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Investing in Real Estate Crowdfunding – see how I’m doing with real estate crowdfunding

Investing with RealtyShares

In 2017, I started investing in real estate crowdfunding. My experience has been positive so far and now I’m ready to write about it. I’ve been a real estate investor for over 10 years, but that’s just in the local market. The Portland real estate market has been great and our investment properties are doing well. However, it can be a lot of work sometime. One of our tenants just gave me a notice to move out. Next month, I’ll have to fix up the unit and find a new tenant. We probably will need to replace the carpet and light fixtures. I will be able to raise the rent a bit, but turning over a unit is not a fun process. You never know what kind of tenant you’re going to get. I’m also somewhat concerned about having such a big chunk of our net worth in one location. What if the Portland real estate market crashes or a natural disaster hits? A big decline in the local real estate market could impact our retirement greatly. These are the 2 main reasons why I want to diversify into other markets with RealtyShares.

Investing in real estate crowdfunding was confusing at first. There are different types of investments and it took me a while to figure them out. Now I have a better understanding and next year I plan to ramp up my investment quite a bit. Eventually, I hope the income from real estate crowdfunding will replace our rental income. I don’t mind being a landlord now, but I’d need to wind it down in 10 years or so. We want to travel more and simplify our lives when we get older. Okay, let’s go over the basics of real estate crowdfunding first and then I’ll share my experience with RealtyShares.

Disclosure: We may receive a referral fee if you sign up through the links on this page.

What is Real Estate Crowdfunding?

RealtyShares is a real estate crowdfunding platform that brings investors together to finance various real estate projects. The platform enables individual investors to access various real estate projects with a modest amount of money. At RealtyShares, each project has a minimum investment starting from $2,000 to $30,000. Investors can invest in single family homes, apartments, or commercial properties. There are three types of investments you can make.

  1. Debt. You invest in the mortgage loan for a property. The investors receive an interest payment every month. The invested capital is returned at the end of the holding period. These debt investments generate around 8-10% return and the holding period is relatively short, just 1 to 2 years. Most of these debt investments fund single family home flips. The investor hold the lien on the property.
  2. Preferred equity. Investors provide an unsecured loan to the sponsor. The ROI is higher at 12-14%, but the risk is higher as well.
  3. Joint venture equity (Equity). The investor receives an equity stake in the property in exchange for funding the project. Payments are realized from the rental income generated by the property and usually payout quarterly. The goal of the property manager is to increase value and sell the property off in 3 to 5 years. The equity investments usually have longer holding periods than debt investments, but the payoff could be higher. Investors receive quarterly payments, typically 5-9%, and get a bigger payout after a successful exit. The projected total return is usually around 16-18% annually. The equity investments are apartment complexes, retail properties, restaurants, and office buildings.

Personally, I like joint venture equity more. The projected returns are higher. However, the risk is higher as well. If the exit plan doesn’t work out, then the holding period will be longer and the return will most likely be lower than projected. You can read more about the different types of investments on RealtyShares’ blog.

Example investment at RealtyShares

Here is an example of an equity investment available at the beginning of September, 2017.

RealtyShares investment project

I pick this example because I lived in this apartment when I was a freshman in high school. Wow, talk about flashback! I remember cutting across the football field, leaving by the back exit, and walking home through the alley. Back then, this apartment was a typical grimy courtyard apartment among hundreds like it in San Fernando Valley. The rent was cheap and the tenants were working class people. They must have improved the property at some point because the interior looks much nicer than I remember.


Let’s take a look at the projected cash flow.

Sample Investor Cash Flows
Sample Investment Amount $50,000
Average Quarterly Payments Objective $712
Total Quarterly Payments (Net of Fees) Objective $8,541
Distribution at Sale (Net of Fees) Objective $69,590
Net Earnings to Investors Objective $28,130


The yearly income would be 5.7% of the amount invested. The distribution after exit is projected to be about 11% annualized. So the total gain would about 17% if everything goes as planned. The exit price seems high to me, though. This area is part of the Los Angeles suburb and there is no shortage of renters. However, can the price really increase that much in 3 years? The purchase price for this complex is $6,125,000. The projected sale price is 8,282,925. That projection is a huge increase in just 3 years.

I want to diversify from Portland, but I want to avoid California and Washington. The west coast markets are very similar. From my experience, the Portland real estate market usually trail California by about a year. I think it’d be a better idea to invest in the Central region instead. There are new projects every week so I can pick the ones I really like.

My investment so far

I started off slow and invested in 5 projects so far.

  1. A strip mall in Arizona ($8,000) This was an equity investment. The estimated cash on cash return is 7% per year. After 3 years, the property will be sold and should generate about 10% (per annum) more. Payments have been on time so far.
  2. A fast food restaurant in Florida ($5,000, 1-year holding.) This one is a senior debt loan and the payments have been on time. The interest rate is a flat 9.5% per year.
  3. An apartment in Texas ($5,000) This equity deal is going well so far and the first payment came through in January. The estimated cash on cash return is 10% per year. After 3 years, the property will be sold and should generate about 6% (per annum) more.
  4. An apartment in Arizona ($10,000) This deal is WIP and we haven’t seen a payment yet. The estimated cash on cash return is 10% per year. After 5 years, the property will be sold and should generate about 6% (per annum) more.
  5. An apartment in North Carolina ($10,000) This deal just closed in January and it will take a few months before we see a payment. The estimated cash on cash return is 8% per year. After 4 years, the property will be sold and should generate about 9% (per annum) more.
Realty Shares real estate crowdfunding income

We didn’t have a lot of liquidity earlier this year because we were concentrating on maxing out our 401k, Roth IRA, and 529. Now those things are mostly done so I’m ready to invest more with RealtyShares. We have some cash now and I’m planning to sell off some dividend stocks to raise more liquidity. I’m nervous about the stock market at this point because it’s been so long since we had a crash. Also, real estate crowdfunding can generate more income than dividend stocks. I want to increase our investment in real estate crowdfunding to $100,000 by the end of 2018. We’ll see if this move pays off in a few years.

Sign up with RealtyShares

So that’s my experience with real estate crowdfunding so far. RealtyShares has been good, but I need to invest more to see if the income can be sustained. One bad project can derail our total ROI. I’ll have to be careful and pick the projects with good management.

You can sign up to browse the various projects and see if real estate crowdfunding is a good match for you.


Here are a couple of alternatives if you don’t like RealtyShares. Currently, I’m concentrating my effort on RealtyShares so I don’t know as much about these other platforms.

  • RealtyMogul – All investors can invest in REIT. In addition, accredited investors can invest in private projects and do a 1031 exchange.
  • Peer Street – Invest in debt only. Peer Street is only open to accredited investors. I will try them next year and report back. I heard they are very good.
  • Fundrise – Low minimum investment starting at $500. Open to non-accredited investors.

Have you tried real estate crowdfunding? Is it working out like you expected?

Lastly, let me know if you have any question or suggestion on how to improve this post. I will refer back to this post from my passive income report so I’d like to be useful for everyone.

Disclosure: We may receive a referral fee if you sign up with a service through a link on this page. The content contains testimonials from Joe. Actual experience of other customers may differ from the testimonials. The testimonials do not represent guarantees of future performance or success. Moreover, no person nor any other entity assumes responsibility for the accuracy and completeness of the testimonials.

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Joe started Retire by 40 in 2010 to figure out how to retire early. He spent 16 years working in computer design and enjoyed the technical work immensely. However, the job became too stressful and Joe retired from his engineering career to become a stay-at-home dad/blogger at 38. Today, he blogs about financial independence, early retirement, investing, and living a frugal lifestyle.

Passive income is the key to early retirement. This year, Joe is increasing his investment in real estate with CrowdStreet. He can invest in projects across the U.S. and diversify his real estate portfolio. There are many interesting projects available so sign up and check them out.

Joe also highly recommends Personal Capital for DIY investors. He logs on to Personal Capital almost daily to check his cash flow and net worth. They have many useful tools that will help DIY investors analyze their portfolio and plan for retirement.
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{ 72 comments… add one }
  • Jay October 4, 2019, 8:44 am

    Can you update your returns on these investments? I am curious because quite some time has passed. Thank you!

  • Andre E August 29, 2018, 3:33 pm

    Thanks for the great article. Did you ever look into RealtyMogul in comparison to RealtyShares. I ask because I’m in the process of moving some assets into this space and am considering both services. Any thoughts?

    • retirebyforty August 29, 2018, 6:59 pm

      The last time I checked RealtyShares was better than RealtyMogul. I forgot exactly why, though. You should research a bit and see if you can find out anything. I think they have both improved from 2 years ago.
      CrowdStreet sounds pretty good too, but they require larger minimum investments.

  • Rodney Allen Hampton May 27, 2018, 5:26 am

    Great info here – I was looking to start real estate investing but did not want the headache of actual property ownership and REITs aren’t right for me.

  • Teri January 29, 2018, 1:11 pm

    I’m going to stay away from this, along with P2P. Would you pay 10% interest to purchase a property in todays market? If you answered yes, RealtyShares might be a good investment for you. I would not. Then, how much does RealtyShares take for managing these investments? The numbers just don’t add up.

    Haven’t seen any information on what these investments are doing for you. Am I just looking in the wrong places?

    Currently, I’m invested in some private REITs and the returns are AWFUL to non existent. The majority of my investments are in commercial real estate, personally owned and managed. I tried property management initially and it was another major fail. Even though it’s a lot of work (11 apartments) the only way I can make any money is by self management.

    Hope your investments in RealtyShares create the returns you anticipate.

  • zhao December 21, 2017, 7:04 am

    just did my first try with an apartment complex at Raleigh NC. https://www.realtyshares.com/investments/arbor-creek . I guess population wise Raleigh is going up due to the high tech moving in. What’s your opinion on its risk / reward?

    • retirebyforty December 21, 2017, 11:33 am

      I like NC. My brother is moving there as soon as he can find a job. It’s much more affordable than the Bay Area.
      The project looks okay. I like the sponsor because they have been around for a long time. I googled the apartment and they had some bad reviews and that’s why I hesitated. Hopefully, the new management can turn it around. Good luck!

  • Jeff September 21, 2017, 10:25 pm

    Thanks for writing this article. Interesting investment option. Have you gotten end of year tax statements yet? If so, does this investment type fall into a unique tax category that would make completing taxes difficult?

  • Done by Forty September 11, 2017, 5:13 pm

    Having sold one our rentals, this does seem like a neat alternative. Having a lien sure is a nice insurance policy against the deal going sideways, too.

  • GYM September 9, 2017, 10:51 am

    Wow this is really interesting and a great alternative to buying it yourself and hiring a property management company yourself, or investing in REITs. I’ll definitely have to look into whether there’s something like this for Canadian investors 🙂 Thanks for sharing your experience and review!

    • retirebyforty September 9, 2017, 9:14 pm

      I heard there are some real estate crowdfunding platforms in Europe, but I’m not sure about Canada. Good luck!

  • Billy September 9, 2017, 6:10 am

    Fundrise is pretty good. They changed there strategy focusing more on forming ereits and efunds. They charge around 1% a year on dividends received. The dividends received is pretty much around 8-12% a year.
    I invested around $8000 into Fundrise since August. If it turns out to be a good investment my first year. I will invest more into it.
    You are right that these crowdfunds are new and needs to be tested during recession time.

  • Dividend Portfolio September 8, 2017, 10:36 pm

    I wish I was an accredited investor to invest in Realty Shares. Diversification of income sources is good and real estate investing is a great way to diversify. This is the form of passive investing that I like.

    Thanks for the write up.

  • Cindy September 8, 2017, 5:32 pm

    Thanks for sharing about real estate crowd funding and I am interested in RealtyShares. How do you prove to them that you are an accredited investor?

    • retirebyforty September 9, 2017, 9:13 pm

      I’m pretty sure it’s the honor system. I didn’t have to mail in my banking statement or anything like that. Investors just answer questions about their net worth, liquid assets, etc…

  • quaid September 8, 2017, 8:59 am

    I’ve had a good experience over the past 2 years with GroundFloor: https://www.groundfloor.us/

    So far I’ve only made very small investments ($100), but I have seen consistent 12-15% returns. I’ve basically just been playing/learning, but I hope to soon start investing much larger amounts. So far, I’m a big fan of crowdsource real estate investing.

  • Irene September 7, 2017, 10:35 pm

    Hi Joe,

    I’m interested in investing with Realtyshares but found out enrollment is only open to accredited investors or high-net-worth individuals with 200,000 or above. Could you confirm.


    • retirebyforty September 8, 2017, 6:19 am

      Yes, RealtyShares is only available to accredited investors at this point. Fundrise is open to non accredited investor, but you need to do more research on them. I don’t know much about Fundrise.

  • Actuaryonfire September 7, 2017, 2:47 pm

    I prefer peerstreet, the minimum investment is only $1000 so it’s easy to get lots of diversification. I’m also pretty risk adverse so I like the fixed income nature and the fact that the loan is secured against a property.
    Thanks for sharing ?

    • retirebyforty September 8, 2017, 6:18 am

      I heard good things about peerstreet too. I’ll try to open an account at some point and invest there as well.

  • Bryan September 7, 2017, 1:53 pm

    Realtyshares is horrible!!! I have done 8 deals with them and they have a complete lack of communication from their sponsors to the investors. Also they post conflicting messages from sponsors – one saying the sponsor has requested a payoff and should happen in the next 30-45 days and then the next post is the sponsor is hopefully going to have House listed by September and close out by year end.

    Won’t do another deal with them!! Hope your experience is better than mine.

    • retirebyforty September 8, 2017, 6:17 am

      Thanks for your input. The communication has been very slow for me too.
      How did you do with 8 deals? Any defaults? How is that handled?

      • Bryan September 8, 2017, 9:24 am

        The first two fix and flips went very smoothly and the communication was somewhat there. The next fix and flip was delayed due to CA regulations and they have suspended their interest payments for the past 3 months. That is the one that they are reporting conflicting information on. One month they say the sponsor has requested a payoff and it should occur in 30 days. Next month they report on the progress of the rehab without anything else. Latest one is they are supposed to have it completed by October and hope to sell it by end of the year.

        Finally the last fix and flip I did suspended its payment after a couple of months and I had to wait 6 months for any communication. Suddenly there was a communication that they are negotiating with the Sponsor for a buyout. It ended up working out but almost seems like there was some behind the scenes stuff to force the sponsor to make the investors whole. That won’t work all of the time!!

        The other 4 deals are all MF or Retail so they are 5 year holds and have performed as expected so far.

        I am more a fan of Realcrowd and Crowdstreet because you deal directly with the sponsors after the deal is closed. Haven’t had any issues with them.

        • retirebyforty September 8, 2017, 11:52 am

          Thanks for sharing. The fix and flips might be better at peerstreet. I heard they have better screening.
          I’ll avoid SFH at RealtyShares and go with MF. The firms on the MF properties seem more professional and have track records.
          I will check out Crowdstreet as well.
          Have a great weekend.

  • Mr. FWP September 7, 2017, 11:43 am

    Thanks for sharing, Joe! I’m curious: how much are you allowed to look at, say, the underwriting and credit info of those who are asking for extensions of credit?

    Especially after 2007-2008, I’m extremely skeptical when an organization sells deals without owning a big chunk of the risk themselves or allowing investors to fully vet deals. (Or relying too much on deal-selling as the key profit center.) The incentives can get out of whack, leading to bad capital allocations and outright fraud.

    Like you, I’m very interested in real estate. For now, I’m going to stick to what I know best (local), although I’m very curious about things like this, and especially about how the deals are vetted/how I can assess whether it’s a quality investment or not.

    • retirebyforty September 8, 2017, 6:15 am

      Not much info on the credit info of the sponsor (company that are running the property.)
      I believe you can see how much the sponsor invest. Sign up and you can see more info on the deals.

  • cato September 7, 2017, 10:17 am

    I’ll be interested to watch this thread. I am not a fan of real estate investing in general as the long term track record is awful. That said, this idea looks interesting. I tried P2P lending through PROSPER many years ago when it first started. It doesn’t favor the investor. I ended up breaking even after five years so I abandoned that strategy.

  • Mr. Tako September 7, 2017, 8:41 am

    Interesting stuff Joe. These look like pretty risky investments.

    The joint equity investment seems the most interesting to me — even if markets turn you can still realize some return from the rents.

    The other investments seem to depend on rising markets to realize returns… i.e. flipping

    Those conditions don’t always happen, and can lead to significant losses when they don’t.

    • retirebyforty September 7, 2017, 11:30 am

      I like the joint equity investment the most as well. If the management company can’t sell, they can just keep running it. It’d be bad if the vacancy rate increase too much, though. Should be okay for now because it seems like housing is a problem everywhere.

    • retirebyforty September 8, 2017, 6:12 am

      Good point about the equity investment. If they can’t sell it, they can keep running it and send us some income. I think the investment should do okay unless we have another housing recession.

  • Tim Kim @ TubofCash.com September 7, 2017, 7:58 am

    Hi Joe, thanks for sharing about real estate crowd funding. To be honest, I’m a little weary on investing in it, but a lot of fellow personal finance bloggers that I respect are dabbling in it, including you and Sam. I’ll follow closely along and see how you guys do with it before tiptoeing in. Thanks again!

    • retirebyforty September 7, 2017, 11:28 am

      Yes, check back every few months. I will keep this post updated.

  • Dylan | Trail to FI September 7, 2017, 7:43 am

    I would be interested to learn more about RealtyShares and other similar platforms from the borrower’s perspective. I am interested in rehabbing a rental property and private lenders like this would be a good tool to use for the rehab and while waiting to get a mortgage approved.

    • retirebyforty September 7, 2017, 11:27 am

      Check with RealtyShares. You probably need to have one or two under your belt. I don’t know for sure.

  • Jeff @ Maximum Cents September 7, 2017, 7:17 am

    Thanks for the informative post. I am considering investing in a real estate crowdfunding company when I become an accredited investor in a couple years. This reminds me of the promises that P2P lending had when they first came out. I tried LendingClub several years ago and did pretty well but soon realized that the returns were lower than advertised and there were several things that could go wrong. Ultimately it wasn’t worth the time and stress to invest. Maybe this is different because you can invest higher amounts.

    • retirebyforty September 7, 2017, 11:27 am

      I’ll keep this post updated so check back anytime. 🙂
      P2P lending was okay for me (7-8%), but it’ll take a dive when we get a recession. That’s why I’m getting out now.

  • Max Your Freedom September 7, 2017, 7:02 am

    I started a few crowdfunding experiments as well this year. RealtyShares is one of them,and it’s also performing well so far, although it took a bit longer than the others to get going. I opted for the Seattle Student Housing offering and it’s finally paying interest. You should check out YieldStreet which has been my favorite so far because of its low correlation to the market, specifically the litigation financing.

    • retirebyforty September 7, 2017, 11:25 am

      I will check out YieldStreet. I guess it’s good to spread the money around a bit.

  • Dads Dollars debts September 7, 2017, 6:40 am

    Interesting. We mainly invest in REITs but this could be a place to put additional money that comes in. It makes me a bit hesitant and I agree with you that investing in California is likely not a great idea. Let’s see how it plays out and give us an update in a few years!

    • retirebyforty September 7, 2017, 11:24 am

      I’ll update this post every month. It will be a part of my passive income update.

  • Jake September 7, 2017, 6:38 am

    Do you have to file taxes in the states where you invest if you’ll be getting a K-1?

    • retirebyforty September 7, 2017, 11:24 am

      I believe you have to file state tax for those. We’ll see next April…

      • Mayanqueen September 16, 2017, 4:40 pm

        I have a question, in order to become a landlord do I need to have a special license? What other documents? Do you have an article on the mentioned type of legality?
        Thank you!

        • retirebyforty September 16, 2017, 9:24 pm

          You don’t need special license to become a landlord. You just need to read up on local rules and make a lease (or buy it from somewhere.) That’s about it. There really isn’t much to it. You just need to screen potential tenants very well.

  • Jack September 7, 2017, 6:22 am

    Thanks for sharing your performance so far. I’d been meaning to get started with Realty Shares now that I’ve put some money into p2p lending. But since my layoff have had to postpone my plans.

    What are the fees like for participating in the different investments?

    • retirebyforty September 7, 2017, 11:23 am

      I think real estate crowdfunding is much better than P2P lending. There are too many defaults in P2P lending and a recession will kill our ROI.
      The fees is around 1-2%, depending on the deal.

  • Mrs. Groovy September 7, 2017, 6:15 am

    Thanks for writing about this. After experimenting with a few rentals several years ago, we found being landlords was not for us. I still like the idea of investing in land and REITs, but perhaps crowdfunding might be just the thing for a small portion of our portfolio.

    I see only a minimal risk of Portland declining quickly. Still, I’m glad you plan to reduce your exposure. Is your pending Texas deal near Dallas? That’s one area that seems to continue to boom.

    • retirebyforty September 7, 2017, 11:22 am

      I like being a landlord when the rent checks come in, but not when I have to go fix stuff and turn over a unit… We’ll get out of it someday. Hopefully, before the local market crashes. We’ll sell some units before we go on our RTW trip.
      The Texas deal is in San Antonio.

      • Mike Roberts February 7, 2018, 10:40 am

        That’s why I love having a property manager to handle things. Yes, I have to pay them, but it’s money well spent. I would have a property manager even if our portfolio was local (which it’s not).

  • Hermann Peterscheck September 7, 2017, 6:14 am

    I’ve used RS for about a year and Fundrise for about 6 months.

    I like RS more because I pick the properties directly and FR has more hidden fees.

    I invest only in senior debt commercial projects right now. But my taxes are high so it’s less attractive on the yield side.

    Things I’d look out for:
    1) People who use RS to raise money do so at higher rates because traditional financing isn’t available to them which as you say adds risk. Because of this the diversity of multiple investments isn’t that high IMO.

    2) low yield and elevated stock prices fan yield chasing and so high yield investments might be more expensive than they appear. A change in tax policy, market correction or spike in interest rates could have a pretty big impact on these high yield low liquidity investments.

    3) tax rates are at income levels vs long term capital gain and you can’t manage the timing of the gains… So a 10% interest rate for a high earner in California may be closer to 5.5-6.5 which may not be worth the risk premium.

    4) if you invest in equity or preferred equity make sure you check the size of senior debt relative to market prices of the property and subtract a margin of safety. So let’s say there’s a 3m$ apartment with a senior debt of 2m and a projected 15% annual return based on a 3 year exit. If the value drops 10-20% the borrower may get into a forced sale or bankruptcy and the senior debt will get paid off before equity holders get anything. In the scenario above you could get a 50% or worse haircut on your initial investment. One landmine like that could wipe out the gains of many successful investments.

    I have about 3% of my Net Worth in these alternatives and I like RS more than crowdsourced consumer debt but I think they are more like 10x more risky than, say, a high yield vanguard fund vs, say 2x more risky… It’s just that the risk will be realized in rare but very painful ways.

    • retirebyforty September 7, 2017, 11:20 am

      Thank you for your extensive comment.
      1) From what I understand, these sponsors probably can’t get traditional loans from the bank. They probably have a lot of debt already. If things go well, then they will be fine. Yes, I agree it’s more risky than companies with more debt ceiling (?).
      2) This isn’t liquid. You have to hold until maturity. I think you’re right about chasing yield, though. Some of the deals are funded very quickly. I read that institutional investors are getting in on the action.
      3) I will find out more about the taxes next year.
      4) Thank you for the advice. I will keep an eye on the senior debt. What do you think is a safe level of senior debt? 50%?

      3-5% sounds about right to me as well.

  • desidividend September 7, 2017, 6:03 am

    I have invested in Fundrise with a small amount to check it .It has worked out ok so far,i will check the reality shares as well.

  • Dividend Growth Investor September 7, 2017, 5:54 am

    Hi Joe, thanks for your review of Realty Shares. I really am enjoying your writing at RB40 recently.

    My concern is that these platforms are still relatively untested. For example, we do not know how they would do during the next recession. And probably giving those platforms a try could be worth it with what many refer to as “play money”.

    Perhaps I do not understand these well enough and need to do more research. However, why would individual investors like you and me get a cut out of lucrative real estate deals, when other REITs (like the ones in VNQ) could be easily taking on those projects? I keep wondering whether those private placement real estate platforms just include mostly higher risk projects that more established players have passed up on, and may not deliver the total returns we want. The real test would be how these platforms would perform during the next recession. It would be interesting to check these out in a decade, and compare notes on how things progressed.

    A decade ago, P2P loans were a new thing. Many people invested in them through Prosper & Lending Club, and the forward results were not good.

    Best Regards,

    • Nick September 7, 2017, 8:16 am

      Really good point, DGI.

      The logic of RealtyShares probably follows the same as P2P Lending. Easier to get funding so you’ve got savvy developers looking for cheaper money.

      I think there will, for a time, be good returns (like there was with Prosper and Lending Club) but then the rest of the market will catch on.

      Joe – I’m curious what your target return is on these investments. 11% annualized would be awesome! Are you hoping to beat the S&P or just looking to put more money into real estate and diversify outside the west coast?

      Thanks for the great write-up!

      • retirebyforty September 7, 2017, 11:29 am

        My target return is 10%. I’m looking to diversify outside the west coast and move some money out of the stock market for now. The income would be helpful for our early retirement as well.

    • retirebyforty September 7, 2017, 11:15 am

      A general recession would be tough on all investments except really safe stuff like bond. I think this would do better than P2P lending. Not sure how it would compare to stock.
      If we get another housing crash, then this would take take a huge hit.
      REIT – they behave more like stock these days, from what I understand. So if the stock market crash, the REIT wouldn’t do that well even if the real estate market holds up. More research needed and we need to see how everything behave when we get a general recession.
      I’ve been pretty lucky with P2P. I’m coming out with 7-8% gain. Not too bad.

      • Mr. ATM September 10, 2017, 5:48 am

        Recession will kill most of these super risking high return P2P and RealityShares type investments. I look at them like high dividend junk bonds, they default at first sight of trouble.

        In my opinion, this is not the time to be in risky unproven investments that have not been battle (recession) tested.

        REITs on the other hand, have been around for decades and have gone through multiple recessions. Most publicly traded blue chip (BBB+) REITs have conservative capital allocation strategies and managements that know how to maneuver through economic downturns/recessions.

        Therefore, it baffles the hell out of me why people would risk their capital by investing in P2P or Realtyshare type investments when the current bull market is at its last breath on top of an anemic economic growth and an imminent downturn or an outright recession at the horizon.

        • retirebyforty September 10, 2017, 4:24 pm

          Recession will kill P2P for sure. We’ll have to see how RealtyShares fares. Flipping would be difficult, but multi family should still be fine if the fundamental is good.
          REITs are good. I’ll keep my REIT investment. Thanks for your comment!

  • Mr. Freaky Frugal September 7, 2017, 5:03 am

    Great info but this is all new to me. So maybe stupid a question but how does RealtyShares validate the offer?

    • retirebyforty September 7, 2017, 11:11 am

      Not a lot of detail. Here is what I found on their site.

      Before listing an investment opportunity, we review certain aspects of the proposed transaction for its general suitability on our platform, and try to gain an understanding of the sponsor’s track record and experience. We also perform background and credit checks on the principals of the sponsoring real estate company. Where we’re sufficiently interested, we review other transaction-specific data such as the sponsor’s pro forma financial projections, the market area in which the subject property is located, the apparent quality of the property, and the proposed investment structure.

  • Ms. Frugal Asian Finance September 7, 2017, 4:52 am

    Thanks for the great analysis, Joe! I have heard about RealtyShares a lot but didn’t really understood what it was until I read your post.

    Mr. FAF just stated his new job in DC, and we are still trying to figure out how much we should put towards our retirement accounts versus our mortgage payment. Once we settle down and have a better idea of where to allocate our income, I will need to look further into RealtyShares as you suggested. Being a landlord is great, but it can cause a big headache. @[email protected]

    • retirebyforty September 7, 2017, 8:36 am

      Thanks! Let me know if I can clarify something. I want this post to help readers understand more about real estate crowdfunding.
      You shouldn’t pay extra on your mortgage. 🙂

      • Ms. Frugal Asian Finance September 8, 2017, 12:34 pm

        Thank you, Joe! I’m having an internal conflict about the mortgage payment. Mr. FAF said I can make whatever investment decisions that I want, so I feel like a lonely person on an island trying to find a financial ship to take me back to PF land (I’m feeling a bit poetic today @[email protected]).

        Have a great weekend!

  • Harald @NonlinearThings September 7, 2017, 4:38 am

    I am thinking more and more about real estate crowdfunding in general. However, here in Europe there are also a lot of other players in the market. I have the feeling that real estate crowdfunding is a recent trend in the whole “personal finance” area. At least that is my feeling from reading and following some blogs.
    Do you agree/disagree with me? Is real estate crowdfunding more established in the US already?
    In my opinion people know that they are not investing into senior debt, but still feel so about receiving their interest rate. I would be very cautious about the project that I put my money into.
    For people with more experience in the real estate crowdfunding space: How extensive is the due diligence that I as an investor receive? Do you only get the information stated on the homepage? Is there any “data room” that I can access with all relevant documents?

    Kind regards

    • retirebyforty September 7, 2017, 8:34 am

      I don’t know anything about real estate crowdfunding in Europe. RealtyShares started in 2014 (I think) so they have some experience. From what I hear, they need better screening. Hopefully, the screening will improve with time.
      The debt investment at RealtyShares is senior debt. That’s the safest investment.
      There are more documents you can go over once you signed up. Financial, investing history, etc… Check them out and let me know what you think. Not much on the financial standing of the sponsors, though. That’s probably the biggest issue.

  • Bob September 7, 2017, 3:33 am

    I wonder if all the crowd-sharing real estate will artificially push up prices and so create the same snowball effect as 10years ago? So now all that is required is for all the crowd-sourcing real estate websites to start selling off slugs of the equity and debt in CDOs =)

    • retirebyforty September 7, 2017, 8:30 am

      Good point. It shouldn’t inflate the price that much. As long as the banks are diligent about the loans, the housing market should be okay. The crowdfunding site will enable more people to flip homes, but demand still needs to be organic. IMO…

  • Ember @ An Intentional Lifestyle September 7, 2017, 3:17 am

    This is really interesting. We want to invest in real estate, and have talked about this type of investment vs the regular rental properties. I’ve never been sure of how I felt, in large part because it was a very new idea. This definitely shows the benefits to doing this, the freedom to travel and not be the landlord but have a diversified investment. And I’ll be interested to see how your experience continues, the longer and more you invest.

    • retirebyforty September 7, 2017, 8:28 am

      I think regular rentals is much better. You have total control. However, it’s a lot more work. Real estate crowdfunding should be a good alternative, but we’ll have to see how it holds up in the long term. I’ll keep this post updated.

    • Mayanqueen September 16, 2017, 4:29 pm

      How does one become an accredited investor?

      • retirebyforty September 16, 2017, 9:22 pm

        You need to have $1 million in investible asset or have income more than $200,000 per year.

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