Investing is one of the best ways for people to achieve their financial goals in life. Whether it’s financial freedom, saving up for a house, for retirement, and so on, investing can help you achieve that goal.
Now when it comes to investing, there are actually a lot of different investment vehicles that you can put your money in.
There’s the stock market, the bond market, commodities, fixed income assets, the real estate market, and many more.
But probably the most lucrative market that you can invest in is the real estate market. This is because returns on investment can be huge, not to mention the possibility of regular cash flow if you rent it out.
The only issue with investing in the real estate market is that you will need large capital to purchase a property.
This is the major hurdle that many people face when it comes to investing in real estate. Fortunately, there are investment companies out there that will make it easier and simpler for you to invest in real estate.
One such company is called RealtyShares. It’s an online company that allows you to invest in a small piece of a larger investment or to invest in the entire thing.
This makes it easier for you to enter the real estate market and have a chance to earn from this lucrative market. It is important to note, though, that the company is no longer accepting new investments or new investors.
They’re still existing and operating, serving their remaining investors and the $400 million of assets under management. This announcement was made in November 2018.
Hopefully, this is just temporary, and the company will soon open its doors to new investors and investments. For now, let us see first if what they offer is legit or a scam.
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RealtyShares is A Legit Company That Provides Investment Opportunities in the Real Estate Market
RealtyShares is an online investment platform that specializes in providing opportunities to invest in the real estate market.
The company, basically, allows you to invest in real estate equity investments or to fund real estate loans. This makes it easier for you to get into the market without the need to purchase the entire property.
Based on what I’ve seen so far, I can say that RealtyShares is a legitimate company that offers an opportunity to invest in real estate.
The investment opportunities they provide in the real estate market are all legit, as the company has a strict review process before they allow an opportunity to be listed on the site.
Of course, there are still some issues about RealtyShares and chief among them is that this opportunity is only available to accredited investors.
There’s also the possibility that more capital will be required from you and filing income tax could be a problem as well.
You also have to consider that real estate investments are not the most liquid assets out there. Lastly, there have been a lot of complaints from investors about not getting their dividend shares.
I’ll discuss these issues in more detail as we progress in this review of RealtyShares.
Who Uses RealtyShares?
RealtyShares is designed to be used by two groups with one being accredited investors who are looking to get into the real estate market.
The other group are real estate developers who are looking for additional capital for any type of cash flowing residential and commercial real estate projects.
For developers, RealtyShares offer them an alternative opportunity to raise additional capital for real estate projects that have already been established and developed.
Sometimes additional capital may be needed, even for projects that are already operating, so the company offers them a great opportunity to get the needed capital with less hassle than banks.
Their projects would just need to meet certain requirements and criteria to be allowed to be placed on the investment listing.
For investors, RealtyShares offers an opportunity to get into the real estate market without the need to purchase the entire property.
You can participate in investing in real estate loans or in real estate equities, allowing for a cheaper option to invest in real estate. You just need to be an accredited investor to participate.
I’ll discuss in more detail how this works and what you need in order to participate in the investment opportunities.
How Does RealtyShares Work?
RealtyShares provides a platform where investors, borrowers, and sponsors can meet and transact. The company basically allows borrowers to list the real estate investment project that they have that investors can put money in.
The company has a list of requirements and criteria that the real estate project of borrowers and developers will need to meet in order for it to be allowed to list on the site.
Once the investment passes the review process it is listed on the site. It will contain all of the necessary and general information that you will need in order to decide if this investment is for you.
This would include the legal documents of the property, which contains the possible risks associated with the transaction.
RealtyShares offer two types of investment that you can put your money in, one is equity investment and the other one is real estate debt.
They call equity investment Mezzanine Financing – Preferred Equity. Here, the borrower is basically pledging their equity interests that control the property as collateral for the loan.
As an investor, you basically gain an equity share of the said property and you get to receive monthly distributions from your investment.
You also get to participate in the net appreciation of the property once it is sold. The distributions are automatically deposited in a linked bank account.
For real estate debt investment, you are basically acting as a bank that indirectly lends money to real estate developers. A subsidiary of the company will extend the loan then the debt securities are what you invest in.
Though this means you won’t really have a direct claim upon the loan’s security, it removes the responsibility and costs in cases of foreclosures. RealtyShares will still be the one to work out the process.
It is free to register to participate in RealtyShares’ investment opportunities. You just need to sign up on the platform to be able to view the available investments and invest in them.
It is important that you are an accredited investor before you can participate in the investment opportunities. The company is also only available to U.S. residents.
The minimum investment needed to participate is $5,000, but there are some investments at RealtyShares that you can participate in for only $1,000.
For equity investments, the company charges a 1% fee per year to manage the investment. For real Estate debt investment, the company charges a servicing fee.
The fee is represented by the spread between the interest rates charged to the borrower and the interest rates paid to the investor.
RealthyShares also provides the necessary tax documents related to your investment. They usually provide this before April 15.
What Are People Saying about RealtyShares?
The majority of people who have tried RealtyShares are happy with the returns they are getting, especially in the first few years that that company has been operating.
Of course, this doesn’t mean there aren’t any issues with this opportunity and one of the common issues that I have seen is that this is not available to everyone.
This is unfortunate since RealtyShares only allows accredited investors to invest with them. Accredited investors are individuals or institutions that are deemed capable of taking increased risks associated with certain investments.
In this case, it’s real estate investment. So unless you are considered an accredited investor, you can’t participate in what the company offers.
There will also be scenarios where the company might contact you asking for more capital. This could be a problem on your part if you don’t have any more money to spare.
You also have to consider that the real estate market is not the most liquid asset available, so any money you are putting in here won’t be easy to get back.
The last issue I saw is that there have recently been a lot of complaints coming from investors about the company not paying any interest on their investments.
This could likely be tied to RealtyShares November 2018 announcement that they aren’t accepting new investment and investors for the moment. This could possibly be attributed to the company’s money is drying up.
Hopefully, this is just a temporary situation.
What I Like about RealtyShares
Now that we know what RealtyShares is and what they are offering, it’s time to discuss what I like about this opportunity.
- One of the things that I like about RealtyShares is that the minimum investment needed is affordable, especially if you consider that you are investing in a real estate property. With only $5,000 (some $1,000), I don’t think you could really find a better real estate deal with that kind of money. Then you also have to consider other costs, like repairs, permits, and so on. So this is a low investment, considering the asset you are investing in.
- I also like that RealtyShares has a variety of real estate investments available. The company lists single-family homes, as well as large commercial properties. This is not usually the case with similar companies since they only focus on one or the other. So it’s good that RealtyShares offer both.
What I Dislike about RealtyShares
Of course, not everything about RealtyShares is good and dandy, as there are also a lot of things about this opportunity that I didn’t really like.
- Probably the biggest thing I don’t like about RealtyShares is that they seem to be running out of capital. The company has already announced last November 2018 that they are only going to focus on servicing their remaining investors and managing the remaining investments that they have. This means, no new investors or investments will be accepted. Research showed that the company likely weren’t able to secure the needed funding to allow it to grow and expand its operations, thus it’s only going to concentrate on what it already has.
- Another thing I don’t like about RealtyShares is that they are not available to everyone. You need to be an accredited investor and a resident of the U.S. to be able to participate in the investment opportunities the company offers. Without both of these, you won’t be allowed to invest in what they offer.
- I also don’t like that there are a lot of complaints coming from investors that they aren’t receiving the interest rates on their investments anymore. Though this could again likely be connected to the November 2018 announcement, it probably would have been better if the company still continued providing the interest rate on investments, especially considering some of these complainants stopped receiving their money for more than a year now.
Do I Recommend RealtyShares?
After learning more about what RealtyShares really is and what they can bring to the table, I would have to say that I don’t really recommend them at the moment.
Though the company offers a good opportunity for you to invest in real estate without the need to shell out a large capital, the fact that the company appears to be on its last legs is hard to ignore.
They aren’t currently accepting new investors or investments, so there’s really no way for you to get in either way.
I’m also concerned with the many complaints coming from investors that they aren’t receiving their interest rates anymore .
You could still check the site from time to time as there’s still a possibility that the company finally secures funding and turn around their current situation.
But until then, just stay on the sidelines and observe to see what will happen to RealtyShares.