There are countless references to “crowdfunding” online.
Thanks to platforms like RealtyShares, crowdfunding has gotten a presence in the real estate market.
Alternatively, RealtyShares has been referred to as the “Lending Club of Real Estate.”
This review will go over RealtyShares to see if it really is the best Online Investment platform out there.
You’ll learn whether Crowdfunding is right for you.
And at the end, you’ll find answers to some of the most frequently asked questions regarding RealtyShares and crowdfunding in general.
Alright, so Realtyshares doesn’t exactly fit into a nice category.
At the end of the day, crowdfunding is a… unique way to think about making money.
It’s certainly possible to make money with off-the-wall businesses like this, but unless you’re interested in taking years out of your life to experiment with an unproven business model, I would look elsewhere.
My #1 personal recommendation if we’re talking about starting a fully-online business has got to be the Lead Generation & Ad Agency business models.
There are a handful of programs that teach you the ropes, but my #1 choice that combines both of those business models into one is the Digital Rental Method program
But, if you’re hard-pressed to jump head-first into an off-the-wall business model, let’s continue on to my full breakdown of Realtyshares.
What Is RealtyShares?
RealtyShares is an online investment platform that specializes in real estate. Investing on the website may interact with lenders, borrowers, and sponsors in one spot.
RealtyShares concentrates on smaller business investments like single-family flips, whereas other online real estate platforms prioritize big apartment buildings and commercial assets.
RealtyShares invested in over 200 properties in dozens of cities across 17 states in 2014. This amounted to $300 million in property value in 2014.
A RealtyShares feature that sets it apart from other real estate investments, such as REITs, is the ability to invest in a portfolio of properties or a single, particular property.
How Does RealtyShares Work?
RealtyShares assesses investment opportunities to make sure they adhere to the basic standards set out by the platform. The investment will be listed on the website if it does.
Everything from background information on the transaction to legal documents detailing its risk elements will be included.
Investors can purchase a small share of a larger or total investment.
The site dashboard tracks the investment’s earnings history and provides investors with year-end tax information.
Investors can fund equity investments or real estate loans. Commercial real estate can be a good place to put your money. The platform will even allow you to introduce your own investment, financed by the website.
To invest in RealtyShares, follow these five simple steps:
- Register for the platform.
- Examine real estate investments (you must first wait 30 days for the SEC’s “cooling off” period).
- Examine and complete your investments
- Wait for the investment’s funding goal to be met (100% funding)
- Online management of your real estate investments
Certainly, preferred equity deals invest in RealtyShares subsidiaries’ debt obligations, known as payment-dependent notes.
The performance of the underlying loans is linked to the performance of these notes. RealtyShares uses a third-party trustee in these transactions to limit counterparty risk for investors.
ROI (return on investment) equity investors typically receive monthly distributions, whereas debt investors receive quarterly distributions.
Distributions are deposited directly into your linked bank account, and equity investors will share any net appreciation upon selling a property.
Why Invest With RealtyShares?
Instead of allocating all of their capital to limited investments, real estate investors can diversify their real estate property portfolio by using RealtyShares.
Investors can participate in various transactions by contributing to loans or taking on private equity holdings. As a result, investors can now join bigger ventures that were previously only open to very large investors.
Investors on the platform have the opportunity to diversify their holdings across a range of asset types, investment opportunities, and geographic locations.
Like financial assets, investments are passive. A property’s day-to-day management does not necessarily require the investor to be active.
The service has shown value for investors and real estate businesses needing funding.
RealtyShares carry out the investigation. Before checking the credentials of the principal executives of the sponsoring real estate company or borrower, the site assesses each opportunity.
They also look over pro forma financial statements, title reports, property inspections, comparable sales data, and other pertinent information.
The findings of their investigation are available on the platform or can be sent to you via email. As a result, risk factors for each investment are known ahead of time. RealtyShares handles all of the research for you.
Any funds invested in the transaction will be fully refunded to you if the investment does not close for any reason.
Pricing. There are no registration fees on RealtyShares, and once registered, you can browse investment listings at your leisure. RealtyShares charges a one-percentage-point annual fee to manage equity investments.
Additionally, they may charge an “over-raise” fee to cover the initial legal costs and other specific expenses associated with the investment.
For debt investments, RealtyShares charges a servicing fee equal to the difference between the borrower’s interest rate and the investors’ net interest.
Security. RealtyShares employs SSL with 128-bit encryption, similar to that used by banks. Third-party security firms review the platform regularly to meet security standards.
Furthermore, the platform does not store your banking information on its servers. You will be logged out automatically after 15 minutes of inactivity.
If you invest in debt securities, your funds will be deposited into an FDIC-insured account with Wells Fargo, N.A. (up to $250,000). The broker-dealer partner and a third-party bank hold equity and preferred equity investments in escrow.
Clearing agency. North Capital Private Securities Corporation provided execution services for RealtyShares’ equity and preferred equity investments.
RealtyShares is also subject to North Capital’s compliance and regulatory oversight. North Capital is a registered broker-dealer and a member of FINRA and SIPC.
I’ll keep you updated. RealtyShares provides quarterly updates on equity and preferred equity investments.
However, additional updates will be provided as new information becomes available. Information is available online and via email sent directly to you.
Reporting of taxes Before April 15th, the platform will also provide you with the necessary tax documents (IRS Schedule K-1 and/or 1099-INT) for your investments.
Holding time. Each RealtyShares investment has a holding period ranging from less than six months to more than five years. However, they may extend beyond the original production.
The initial investment is minimal. Although the general minimum for any single investment is $5,000, some investments may be available for as little as $1,000.
Debt Deals And Equity Investments
Debt Investment
To get started, I invested in tiny loan arrangements with low minimums. When making these kinds of investments, the investor serves as a lender to the transaction sponsor or property owner.
Investors receive a fixed rate of return based on the amount invested and the loan’s interest rate, which is secured by the property.
The investor is at the bottom of the capital stack in a debt deal, prioritizing claiming a payout from the property.
These transactions were simple to understand, but one of the major drawbacks is that the loan’s interest rate limits return. In other words, their profits are limited.
Preferred Equity Investments
As I became more at ease with RealtyShares, I decided to move forward and look at preferred stock options.
With these investments, the investor becomes a shareholder in a particular asset. Their stake is based on the amount of money invested.
The rate of return is determined as a proportion of the rental income generated by the property, less any costs paid to the crowdfunding platform.
Investors may be paid a portion of the appreciation value if the property is sold.
What drew me to these equity deals was the possibility of profiting from the sale of the property.
In essence, there was no cap on returns, and the tax benefits were exceptional.
One advantage of owning an investment property is deducting certain expenses associated with its ownership, such as depreciation and repair costs.
Real Estate deals in equity crowdfunding are typically structured through an LLC, taxed as a flow-through entity. This means that investors can benefit from the depreciation deduction without directly owning property.
With the possibility of higher returns comes the possibility of higher risk. These transactions are typically riskier than debt transactions, but I was willing to take a chance.
Preferred Equity InvestmRealtyShares Crowdfunding Real Estate Investing Platform Shutdownents
RealtyShares informed investors via email on November 7th, 2018, that they would be closing down. After failing to secure additional funding, they will not accept new investors or make new investments instead of focusing on servicing the deals they have already made.
Can I Make Money With RealtyShares?
Yes, you can!
But…
There’s a lot that comes along with Real Estate Investing that many people struggle with.
Now, don’t get the wrong idea…
It’s not impossible to make money with Real Estate Investing but if you’re gonna put in the amount of grueling work to do this business (which, trust me, isn’t easy), you might as well bring in some REAL money while you’re learning the ropes.
Is RealtyShares Legit?
Yes, it seems legitimate. But based on BBB, this company is not accredited to them as of now. RealyShares Inc. has a D- rating on the BBB website, although there’s no definite reason for that rating.
But, when it comes to building a business, you have plenty of options.
And even if you’re dead set on becoming a Real Estate Investor, you’ve got way better options than RealyShares.
Keep in mind, that I don’t get paid to promote any of the programs I review. I personally think Real Estate Investing is a great business model, but you could end up leaving way too much money on the table.
RealtyShares Pros & Cons
Pros:
- Minimum of $5,000: With RealtyShares, you can begin with a small investment. Some offerings require only a $1,000 investment.
- Real Estate Offerings of Various Types: Other real estate crowd investing services are only interested in large commercial properties. RealtyShares allows you to invest in everything from single-family homes to large commercial properties.
- With Small Investments, Diversify Into Real Estate: Unlike traditional real estate, you must have a large sum of money to begin investing in real estate.
- Investing May Provide Tax Benefits: For example, depreciation, monthly mortgage interest payments, and other property-related expenses can reduce taxable income from real estate investments.
- Investment Types Available: 3 types of investments are available: debt, equity, and preferred equity. Realty Shares is one of the few real estate crowdfunding platforms that provides all three.
Cons:
- Only Accredited Investors: You must be an institution or a qualified investor.
- There is no direct IRA provision. At the moment, Realty Shares does not offer IRA accounts. Still, the company does invite you to contact them if you want to invest in the platform through an account with another custodian.
- Only U.S. citizens are eligible: Due to tax and legal issues, non-US investors are currently barred from using the service.
- Capital Requests: If an investment requires more capital than was initially committed, the project company’s manager can request additional capital contributions from investors. There are some constraints in this regard, but it is a possible outcome to be aware of.
- Speculative Investments: There is no secondary market for selling your positions, so you must hold them until maturity.
- Consequences of Multi-State Income Taxation: You may be required to file an income tax return in each state where you have a RealtyShares real estate investment.
RealtyShares Review Summary
The ability to diversify into real estate for a crowdfunding platform, particularly one that allows for small real estate investments, is a great reason to use the services of a site like RealtyShares.
The fees are low, and the website contains all the required technical information so that you won’t lose money.
The service has several advantages and disadvantages. Still, RealtyShares would work better if it did not require accredited investors. Crowdfunding generally democratizes investing by making it accessible to even the most inexperienced investors.
The requirement for accredited investors restricts the platform’s use to high-income and high-net-worth individuals.
Alternatives To RealtyShares?
Yes, there are plenty of other business models to choose from if you want to pursue this making money online. Here are just a few:
Is RealtyShares A Scam?
Time for the $1,000,000 question: is RealtyShares actually a scam?
I wouldn’t technically call it a scam, though others might.
It’s technically possible to make money with this program, so in that sense, it isn’t a scam.
What I’m saying is: after buying, someone will in fact send you a login to a website where you can actually view their material. No one is riding off into the sunset with your money, leaving you empty-handed… technically speaking.
But the second, more important question is: is RealtyShares actually worth the investment?
My honest answer is that for most people out there, probably not.
There are countless other business models that are proven & easily scalable, so why risk it for… not an incredibly huge payoff?
I’d rather have a program with thousands of successful students & plenty of room for others to join.
If you’ve followed my blog for long, you know I recommend a few different programs depending on your skills & goals.
My current top choice is using the Digital Rental Method, because you have a proven, systematic path to 6-figures, and you can do it from anywhere you want.
I’ve got friends in there that are posting deals from the middle of the woods in a camper-van with their pet pig… which is kinda cool.
What Is My #1 Recommendation For Making Money Online In 2022?
Alright, time for me to get real with my lovely readers for a moment:
I’ve personally tried all of the major online business models:
Read Our In Depth Breakdown Of The Top 5 OppOther Courses For 2024
- I’ve sold fidget spinners through Amazon FBA
- I’ve drop-shipped a toilet bowl putting green on Shopify
- I’ve sold women’s health supplements via Clickbank affiliate marketing
And I made money with all of them, so trust me when I say: there is no “perfect” business model.
THAT BEING SAID: I would at least recommend you implement something that is tried and true, because I’ve seen TOO MANY people (including friends and family) get burned by stuff like RealtyShares.
They come out of left field with some random idea, make it seem attractive, and then make themselves a quick buck by luring in unsuspecting people.
I’m not saying RealtyShares itself is a piece of trash, I’m just saying you need to be very, very careful.
This is a big reason why I only recommend proven, tried and true business models, like Lead Generation & Ad Agencies.
There are a bunch of programs out there that teach you those skills, but my top choice is the Digital Rental Method program.
Why? It has proven leaders with their own 7-figure businesses implementing exactly what they teach you.
I’ve also got over a dozen personal friends in there, so I feel comfortable telling you it works.
Whether you’re a complete newbie, or you’ve been around the block before but have never had that “big win” to propel you forward, their program works.
Here’s why:
1)Time: If you’ve got a spare hour-or-two each day, you can do this. If you want to drop everything and go all-in, you can do this. More time obviously means faster results, but even putting in a few hours per day is enough to see real success.
And because of that flexibility, you don’t need to trade your time for money. Once the income starts, it’s recurring (for the most part).
That means you can take a month off, travel the country, pursue a passion project, chill on the beach, or charter a boat across the world.
But you can only do that once you’ve created an income stream that doesn’t require YOU to be there all day, every day.
2)Big Margins: With most businesses, you’re often going to have really slim margins. That means you need to hit a serious scale to make serious money.
using the Digital Rental Method, your profit margin is nearly 100%. Watch here to learn how.
Just a reminder: these Digital Rental Properties are worth (at a minimum) $500/mo in semi-passive income. And each time you create another one, your income increases, and the effort put into creating the next property decreases.
Best case scenario, you have properties bringing in over $3,000+/mo on “auto-pilot”.
3)It’s Effectively Copy-Paste: Here’s my favorite part: once you have your first Digital Rental Property up, you can literally copy-paste another version of it and find another willing “renter” in a few days. DOUBLING your income doesn’t get much easier than that…
If you wanted to double your income with crowdfunding, you would need [what they need to do]. And I can guarantee you, that’s a lot harder than a few clicks & a phone call.
4)You’re Helping REAL People: My biggest gripe with RealtyShares is that you’re basically only helping yourself.
But With the Digital Rental Method, you’re helping solve REAL problems that people are ASKING for help with:
Small local businesses around the world need one thing: customers. Without them, their business would fall apart. If you can provide those customers, they’re going to be really happy – and they’re going to pay you for it.
You’re helping a struggling mother or father put food on the table for their families, put their kids through college, or simply live life a little bit more comfortably.
Having this type of impact on the world is what will help you sleep soundly at night.
So, the rest is up to you. You could keep looking at other off-the-wall business models like RealtyShares and maybe hit it big one day.
You could keep researching and researching for the next few months (or few years), never making a concrete decision.
OR, you can look deep inside, think about those dreams, hopes, & desires, and make the decision to ACTUALLY make it happen, just like it has for thousands of other students before you.
Making a fortune while actually helping real people that need it.
If this sounds like you, click here to see how it all works.
