Registering for EQUITYMULTIPLE and browsing our investment opportunities is completely free. There is also no cost to investors for initiating an investment. Our fees are charged over the course of the deal and are largely dependent on the success of the investment. We structured our fees this way to better align our interests with investors – we are incentivized not only to pick good investment opportunities but also to monitor them for the life of the project.
Our fees vary depending on the structure of the underlying investment. Once an equity investment has been made, EQUITYMULTIPLE charges investors a small annual fee — typically 0.5% of the aggregate amount invested — that is paid periodically to cover ongoing investor reporting, tax preparation and communications relating to the investment. EQUITYMULTIPLE also receives 10% of investor profits after investors have received all of their initial investment back.
For preferred equity and debt investments, EQUITYMULTIPLE typically takes a servicing fee in the form of a “spread” between the interest rate being paid by the sponsor or originating lender and that being paid to investors. EQUITYMULTIPLE also generally charges the lender an origination fee and other charges typically associated with initiating a real estate loan or preferred equity investment. In the event of default, extension or other special circumstances, certain fees and charges payable by a borrower or Sponsor will be shared among EQUITYMULTIPLE and investors, as such situations involve increased servicing duties on the part of EQUITYMULTIPLE. Details as to such fees and sharing arrangements can be reviewed in the applicable investment documentation.
For all investment types, a portion of the total amount raised will be retained by EQUITYMULTIPLE and/or Growth Capital Services to cover certain transaction expenses, originations fees (like those discussed above) and commissions. This retained amount is not a fee to investors, instead it is treated as an expense of the underlying investment. For example, if $500,000 is raised by investors, the sponsor or lender will be net funded, for example, $490,000. The investment will, however, still be treated as a $500,000 investment for all intents and purposes.
We believe it is essential that all fees and other amounts earned by all parties to an investment are transparent to investors. All return projections for investors are presented net of all fees. Real estate payment and fee structures, particularly for equity investments, are complex because they typically involve multiple parties, involve profit sharing arrangements and payment priorities. For more background on real estate payment and fee structures, check out this blog post. For each investment please review the offering page and offering documentation for information about any specific fees.