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The Bottom Line: RealtyMogul is a real estate crowdfunding platform that offers opportunities to invest in various types of real estate without requiring that a person buys a property outright. Instead, it can buy shares in an LLC managed by the company (if you’re an accredited investor) or through a REIT (real estate investment trust). Since individuals can choose specific investments, RealtyMogul gives you the chance to invest in properties within your vicinity.
Real estate crowdfunding has made it more accessible for investors to invest in real estate. As one of the most well-known commercial real estate crowding platforms around, RealtyMogul has given many investors — accredited and non-accredited — an opportunity to add real estate to their portfolio.
If you’re considering whether RealtyMogul is the right choice for you, read on to find out what the company is about, available products and what else you need to consider.
Minimum Investment: $1,000
Fees: .30% to .50% annually
Promotion: No current promotions
What Is Realty Mogul?
Founded in 2013, RealtyMogul is an online real estate crowdfunding platform founded by Julliene Helman and Justin Hughes.
The idea is that investors can fund deals for commercial real estate without needing to fork over tens of thousands of dollars. With the introduction of their REITs (real estate investment trusts), non-accredited investors can now invest on the platform.
RealtyMogul claims there are more than 175,000 borrowers, investors and sponsors on the platform and provided funds to more than 1,000 properties, totaling over $400 million.
There are equity and debt products for commercial real estate and some residential debt products.
Who Can Invest With Realty Mogul
Before diving in, let’s differentiate between an accredited and non-accredited investor.
Here’s how you qualify as an accredited investor:
- You have a net worth that’s at least $1 million, not including your primary residence
- You earn at least $200,000 as an individual or $300,000 as a couple for the last two years
- You own a trust with more than $5 million of assets
The good news is that even if you’re a non-accredited investor, you can still invest with RealtyMogul — you’re limited to their REITs.
Accredited investors have the additional benefit of investing in buying into shares of LLCs, known as “equity opportunities,” which we’ll explain how it works below.
How Does Realty Mogul Work?
As mentioned in the last section, RealtyMogul allows investors to partake in a variety of real estate investments.
These include industrial sites, hospitality establishments, multi-family housing, office buildings, retail, medical buildings and self-storage facilities.
For accredited investors, you can invest by buying shares in an LLC (limited liability company) formed by RealtyMogul. Then it’ll invest into an LP (limited partnership) or another LLC which holds a title to the actual property.
RealtyMogul does this so that it minimizes overhead for the investment sponsors and streamlines reporting of distributions through their platform. Lowering overhead costs means that you can get access to more investment opportunities.
The investments aren’t liquid — you’ll get a return on your investment depending on which type it is. Equity investments last anywhere from three to 10 years and distributions are paid out monthly.
Debt investments can last from six to 12 months and distributions are paid out quarterly. Keep in mind that a return on an investment is never guaranteed, so you’re not privy to distributions on any of their investments.
Speaking of debt investments, you’ll purchase an entire loan — it’s also referred to as a platform note — and it’s secured by real estate. The notes are unsecured, limited-recourse loans that resemble the underlying mortgage loan originated from RealtyMogul.
In other words, they’re borrower payment-dependent promissory notes, meaning you’ll earn money when the borrower pays back what was borrowed.
That means you won’t get your money back if there’s a default. You’re also on the hook for the cost of any foreclosure of you’re the only investor on a whole loan.
Other RealtyMogul Product Offerings
To compete with other real estate investing platforms, RealtyMogul introduced REITs, or real estate investment trusts. Theses are properties financed by RealtyMogul that offers income-producing real estate.
It gives non-accredited investors the opportunity to get in on real estate investment without forking over a ton of cash and provides more diversification compared to investing in individual properties.
These are private REITs, meaning they’re not traded on a national securities exchange, or publicly traded.
Since they’re typically not registered with the SEC (U.S. Securities and Exchange Commission), they’re exempt from Regulation D, meaning a company can open these types of investments to non-accredited investors.
MogulRealty’s first REIT product is called MogulREIT I and allows you to invest as little as $5,000, though in some cases the minimum is $1,000.
This REIT invests in a bunch of property types which, according to RealtyMogul, can include industrial, retail, medical office, multi-family, orrice and hospitality.
The MogulREIT I puts funds in different commercial real estate-related debt and equity securities throughout these various types of properties. The idea is that it’ll be diversified as investments will be spread throughout the U.S. and property types.
RealtyMogul also offers another type of REIT called the MogulREIT II. It’s also open to non-accredited investors.
However this one differs is that it focuses on multi-family properties — it’s considered a pretty hot part of the real estate market because of its potential for income growth and drop in vacancies from tenants.
The good news is that RealtyMogul allows redemptions quarterly, though there will be limits in the total amount of redemptions each year.
This is more often compared to other types of private REITs.
Pros & Cons
Straightforward process - It can be quite complex if you purchase commercial real estate investments individually. Think about the type of financing you need and the legal hoops you may need to go through.
Instead, RealtyMogul makes it easier on investors by taking care of the entire process — you just invest your money like you would do with a typical investment brokerage with paper assets.
Available to non-accredited investors - Non-accredited investors can now invest with RealtyMoul with their MogulREIT I and II products.
No capital calls - you won’t be required to fork over additional capital aside from your initial investment, aside from foreclosure costs on whole loans.
If more is needed for additional investments or there are member loans at a higher rate of interest (at least 10%), then your investment could be diluted. In other words, member loans would be paid back before you get your equity distribution.
Vetting done for you - these investments are “pre-vetted”, meaning that RealtyMogul has gone through a preliminary underwriting process which looks at factors such as the location, property, and even background checks on whoever is involved with the investments.
More control - You can choose from individual properties, even their REITs.
More opportunities for accredited investors - Although non-accredited investors can invest in MogulREITs, accredited investors can also invest directly in an asset.
To qualify as an accredited investor you need at least $1 million in net worth (not including your personal residence) or have a $200,000 ($300,000 as a couple) as your annual income.
Illiquid investments - You need to hold your investments until maturity
High minimum - RealtyMogul requires a minimum of $5,000 for REIT investors, which is higher than some other real estate crowdfunding platforms.
However, it is lower than what it would take for you invest in commercial real estate yourself.
How to Get Started
According to RealtyMogul, you need to make an initial investment of at least $1,000 to be able to access the platform, though you’ll need at least $5,000 ($1,000 afterwards) when buying into a MogulREIT.
You can conduct a standard ACH transfer if you’re investing up to $100,000 or a wire transfer for amounts over $100,000. Each amount you transfer will go to a specific account number so that RealtyMogul will know which investment opportunity you want.
It’s simple to sign up for RealtyMogul. Head to their website to create an account — create a password and confirm your email address.
Once complete, then you’ll need to certify that you’re an accredited investor if you want to participate in the debt and equity deals (remember, it means you have at least $1 million in net worth, no including your primary residence or an annual income of at least $200,000 as an individual or $300,000 as a couple).
If you only want to invest in their MogulREITs, then you don’t need to be accredited. Then you’ll need to enter other personal details and you’re good to go.
From there, you can navigate around the RealtyMogul dashboard which lets you track all of your investments, such as the terms, amount invested, earnings and active transactions.
Realty Mogul offers a unique opportunity to invest in real estate that’s less involved than buying a property outright on an individual basis but is much deeper in scope than investing in real estate through a real estate investment trust (REIT).
Should You Invest With Realty Mogul?
For investors who want to get some exposure in the commercial real estate market, RealtyMogul can be a great choice.
The MogulREIT I and II are a sound option for non-accredited investors and individual investing opportunities for accredited investors gives you an opportunity to get a slice of the pie without much upfront investment.
However, RealtyMogul isn’t for everyone. Their investments are liquid — you need to wait at least a year before you sell your shares for MogulREITs or wait until it pays off for individual investments.
Plus, there are more risks with real estate investing so definitely do your homework before pulling the trigger.
If you do your due diligence and understand the consequences, it can be extremely beneficial to your portfolio, especially if you don’t have exposure to real estate.