Real Estate Crowdfunding: 2018 target $5,000 passive income
*Update* RealtyShares is closing down due to lack of fund. See update at the end of this post.
Here is a new way to invest in real estate if you don’t want to be a hands-on landlord. I started investing in real estate crowdfunding with RealtyShares in 2017. My experience has been positive so far and my goal is to increase our investment to $100,000 this year. You can read more about how I got started with real estate crowdfunding here. There are also more details there about what type of investments you can make in real estate crowdfunding: debt, preferred equity, and joint venture equity.
At the end of 2017, we had $28,000 invested with RealtyShares so it will be tough to reach $100,000 this year. We can do it if we sell our rental properties, but I don’t think it’s going to pan out this year. I found a new tenant so our condo will be occupied until 2019, at least. I’ll just have to add money opportunistically. I doubt think we’ll reach $100,000 this year so this goal will be a multi-year effort.
You can see all of our passive income over on the Passive Income page. I will update these passive income pages monthly.
2018 YTD real estate crowdfunding income
September was a slow month with real estate crowdfunding. Only one project paid out last month, $39.58.
- 2017 real estate crowdfunding income: $437
- 2018 YTD real estate crowdfunding income: $1,664
Real estate projects I invested in
- 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. The estimated total rate of return is about 17% per year. The payments have been on time so far.
- 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. This deal was extended for 6 more months.
- An apartment in Texas ($5,000.) This equity deal is going well so far. The estimated cash on cash return is 10% per year. After 3 years, the property will be sold. The estimated total rate of return is about 16% per year.
- An apartment in Arizona ($10,000.) This equity deal is going well so far. It’s looking good so far. The estimated cash on cash return is 10% per year. After 5 years, the property will be sold. The estimated total rate of return is about 16% per year.
- An apartment in North Carolina ($10,000.) This equity deal is going well. The estimated cash on cash return is 8% per year. After 4 years, the property will be sold. The estimated total rate of return is about 17% per year.
All our investments are doing well so far. This is the early stage of all these projects and we haven’t seen any problem yet. I hope to generate at least 10% ROI annually from RealtyShares. The equity deals return a portion of the profit quarterly and we’ll receive the rest of the profit when the project sells at the end of the term. We’ll have to wait until each project finished to calculate the total ROI.
*Estimated ROI is just that, an estimate. There are risks with any investments including real estate. If you’re not comfortable with real estate crowdfunding, I recommend REITs. They are more established and also has good returns. We have some REITs in our dividend portfolio. I like investing in real estate more directly and the local market is getting too expensive for us. My plan is to sell our local rentals and invest more in real estate crowdfunding and stocks. I may look into local rentals again if the market drops.
Sign up with RealtyShares
RealtyShares has been excellent so far, but we need to stay invested to see if the income can be sustained over the long haul. One bad project can really derail our total ROI. I’ll have to be careful and pick the projects with good management.
RealtyShares is laying off most of their employees. They couldn’t secure additional VC funding to keep the business going. The company will no longer offer new investments or accept new investors on the RealtyShares platform. However, they will keep a small crew going to run the existing projects.
From this point forward, RealtyShares’ focus will be servicing our existing investors and approximately $400 million of assets under management. This transition will have no impact on the underlying real estate investments. Investments will continue to be managed and distributions will continue to be made. Investors will continue to receive asset management updates and year-end tax information.
Unfortunately, it looks like RealtyShares couldn’t make it work. I’ll try to get more info and give you another update soon. I’m nervous about my investments too. However, the sponsors are still in business so I’m still optimistic. We’ll see how it turns out. Here is a little more info at Financial Samurai’s forum.
ou can sign up with RealtyShares to browse the various projects and see if real estate crowdfunding is a good match for you.
Disclosure: We may receive a referral fee if you sign up for a service through a link on this page. The content contains testimonials from Joe. The 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.
Joe left his engineering career behind to become a stay-at-home dad/blogger at 38. Today, he blogs about financial independence, early retirement, investing, and living a frugal lifestyle. See how he generates Passive Income here.
Joe 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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