Founded by Nav Athwal, RealtyShares is a crowdfunding website for real estate developments that claims to help you diversify your portfolio and invest in pre-screened and professionally managed residential, commercial, retail, and mixed-use projects. Not only does RealtyShares claim to help you purchase shares in private real estate investments, but the company also claims to help companies access a new source of funding to raise capital for their investments.
How Does RealtyShares Claim To Work?
By now, you’re almost certainly familiar with crowdfunding sites like Kickstarter, Indiegogo, GoFundMe, and Booster.com, which help people raise money for their business ventures and personal needs. Using these websites, all you have to do is list your project, and if other people are interested in helping you out, they can contribute as much money as they’re comfortable with.
Recently though, a new era of crowdfunding has entered the market with websites like RealtyShares, which claims to serve two primary purposes: 1) to help accredited investors invest in a variety of real estate projects, and 2) help companies fund their real estate projects without having to go through traditional banks or other large lenders.
Since coming online in late 2013, RealtyShares has garnered quite a lot of media attention, having been featured on the Wall Street Journal, Forbes, CNN Money, Business Times, and more, due in no small part to their claimed focus on helping individuals invest in real estate projects from their living rooms, and giving them everything they need to invest intelligently.
In short, RealtyShares acts as a centralized area where companies who need funds for their private real estate projects can meet with investors who are willing to purchase shares in these projects. And according to the company, they give you the ability to make real estate investments in 5 simple steps:
- Sign up for a RealtyShares account.
- Browse investments securely. If you find one you’re interested in, you’ll then be able to access a detailed page explaining the offering, including “financials, property information, legal and financial documents and investment manager bios.”
- Finalize your investment directly through the RealtyShares website. The company even claims all documents can be signed electronically using DocuSign and funds can be transferred via Balanced.
- Next, each investment comes with a specific funding goal that must be met before you officially own a share. While you’re waiting for this to occur, your money will be held in an FDIC insured escrow account. And if this goal isn’t reached, then 100% of your money will be refunded.
- All RealtyShares members have access to a personalized dashboard where you can monitor your investments and returns and manage your documents. You’ll also receive quarterly updates about the project via email, and tax documents are provided once per year.
You’ve worked diligently over the years to make smart investment decisions, and this new breed of real estate crowdfunding websites has piqued your interest, but you’re wondering if they’re ultimately worth your time, or are just a passing fad. After all, you invest carefully and aren’t in the habit of losing your hard-earned money.
But is RealtyShares a company that you can count on to help you make wise investment decisions? Consider the following:
You Have Options When it Comes to Real Estate Investing
First and foremost, if you’re thinking about using a real estate crowdfunding website, keep in mind that RealtyShares isn’t your only option, as other sites such as Fundrise, Realty Mogul, CrowdStreet, Collaperty, and many more are vying for your business.
With this said, according to RealtyShares’ CEO, the company differentiates itself from other real estate crowdfunding websites by offering lower fees, complete transparency, a seamless investment process, and access to a wider range of investment opportunities.
How Much Risk Are You Willing to Take On?
Next, like any other type of investment, real estate projects come with a certain level of risk, so you’re not guaranteed to make any money. In fact, in a worst-case scenario, you could end up losing your entire investment.
Also, remember that real estate investments are not liquid, which means that your money might be tied up for long periods of time. As such, you’ll need to thoroughly vet any investment you’re thinking about becoming involved with it.
RealtyShares’ Investor Guidelines
If you’re thinking about investing in a real estate project featured on RealtyShares, the most important thing you need to know is that you must be qualified as an Accredited Investor. According to the RealtyShares FAQ, this means you must be “a natural person with (1) a net worth or joint net worth with the person’s spouse exceeding $1 million, not including the value of the primary residence, and / or (2) annual income of $200,000 in each of the two most recent years, or joint income with a spouse exceeding $300,000 for those years and a reasonable expectation of the same income in the current year.”
On top of this, you must have a minimum of $5,000 to contribute to a project, although some investments may go as low as $1,000. There is no maximum investment amount, and you can even qualify as a foreign investor.
RealtyShares’ Investment Options
If you qualify as an investor, you’ll have two options: Debt investment and equity investment.
Debt investment means that your contribution funds a loan for the company who’s responsible for the project, and depending on your level of investment, your portion of the money earned from monthly interest charges will be deposited into your account. On the other hand, an equity investment pays a percentage of cash flow from rent on a monthly basis, or on the profits if the project is sold.
Regardless of the type, each investment will come with its own ‘hold period,” which references the expected amount of time that will pass before investors recoup their money after a project has been paid off or sold. This information will be available on the project’s Investment Overview page, and can last anywhere from less than 6 months to more than 5 years.
RealtyShares’ Company Guidelines
According to the company’s website, RealtyShares only provides loans (e.g. debt investments) for 1-4 unit residential properties, and some commercial properties, such as apartment buildings. Specifically, the website’s FAQ states projects must be:
- Cash-flowing/Value-Add equity investments in commercial and residential properties such as apartments, retail, office and pools of single family homes;
- Equity investments in Fix & Flips located in high demand/low supply markets;
- Loans secured by residential and commercial real estate.
On top of this, borrowers must have a minimum 650 credit score, a loan to purchase price of less than 80%, and an “estimated loan to after repair value (once the property is rehabbed) less than 65%.” As such, the RealtyShares will not work for construction or ground-up development projects.
On top of this, RealtyShares claims to closely screen all new projects prior to being listed, including background and credit checks, comps, projected returns, geography, property type and quality, investment structure, a knowledgeable team, and a proven track record.
Although RealtyShares doesn’t guarantee successful funding, the company claims that most projects listed are funded within 5-7 days. However, for any projects listed on RealtyShares, companies will not be able to advertise them elsewhere in order to remain in compliance with Regulation D Rule 506(b).
Finally, RealtyShares’ funding methods are claimed to help you focus on operating the investment instead of communicating with numerous investors, since all funds are pooled into a single LLC.
The Difference Between RealtyShares & REITs
When compared to REITs (Real Estate Investment Trusts), RealtyShares claims to give investors the ability to choose the specific type of property or groups of properties they’d like to invest in, whereas REITs traditionally only allow you to invest in specific asset classes or projects based on geography. In addition, RealtyShares claims to charge substantially lower fees than REITs (we’ll talk more about this in a moment).
What Are Other Investors Saying About RealtyShares?
RealtyShares, Inc. has only been in business since late 2013, and there were no individual reviews available online at the time of our research.
However, most professional reviews from large websites such as Forbes and TechCrunch seem to be favorable, not just for RealtyShares, but for the growth of the real estate crowdfunding industry in general.
RealtyShares is free to sign up for an account, whether you’re an individual looking to invest or a company looking for funding. However, according to the company’s FAQ, they “will charge a fee to cover ongoing investor reporting and communications for the investment,” although the specific fee for each investment can vary, and will be outlined in the project’s operating agreement.
After a project has been funded, the money is pooled and moved into an individual LLC, which is the entity that will actually provide the loan or hold equity in the investment. As such, you will be a shareholder in this LLC.
Compared to many other real estate crowdfunding websites, RealtyShares accepts Bitcoin for investments, either through Coinbase or your Bitcoin Address, although distributions will be paid in US Dollars.
In order to ask questions about fees, payments, or anything else, you can contact RealtyShares’ customer service department at 866-202-2023.
Can RealtyShares Help You Wisely Diversify Your Investment Portfolio?
Chopping to the Point: Considering the fact that RealtyShares has received a fair amount of positive media attention, that the real estate crowdfunding industry is in a growth phase, and that there aren’t any negative online reviews for the company, they appear to be a solid choice for purchasing shares in real estate projects.
Have you invested in any projects through RealtyShares? If so, what was your experience? Tell us about it by writing your review!
Total write-off? New England High Yield Portfolio VII.
I invested a 5-figure sum with RealtyShares in a supposed high-yield project backed by Residential Real Estate. RealtyShares did not properly vet the sponsor nor did they properly secure the investment funds with actual real estate collateral. No interest payments have been made, and it looks like this could be a total loss.
RealtyShares has communicated nothing other than this, "RealtyShares has hired a forensic accountant to help us thoroughly analyze the flow of funds from the investment to the payoffs. We are requesting additional books and records from the sponsor."
I have had great success with other crowdfunding sites, but I would strongly recommend steering way clear of RealtyShares.
Bottom Line: No, I would not recommend this to a friend
1 out 1 people found this review helpfulUpdated review
For the month of December, only 3 of my 7 investments made the monthly payment. One of the current "okay" investments hit a snag and may be going into foreclosure.
Bottom Line: Yes, I would recommend this to a friend
Be very careful
I have been participating for about two years. Out of my 10 investments, 2 paid off on time, 1 paid off very early (wasting my time and effort), 2 had their payoff date extended, 2 are in bankruptcy and are not making payments and 3 are doing okay.
Customer service is excellent. There is a wide variety of offerings. For the normal investor, Debt offerings are better than Equity.
Bottom line: this is very risky. You have to trust that RealtyShares is doing good due diligence. You have to trust that RealtyShares will not pancake. Read all the documents carefully.
6 out 7 people found this review helpful
The e-trade for real estate
Very positive experience. I've always wanted to invest in real estate, but there haven't been many great options. I was able to invest in 10 different investments (with as little as $5,000) and get exposure to diverse markets and product types.
The user experience is simple, and everything is streamlined.
Bottom Line: Yes, I would recommend this to a friend
37 out 38 people found this review helpful
I invested two years ago in few offerings and so far, everything is in deep red. "Triwest" who sponsored 12954 Blairwood Dr & 12090 Chalon Rd. investment and Paragon who sponsored 1651 Gilbert Road, have stopped making payments. They have given lame excuses for delays.
They are running a Ponzi scheme to dupe investors and RealtyShares did not do any due diligence before offering this deal and luring investors. Don't get caught in this poor dealings.
Bottom Line: No, I would not recommend this to a friendView all 1 commentsHide comments
May 23, 2017
TriWest certainly has been a disaster. Fortunately, they managed to sell the property I had investments in and made some money, but nothing like their claimed return. Even though the property sold for more than the original financial estimate.
I agree that RealtyShares does minimal due diligence. What is shocking is you can't get access to the agreement with the sponsor, only the RealtyShares LLC., you are investing in, so the real terms and conditions aren't available.
They are also easy to dupe, they did an investment that claimed it would put no debt on the property and the sponsor secretly went to another website and got another big loan on the property while claiming it was unencumbered. RealtyShares has been almost completely unresponsive to emails about issues but they certainly keep sending out emails about new opportunities.
A strong buyer beware. Not only does RealityShares do little to no due diligence, but they make it impossible for you to do so either. Go ahead and ask if the sponsor has other projects at RealityShares and they won't answer.
I went back to making my own hard money loans so I have access to the property, the borrower and can track things closely.
23 out 31 people found this review helpful
Great experience with a credible organization
It seems natural to approach with caution, since most people don't have much experience with this specific concept. My experience has been very positive. RealtyShares has been very professional and responsible. Any real estate project has risks by default, but I have had no issues after making more than 35 investments using the RealtyShares platform. RealtyShares does a great job screening prospective deal sponsors; because of that, projects that might include underfunded developers, crackpots, slackers or sponsors who are challenged with planning and organization get screened out before any deal is offered on the platform. The return/risk equation has seemed promising to me on the vast majority of the deals offered. I would - and have - recommended RealtyShares to good friends.
Bottom Line: Yes, I would recommend this to a friend