family. Most other platforms instead fund loans to developers and sponsors via their own cash reserves, effectively acting as the lender.
We believe in the syndication model because it allows us to originate these debt investments from experiences lenders with specialized knowledge and extensive track records within their geography and/or project type. This provides our investors multiple layers of diligence: the lender’s underwriting, our vetting of the lender, and our further diligence of the specific deal.
Mission Capital Partnership: A handful of platforms in the space are advised by accomplished real estate investors. To our knowledge, we’re the only platform directly partnered with an established real estate firm – Mission Capital Advisors. Based in Manhattan, Mission Capital has executed more than 60 billion in commercial real estate transactions over the past decade, always operating ahead of the curve in adopting new technology. Three of Mission’s principals sit on the board of EQUITYMULTIPLE, helping to inform investment strategy, and often investing directly in deals.
Above all, the partnership means access quality deal flow from Mission’s database of experienced lenders and sponsors from across the country.
Institutional Commercial Real Estate Focus: Some platforms focus exclusively on financing single-family projects, some offer only equity deals. Others have tended toward funds, whereby investors invest in a group of properties with limited visibility. Our focus is on large commercial projects from experienced real estate companies, with a mix of debt and equity offerings. We feel that both aspects of this approach will serve investors best in the long run, through market fluctuations.
The Different Kinds of Online Real Estate Investing Platforms
In the 4+ years since the JOBS Act passed, some common threads have emerged with respect to the offering makeup and business models of companies in the space:
- Direct, Distinct Properties: some platforms – such as RealtyShares, CrowdStreet and RealCrowd – continue to offer equity investments in larger multifamily, office and mixed-use projects, allowing individuals to participate in the kinds of commercial real estate projects that were generally accessible only to institutional investors and the ultra-rich prior to the JOBS Act. On the plus side, these platforms allow investors to pick the specific properties and projects they want to invest in, and to participate in greater upside for successful deals. Of course, risk and potential return always move inversely, and thus there is somewhat greater risk associated with these platforms. These platforms are more appropriate for opportunistic investors and those with more time to understand individual real estate projects. While EQUITYMULTIPLE is unique, per the above factors, our model most closely fits within this category.
- eREITs: several companies – most notably RealtyMogul and Fundrise – have pivoted to offering blind or semi-blind funds that aggregate multiple individual real estate properties into a single investment product, similar to the real estate investment trusts (REITs) that have existed since long before the JOBS Act. eREITs ostensibly provide built-in diversification, particularly for investors that lack the time, knowledge, or means to spread their investment dollars across specific properties and markets. On the other hand, some investors may be turned off by the lack of transparency. These platforms are most appropriate for non-accredited investors looking for built-in diversification at a very low minimum.
- Senior Debt: several platforms have opted to concentrate on debt financing of smaller projects (typically fix-and-flip operations), while on the other side of the coin offering a fixed-rate investment offering to investors. PeerStreet, LendingHome and Patch of Land remain the biggest names in this space. On the plus side, these platforms offer an easy-to-understand investment opportunity and unambiguous flat rate of return. Further, investments offered through these platforms are typically secured by a first lien (similar to a mortgage), adding a layer of security to the investment. On the other hand, upside is limited; investors will not exceed the flat rate of return. These platforms present an interesting alternative to other fixed-rate vehicles, such as bonds and treasury notes. These platforms are most appropriate for conservative investors seeking preservation of wealth. Note that EQUITYMULTIPLE also offers senior debt, but on institutional commercial projects, rather than fix-and-flips.
Regardless of how offerings are structured, investors should carefully consider the real estate experience, transparency, attentiveness of the people behind the platform. It’s in these respects that EQUITYMULTIPLE is truly unique.