Real estate investing can be a cornerstone of a successful wealth-building strategy. But going it alone can be a daunting task for most investors. RealtyMogul streamlines the process of real estate investment so investors from all walks of life can harness the power of this asset class.
Is RealtyMogul the gateway to real estate investing you’ve been searching for? Let’s take a closer look in our RealtyMogul review.
What Is RealtyMogul?
RealtyMogul is a real estate crowdfunding platform that provides real estate investment opportunities to accredited and non-accredited investors alike. The company was founded back in 2012 by Jilliene Helman and Justin Hughes, making it one of the oldest crowdfunding real estate sites.
Currently, the platform has over 219,000 members that have invested over $700 million into over 400 properties with a total value of $4 billion dollars.
The company places a big emphasis on conducting extensive due diligence as it seeks commercial real estate that produces cash flows. Potential deals need to undergo an extensive screening process that includes a review of the property, possible returns, local market conditions, and background checks of all involved parties.
According to their site, RealtyMogul only moves forward with one of every 1,000 deals that pop up on their radar. As an investor, that means you can place more trust in the deals available on the platform.
How Does RealtyMogul Work?
RealtyMogul offers three distinct investment opportunities — non-traded real estate investment trust (REITs), individual real estate syndication deals, and 1031 exchanges.
Here’s a closer look at each:
You’ll find two REITs available through the platform.
First up is Income REIT (MogulREIT I), which is focused on producing a monthly income for its investors. The public and non-traded REIT makes commercial real estate investments through both debt and equity.
The Income REIT has paid investors an annualized cash distribution of 6-8% for the last 60 months, totaling $17.1 million in cash distributions to investors. Currently, the REIT has over 6,000 investors, and $375 million in assets have been purchased.
The second REIT available is the Apartment Growth REIT (MogulREIT II). As the name suggests, this REIT is focused on investments with a strong potential for growth. However, the REIT still has a track record of annualized cash distributions of 4.5% for the last 15 quarters. Currently, the Growth REIT has over 2,500 investors and $248 million in total asset value.
If you decide to work with either REIT, keep the lack of liquidity in mind. Although you may have the option to sell back your shares to RealtyMogul, that is not guaranteed. The repurchase option is limited to 5% of the shares in any particular calendar year. Plus, you won’t receive the full value of your shares if you sell within the first three years.
Individual Real Estate Syndications
Outside of REITs, you can invest in standalone real estate deals. RealtyMogul takes care of the heavy lifting when it comes to due diligence on a wide range of commercial real estate investment opportunities. You’ll find everything from apartment complexes to self-storage buildings. As of November 2021, there are seven deals available to investors, and each requires a minimum investment of $35,000.
As you view your options, you’ll see the required investment minimum and the target numbers. These targets include the cash on cash return, equity multiple, and holding period. A big number to look for is the target holding period -- the amount of time it may take to get your money back. The target holding time may vary a bit from the actual holding time. But it should give you an idea of how long your funds will be tied up.
The minimum investment is rather steep, but the investment will give you the access to commercial real estate you’ve been searching for.
RealtyMogul also offers members a streamlined 1031 exchange option. The 1031 exchange platform offered by RealtyMogul can be an extremely helpful tool for established real estate investors seeking to execute a 1031 exchange painlessly.
Within the platform, you can invest your 1031 funds immediately. Forget about the hassles involved with agents, escrow, and closing costs. RealtyMogul allows you to invest between $25,000 to $50,000,000 through this option. And the best part is that the commercial real estate investment options available through RealtyMogul are completely passive.
RealtyMogul Pros and Cons
Here are the pros and cons to consider before working with RealtyMogul.
- Potential for passive income
- Extensive due diligence performed
- Different investment options
- Open to accredited and non-accredited investors
- Easy to use platform
- High investment minimums ($5,000)
- Limited liquidity with money typically tied up for years
- Limited number of deals
Who Can Invest With RealtyMogul?
RealtyMogul allows both accredited and non-accredited investors to work with the platform.
As an accredited investor, you will have access to all of the opportunities on the platform. But as a non-accredited investor, you will only be able to invest in the public, non-traded REITs.
RealtyMogul Minimum Investment and Fees
As an investor, you’ll need to be ready to commit at least $5,000 to work with RealtyMogul. The $5,000 minimum investment will allow you to invest in the REITs available on the platform.
If you want to access individual investment properties, then the minimum investment will likely be much higher than $5,000. As of November 2021, all of the available deals required a minimum investment of at least $35,000. However, that number can vary based on the deal in question.
Beyond the minimum investment requirements, you’ll need to be aware of the fees. There’s no fee to join the platform, but each investment will have fees associated with it.
For individual property deals, the fees will vary. You can count on a 1% administrative services fee charged by RealtyMogul, though.
In terms of REITS, there are two fees to keep in mind. First, there is an organization fee of up to 3% of the equity raised from investors. This fee is used to cover some of the expenses associated with the property, including legal assistance, accounting, and marketing. Additionally, each REIT charges an asset management fee. The Income REIT charges a 1% annualized asset management fee. The Growth REIT charges a 1.25% annualized asset management fee.
How Do Investors Make Money?
Investors have several opportunities to make money.
An investor in an individual property might receive distributions throughout the investment holding period. The distribution will depend on the particular deal in question and they are not guaranteed. Ultimately, investors in equity deals should expect to receive money when the property has cycled through a holding period and been sold.
As an investor in a REIT, you can expect to receive a monthly or quarterly distribution. The amount will vary based on your investment. Additionally, you can earn money by selling your shares back to RealtyMogul if the option is available. Generally, it’s best to wait at least three years to avoid missing out on value.
Looking for more? Check out our CrowdStreet review, our No. 1 real estate crowdfunding pick.
Biggest Difference Between RealtyMogul and Other Platforms
Like many other crowdfunding real estate platforms, RealtyMogul offers REITs for non-accredited investors. But RealtyMogul stands apart from the crowd by placing an emphasis on commercial real estate and harnesses the power of extensive due diligence.
You won’t be limited to REITs though. RealtyMogul offers the opportunity to invest in individual deals and utilize your 1031 exchange funds seamlessly.
Should I Invest in Commercial Real Estate?
That's the big question you may be asking yourself right about now. Commercial real estate is an attractive asset class with high income potential but low liquidity. Like all investment opportunities, you should consider your unique goals and liquidity needs before incorporating commercial real estate into your investment portfolio.
Want more options? We've rounded up the best real estate crowdfunding sites.
RealtyMogul provides the chance for investors to dive into real estate. Although there is a relatively high minimum investment, you don’t have to be an accredited investor to tap into these deals.
Ready to jump in? Check out RealtyMogul today.