Best Real Estate Crowdfunding Platforms for Passive Income

Who is RealtyMogul?

RealtyMogul was founded in 2012 by CEO Jilliene Helman, when she was a Vice President at Union Bank in Los Angeles, CA, and launched in 2013 after she recruited Justin Hughes, RealtyMogul’s CTO, and raised a small seed round. Since then, they’ve raised money five more times for a total of $46.6 million, including lead investors such as Canaan Partners and Sorenson Capital.

They’ve signed up over 150,000 members and invested in over $2 billion real estate value, disbursing over $82 million to investors. They’ve been at this for a while and had good success with the deals they’ve closed. They boast that they see a thousand deals before approving one that meets their standards.

If the name sounds familiar, perhaps you heard of their most famous deal – $1.5 million for the Hard Rock Hotel in Palm Springs, CA. The raise happened in 2014 and it was the first crowdfunded hotel deal in the nation. Hard Rock Hotel spent millions of dollars renovating the former Hotel Zoso and reopened the location in October 2013.  

Types of Investment Opportunities

RealtyMogul offers both equity and debt/loan deals for accredited investors as well as a REIT-style investment, called MogulREIT.

They started by offering equity deals, like many other crowdfunded real estate investing sites, but quickly added debt and loan products. They only offer commercial deals – commercial, industrial, office, hotels, retail, as well as multifamily properties like apartments. They used to offer residential deals but no longer do.

What is MogulREIT?

MogulREIT is RealtyMogul’s REIT product. MogulREIT I was launched in August 2016 and holds a mixture of debt and equity assets (55% debt, 45% equity) in the commercial real estate space within the United States. It aims to distribute 8.00% annually, through distributions made on a monthly basis.

You do not need to be an accredited investor to invest in MogulREIT as long as your investment in the fund does not represent more than 10% of your annual income or net worth (whichever is greater).

The minimum investment is just $1,000 and it’s managed by Opus Fund Services, a fund administrator based in Illinois. You can invest in MogulREIT I through a self-directed IRA but the minimum initial investment increases to $5,000.

MogulREIT II is their second MogulREIT fund and the difference is it targets multifamily apartment buildings, rather than commercial real estate, and distributes quarterly.

RealtyMogul isn’t very straightforward when it comes to the cost of their service. The fastest way to find information about their fees is to visit their investment options page under the “INVEST” tab at the top of the screen. Then, scroll down to the REIT offerings and click view details.

For example, MogulREIT II has organizational and offering costs limited to 3% of the total offering, a 1.25% annualized management fee paid to RM Adviser and other operating expenses.

If you want to understand all of the fees you’ll be charged, you’d be best off reading the Offer Circular document for the particular investment you’re interested in. Alternatively, you could call the investor relations phone number and speak with a RealtyMogul representative.

Benefits and Drawbacks of RealtyMogul

The biggest Pro for RealtyMogul is how they have options for both Accredited and Non-Accredited Investors. The MogulREITs are solid offerings with clear differentiation (commercial real estate or multifamily) and a decent distribution rate and frequency. You have to dig a little deeper into the fees as they’re more expensive than other REITs but it’s a different product (Vanguard’s REIT just invests in publicly traded real estate companies, it doesn’t source, vet, and coordinate the funding of individual projects).

There is a great variety of direct investments and the ability to take advantage of Section 1031 means you can be more tax efficient in your investments. The minimums on these direct deals are higher than some other platforms (of the five available deals, the minimum was $25,000) but all other aspects of the deals were similar.

This is not a drawback on the platform but for the investment type – it’s illiquid. When you invest in a property, you can’t sell your portion on a secondary market. With the MogulREITs you can redeem your shares but it’s limited. This is how it is with actual real estate investing, so it should come as no surprise, and most REITs have limitations on trading (they’re not meant for trading, so they limit you on purchases and redemptions).

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