EquityMultiple offers accredited investors access to commercial real estate investment opportunities for as little as $5,000. There are several ways to invest, including direct equity investments, real estate funds, and short-term notes (debt), allowing investors to create a diversified portfolio within the platform. EquityMultiple follows a stringent deal review process, and offers the potential for a high rate of return on fully-realized equity deals.
Overall, EquityMultiple is ideal for accredited investors that want to diversify into real estate investing, but without the up-front cost (and headache) of traditional real estate investing.
What Is EquityMultiple?
EquityMultiple is a real estate crowdfunding site that offers access to individual commercial real estate deals, as well as other investment opportunities to accredited investors. Founded by Marious Sjulsen & Charles Clinton, former private equity and real estate development professionals, EquityMultiple offers commercial real estate expertise.
A majority of the investments offered are direct and preferred equity deals, where the investors own shares of a property, collecting dividends from rental income and a percentage of the equity gain when the property is eventually sold. There are also tax-efficient investments available, such as opportunity zones and 1031 exchanges. These equity investments offer higher potential returns, but with more risk associated. Minimum investments are also higher, starting from $10,000 to $20,000.
In addition, EquityMultiple offers debt instruments, such as senior and mezzanine debt, allowing investors to invest in commercial real estate loans that are secured by the mortgage or deed of trust of the property. These investments offer dividends from collecting interest payments on the debt, with a lower perceived risk than a direct equity investment. The minimum investment for these types of investments is $5,000.
EquityMultiple screens out 95% of the deals it reviews, opting for only the highest-quality investment opportunities from qualified sponsors. Accredited investors gain access to a simple-to-use dashboard to review investment opportunities, read through deal summaries and details, and manage their investment portfolio, all online.
EquityMultiple’s Pros and Cons
Pros
- Large selection of investment types
- High return potential (17%+ historial IRR)
- Tax-efficient investment strategies available
- Easy-to-use online dashboard and portfolio management
Cons
- Highly illiquid investments (can’t access cash quickly)
- Must be an accredited investor
- High minimum investment
- Most investments issue Form K-1’s, which can complicate your tax situation
Who Can Invest in EquityMultiple?
EquityMultiple is open to accredited investors only, meaning you need to provide your personal financial information to prove your status. To be considered an accredited investor, you need to meet one of the following requirements:
- Have a net worth (or joint net worth) of at least $1 million, excluding your personal residence, or
- Have earned at least $200,000 gross income (or $300,000 if married filing jointly) in the previous two years, with a reasonable expectation of earning the same amount (or more) going forward.
EquityMultiple offers three main investment types, each with a respective minimum investment amount:
- Fund Investing. Funds own multiple properties or other real estate investment options in a single investment vehicle, paying investors quarterly dividends. These investments allow users to gain diversification and regular income payments. The minimum fund investment is $20,000.
- Direct Investing. Users can directly invest in specific real estate deals, such as commercial buildings, multi-family homes, or other opportunities. Investors can pick from a list of available deals, with a minimum investment of $10,000.
- Short-Term Notes. Designed as an alternative to fixed income savings, EquityMultiple allows users to invest in short-term notes that pay monthly interest payments. These notes have three, six, and nine-month terms, and pay a relatively high interest rate to investors, with a short hold duration. The minimum investment is $5,000 for short-term notes.
What Makes EquityMultiple Different?
EquityMultiple offers more investment types than most crowdfunded real estate platforms, including preferred and common equity, debt, opportunity zones, 1031 exchanges, short-term notes, and equity funds. This allows investors to create a diversified portfolio within their account, investing in individual projects, real estate funds, and debt instruments.
EquityMultiple also has a stringent deal review process, only approving about 5% of the deals that are reviewed. While there are fewer projects to choose from than some other crowdfunded real estate platforms, the deals offer a high rate of return, and are thoroughly vetted before being presented to investors.
And finally, EquityMultiple has a lower minimum than most commercial crowdfunded real estate investing platforms. While some platforms require $25,000 or more, EquityMultiple gives investors access to deals directly for much lower, with most equity deals only requiring $10,000, and some investment opportunities are available for only $5,000.
Still considering how to invest in real estate? Check out our guide: REITs vs Real Estate Crowdfunding.
Is EquityMultiple a Good Investment?
EquityMultiple can be a good investment for accredited investors looking for a long-term opportunity in commercial real estate investing. While the investments have longer holding periods than, say, a stock or bond investment, the returns have proven quite good in EquityMultiple’s short history.
Past return rates are north of 17%, according to EquityMultiple’s historical deals completed, with over $120 million paid out to investors since 2015. Of course, past returns don’t guarantee future results.
That being said, all real estate investing, even crowdfunded real estate, carries the risk of loss. It may be wise to consult with a licensed financial professional before investing.
Want more options? We've put together the best real estate crowdfunding sites.
How Does EquityMultiple Compare to Fundrise?
Both EquityMultiple and Fundrise offer commercial real estate investing opportunities to investors. Both offer access to investment funds that hold real estate investments, allowing users to gain access to diversification in a single investment. Both options offer fairly low fees, with Fundrise charging an annual 1% fee, and EquityMultiple charging from 1% to 1.5% per deal (plus a percentage of the proceeds from any sale).
But while Fundrise does not require accreditation and offers a minimum investment of $10, EquityMultiple is exclusive to accredited investors, and carries a $5,000 minimum investment.
Fundrise focuses exclusively on REIT investment funds, that is, they help users build a portfolio of real estate holdings based on a preset investing strategy. EquityMultiple, on the other hand, offers direct equity investments into pre-screened commercial real estate projects, in addition to their investment funds.
Overall, Fundrise is designed for average retail investors that want to invest in commercial and residential real estate using a portfolio of funds, while EquityMultiple is designed to give investors direct access to high-quality commercial real estate deals.
Ready to learn more? Check out EquityMultiple today!
References:
https://www.equitymultiple.com/how-it-works
https://www.equitymultiple.com/blog/commercial-real-estate-practice/cap-stack-commercial-real-estate-works
https://www.equitymultiple.com/about-us
