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Real estate investing can be complicated. The traditional style of real estate involves taking on huge personal risk in some cases, depending on the type of real estate you’re investing in.
While some real estate knowledge is helpful, you no longer need to be an expert to invest in real estate, thanks to the rise of crowdfunding.
One such company, EquityMultiple, is thriving by combining the old with the new on their crowdfunding real estate service.
Let’s get into the details and see if it’s worth your time and money.
What Is EquityMultiple?
EquityMultiple is a crowdfunded real estate investment company that offers its services over a web-based platform.
You’ve likely heard about these before, but it’s important to remember that real estate is still a complex world to invest in and involves several risks.
Let’s explain how EquityMultiple works to help you understand the company.
How Does EquityMultiple Work?
While several crowdfunded real estate platforms are available now, each one caters to a specific type of investor.
Some cater to beginners and offer some REIT investment options, while others cater to those who have plenty of cash and a relatively good understanding of the real estate market.
EquityMultiple is one of the latter. There are three types of investments prospective investors can consider:
- Fund Investing – several diversified properties funds have various strategies, including debt, equity, opportunity funds, and CRE securities. Most of these have a minimum investment of $20,000.
- Direct Investing – This approach allows investing directly into individual properties, and investors can create their own custom portfolio of several properties. The minimum investment as of this writing is $10,000.
- Tax-Deferred Investing – This offering is technically for 1031 investors. In a nutshell, it offers a place for investors to place capital gains while waiting to invest in opportunities, all while making sure taxes aren’t taken out of the capital gains.
EquityMultiple focuses on making both debt and equity deals to bring in returns for investors. Debt deals are only made with the highest lender quality, but they don’t work as a lender themselves.
Equity deals are fairly straightforward. The company brings in cash flow from rent paid by tenants in the various properties under management.
They obviously focus on common equity deals, but they also have some deals with preferred equity. These deals simply have a bit more security in the event the deal falls apart than common equity.
One other point is that investors who want to work with EquityMultiple must be accredited. More on that later.
EquityMultiple Pros and Cons
- Low minimum investments for individual real estate deals, at least compared to competitors
- 1031 offerings
- High-quality deals
- Potential for high returns
- Must be an accredited investor
- High and confusing minimum investment
- Slower deal flow
EquityMultiple Features and Benefits
To achieve even a little success, each of these crowdfunded real estate companies must give investors something that makes investing easier and does it better than the competition.
Let’s look at what EquityMultiple has to offer.
Exclusive Deal Flow
The deals that reach the website are only for EquityMultiple. They’ve partnered with several experienced real estate firms to ensure that the deals are exclusive to EquityMultiple.
While the deal flow might be a bit lower than competitors, EquityMultiple partners with Mission Capital Advisors, who provides access to high-quality sponsors who make it through Mission’s doors.
Data-Drive Vetting Process and Diligence
Even though they have connections, EquityMultiple has a powerful vetting process in its own right. They have two steps in their process, all conducted by experienced professionals in commercial real estate.
Each prospective listing goes through a deep dive analysis of the property itself and the market in the region, specific location, potential return, and other points.
If it makes it through the first analysis, it goes through the second, where the team decides if it fits within the portfolio, what the terms should be, and other specifics.
Team of Experts Monitoring Real Estate Holdings
While the deal selection is a critical part of the process, one facet where EquityMultiple shines is what happens after the investment period closes and the deal is working its magic.
The company has an asset management team constantly reviewing the listings to ensure the original parameters are still holding.
Regardless of what happens, they provide transparent reports to make sure investors are updated consistently.
Besides the diversified fund opportunities, the listings themselves are diverse in nearly every aspect of the deal.
From investment strategy to target timeframe, each listing is unique.
Some investors might find that the funds provide enough diversification, but experienced investors will be satisfied with the variety of individual listings as well.
Only Accredited Investors Allowed
This is perhaps one of the big asterisks in this whole review – you must be an accredited investor to enjoy the benefits and invest with EquityMultiple.
“Accredited Investor” is a type of investor defined by the SEC. Here are the requirements to qualify:
- You have invested assets excluding your personal residence of at least $1 million
- You made at least $200,000 personally or $300,000 with your spouse in the last three years.
The idea behind this is that if you have substantial enough assets, you will have been exposed to plenty of investment advice and material.
As a result, accredited investors are expected to understand the risks associated with certain investment opportunities not available to regular investors.
The web-based platform is on par with the competition. The sign-up process is simple and does not require an initial deposit.
Once prospective investors sign up, they can look through all the current listings.
However, to complete the sign-up process, you have to verify that you are an accredited investor.
They don’t require any proof, but it could come back to bite you. Obviously, when you start investing in listings, they will certainly require proof of your status.
The thumbnails of deals provide minimal information, but everything is provided within the linked site for each listing.
EquityMultiple Investment Approaches: How Your Money Is Invested
As we mentioned earlier, there are three ways to invest your money with EquityMultiple.
There are several funds that investors can choose from. Each one has a different strategy, such as debt investments, equity investments, opportunity funds, commercial real estate securities, or combinations of these.
Opportunity funds are devoted to investing in opportunity zones as dictated by each state.
These tracts of land could potentially turn into big returns if the land is developed later on.
This is the meat and potatoes of what EquityMultiple offers. The individual listings allow investors to tailor their own portfolios and capture returns in several different ways.
When you invest in a listing, that listing is kept under its own LLC umbrella. This is how returns could potentially be higher – you are a partner in that LLC, so you’re entitled by law to a return based on your initial investment.
Most of the listings that make it to the platform are in proven areas. Many may even already be generating cash flow.
Only a few crowdfunded real estate companies offer this service. Since the clientele is a bit more suited to such a strategy, EquityMultiple offers ways to help their clients wait for the right moment to reinvest their returns.
Sometimes, real estate investors will need to sell investments based on what the market is telling them, and they will have capital gains to potentially deal with.
One of the benefits of real estate investing is that capital gains won’t be taxed at all if that money is used to reinvest in another real estate asset.
However, there isn’t always a good investment ready to go when the capital gains come in. This is where tax-deferred investing comes in.
By offering strategies to park money so it won’t be taxed as real estate income, EquityMultiple places itself as a long-term one-stop-shop in the eyes of its clients.
EquityMultiple Fees Explained
EquityMultiple makes money by taking a 10% return profits from fully complete common equity deals. This is also known as a 10% carry.
In addition to this, EquityMultiple charges between 0.5% and 1.5% on investor funds managed. This varies depending on the deals, but the fees are clearly defined before investors even put money in the listing.
How to Sign Up for EquityMultiple (Step-by-Step)
The sign-up process is simple but bear in mind that you will not be able to truthfully sign up unless you verify that you are an accredited investor.
They don’t require proof, though, so it’s really just a handshake deal to start. Here are the steps to start an account with EquityMultiple.
- Register for the platform with your email and a password.
- Enter your personal information
- Enter your employment information
- Confirm you qualify as an accredited investor. A few checkboxes may pertain to others with a higher net worth (above $2.1 million) or trust managers.
- Re-confirm your status as an accredited investor and agree to the terms of service.
After that, you’re in! You can review the listings and funds at your leisure and prepare your real estate investment portfolio.
How Does EquityMultiple Compare to Other Crowdfunding Real Estate Services?
#1. EquityMultiple vs. DiversyFund
DiversyFund is the newest crowdfunding platform to enter the market but is emerging as a clear leader. With the lowest minimum investment, transparency, and tailored portfolios, DiversyFund has attracted a legion of fans.
>> Learn More: DiversyFund Review
#2. Fundrise vs. EquityMultiple
Fundrise is far more accessible to beginners and average investors who would still like some exposure to private real estate listings.
They also have registered private REITs with a low minimum of $500 and no requirement to be an accredited investor, which is much lower than the minimum of $10,000 with EquityMultiple.
>> Learn More: Fundrise Review
#3. RealtyMogul vs. EquityMultiple
These two companies are almost direct competitors. Both of them require investors to qualify as accredited investors to put money into individual listings.
However, RealtyMoguloffers private REITs to non-accredited investors with minimum investments of $5,000.
While it’s not exactly a gateway, this gives RealtyMogul an edge over EquityMultiple in terms of accessibility.
>> Learn More: RealtyMogul Review
#4. CrowdStreet vs. EquityMultiple
CrowdStreet is also a very close competitor to EquityMultiple. However, the primary difference is the number of deals that CrowdStreet offers – it is much higher than that of EquityMultiple.
For the privilege of accessing the plethora of deals, the minimum investment across the whole CrowdStreet platform is a staggering $25,000.
On the other hand, EquityMultiple shines in their customer service, whereas CrowdStreet is somewhat lacking.
>> Learn More: CrowdStreet Review
#5. EquityMultiple vs. PeerStreet
While commercial real estate is the specialty at EquityMultiple, PeerStreet is focused on funding private real estate loans for real estate borrowers.
It is also only for accredited investors, but it’s a bit more unique in the crowdfunding field as their focus isn’t necessarily on properties.
Frequently Asked Questions
Is EquityMultiple Legit?
Absolutely! EquityMultiple scores high on several top lists and brings institutional-grade commercial real estate to their investors.
Is It Safe to Invest with EquityMultiple?
Also, yes! The platform offers the standard security investors expect from web-based crowdfunding companies. There isn’t a mobile app, which limits the exposure somewhat, though it reduces the accessibility.
Is EquityMultiple Better than Fundrise?
These two companies aren’t necessarily direct competitors. Fundrise is very good at packaging private REITs of varying levels to their investors, whereas EquityMultiple focuses on bringing in high-quality commercial real estate properties for their investors to directly partner with.
Both are safe and have great track records, but they are very clearly directed at different investor types.
Bottom Line: EquityMultiple Review
EquityMultiple is a wonderful option for accredited investors looking to expand their portfolios into direct real estate investments.
While there is some competition in this field, EquityMultiple is growing quickly due to its higher-than-average returns.