Yes, crowdfunding is out of reach for the average newbie syndicator. But if you’ve got a great deal and a willingness to hustle, it is possible to partner with a larger real estate company and take advantage of the capital available through crowdfunding. Platforms like Realty Mogul are looking for sponsors with a track record, so if you don’t have one—find someone who does.
Jilliene Helman is the CEO of Realty Mogul, the premiere online marketplace for real estate investing. The platform employs cutting-edge technology to connect its network of 130,000 registered investors looking for passive investments in commercial real estate with established real estate companies looking to acquire and operate commercial properties.
Realty Mogul is a marriage of Jilliene’s affinities for financial services and technology. She founded the company in 2013 to take advantage of the opportunities around crowdfunding afforded by the JOBS Act. Today she discusses why Realty Mogul chose to focus on the commercial space, the types of investments the platform offers, and the Realty Mogul definition of a good deal. Learn about the evolution of the crowdfunding industry, and heed Jilliene’s advice about partnering for aspiring syndicators.
Key Takeaways
[2:33] How the crowdfunding industry has evolved
- Started five years ago with passage of JOBS Act
- Has become more and more mainstream
- Began with donation-based sites (e.g.: Kickstarter, Indiegogo)
- Evolved into investment-based crowdfunding (i.e.: commercial real estate)
- Since 2013, Realty Mogul has raised $300M online
- Will continue to grow, scale
- Over $1B in invested capital through crowdfunding this year alone
- Provides investors access to private transactions
[3:55] Why Realty Mogul chose to focus on the commercial space
- Huge opportunity in single-family space early on (2013-2015)
- Banks off-loading residential properties
- Not easy to make money doing fix and flips
- Chose to focus on existing properties, tenants and cashflow
- Less risky than vacant residential property being renovated
[4:54] The types of investments Realty Mogul offers
- Joint venture (common) equity investments
- Paid last (riskiest part of capital stack)
- Gets piece of appreciation
- Preferred equity investments
- Paid before joint venture equity
- Receives flat, pre-negotiated rate (doesn’t get any of appreciation)
- Mezzanine debt investments
- Senior mortgage debt investments
[6:54] What Realty Mogul is looking for in a sponsor
- Don’t do business with first-time sponsors
- History, track record of success
- Real estate company with experience in market, property type
- Investors want to work with sophisticated real estate companies
- Typically don’t work with solo operators
- Looking for full-time sponsors with own company, employees
- Serious and professional about execution in investing in real estate
[8:34] Jilliene’s advice for aspiring syndicators
- Do a transaction
- Raise capital from friends, family
- Add value, build a track record
[10:12] Jilliene’s guidance around partnering with a larger real estate company to employ crowdfunding
- If have solid deal, no reason you can’t partner
- Will have to pay real estate company
- Won’t have control of transaction
- Realty Mogul requires one sponsor to have final say
[11:47] What Realty Mogul defines as a good deal
- Every deal is different
- Focus on cashflowing real estate (existing tenants)
- Majority of deals are Class B assets in secondary markets
- Look for opportunity to value-add
- 7-8% average cash-on-cash return to investors
- 15% IRR net to investors
[14:13] The requirements for passive investors on Realty Mogul
- Public, non-traded REIT open to all investors (diversified pool of commercial real estate investments)
- Private transactions limited to accredited investors (income above $200,000 or net worth above $1M)
[15:28] The process of becoming a passive investor with Realty Mogul
- Sign up for user account
- Select transaction
- Entire experience is digital
- REIT is blended vehicle
- Accredited investors pick and choose specific properties
[16:40] The benefits of working with Realty Mogul
- Track record
- Over $300M invested in commercial real estate
- Real estate companies do multiple transactions (speaks to experience)
- Network of 130,000 investors
[17:23] How Realty Mogul came to be
- Jilliene worked in banking (wealth management)
- Wealthiest clients were real estate investors
- With JOBS Act, Jilliene saw opportunity
- Blends her passions—financial services and technology
- Mission to help people generate wealth via real estate investing
[18:22] Jilliene’s take on the future of crowdfunding
- Will continue to grow
- More and more mainstream
- Investors more comfortable with doing transactions on internet
- Billion-dollar industry
Connect with Jilliene
Resources
Free eBook: The Secret to Raising Money to Buy Your First Apartment Building
