EquityMultiple Real Estate Review – Is This Investment for You?

EquityMultiple Review – Invest Like the Professionals

EquityMultiple is an online real estate crowdfunding platform committed to bringing high-value commercial real estate investment opportunities to accredited individuals. This EquityMultiple review will help you decide whether this online real estate investing platform is for you by discussing the main features of the company and its pros and cons.

Investing in real estate is great, eExcept for the unpredictable returns, high initial outlay, and the need to deal with leaking roofs, broken toilets, and icy sidewalks. EquityMultiple’s extensive and selective vetting process results in high quality commercial real estate offers without the real estate direct investment drawbacks..

This article may contain affiliate links which means that – at zero cost to you – I might earn a commission if you sign up or buy through the affiliate link.

EquityMultiple Investments Overview

EquityMultiple  focuses on the mid-market commercial real estate market with diverse offers of multi-tenant properties. The real estate is managed inhouse with accessible phone investor relations representatives available weekdays.

Most commercial real estate investors will find suitable investments including;

• Equity – You own a share of the property and your returns are finalized after the project is sold. Investors receive a portion of the property’s appreciation. Investors can expect to tie up their investment between two and five years, or more. 
• Preferred Equity – A combination of debt and equity ownership. You receive regular cash flow from the debt portion of the investment and a proportion of the capital appreciation, when the property is sold or refinanced. The term is typically one and three to five years. 
• Senior Debt – You lend to the borrower in exchange for regular cash flow and return of your principal investment, at the loan’s term. The loan term is typically in the six to 24 month range and good for those seeking cash flow.

This review will explain the firm’s offers, investment process, pros,  cons and help you decide whether EquityMultiple  fits with your goals.

What is EquityMultiple?

EquityMultiple is a real estate crowdfunding platform for smaller accredited investors seeking opportunities to invest in professionally managed commercial real estate. The company is committed to transparency, rigorous underwriting, and investor support. Their rigorous vetting process leads to an acceptance rate of approximately five percent.

EquityMultiple has raised more than $573.3 million through 248 offers and and distributed $344.9  million to investors. There is approximately $260 million invested in the platform as of March 31, 2023.

How Does EquityMultiple Work?

EquityMultiple brings together commercial real estate companies and investors. The firm applies rigorous, technology-driven investigation and underwriting standards. This results in only five percent of real estate projects accepted onto the EquityMultiple platform.

First, sponsors and lenders undergo strict vetting to ensure a reliable track record.

Second, after vetting the project sponsors, EquityMultiple’s rigorous selection process focuses on evaluating markets. Each project, or deal, must pass the company’s proprietary due diligence process before moving to the next stage.

Third, the projects that survived the previous selection stages undergo stress testing of underwriting assumptions, scrutiny of their legal documents, and third-party reports. Fewer than 10% of the sponsored projects pass this due diligence stage.

Fourth, investors are offered successful projects through a streamlined platform built with bank-grade security protocols.

All investments are in institutional commercial real estate in the form of debt, equity, and preferred equity  deals. Available properties vary and you can diversify your portfolio across markets, asset classes, and project types.

EquityMultiple’s Niche in Real Estate Crowdfunding

EquityMultiple differs from other crowdfunding investment platforms in the following ways:

• It looks for commercial properties, short-term senior loans, and projects with construction components (these have to meet specific, stringent criteria).
• The company uses a three-stage due diligence process to select fewer than five percent of all submitted projects.
• It focuses firmly on separate projects. Unlike other crowdfunding real estate investing platforms, it doesn’t offer REITs or real estate investment trust investment funds. EquityMultiple is for investors seeking greater autonomy in selecting their investment projects. Its in-house diligence measures provide added comfort for investors.
• Creating a separate LLC keeps each project or real estate investment opportunity independent. This’s an additional layer of protection for investors.

Less experienced, non-accredited investors may wish to look at real estates crowdfunding platforms like Fundrise and RealtyMogul.

How is investing in EquityMultiple different from investing in real estate stocks and REITs?

When investing in EquityMultiple, you invest in specific projects rather than companies (stock) or various real estate companies (REITs). 

EquityMultiple offers greater transparency than investing in publicly traded REITs. 

The private-market real estate investments on EquityMultiple may offer returns that correlate less closely with the stock market. This can add diversity to a stock and bond portfolio. 

Who Can Invest With EquityMultiple?

EquityMultiple is a company committed to  selective and robust due diligence.

This applies not only to sponsors and projects but also to investors (or lenders).

To invest with EquityMultiple, you must be:

• An accredited investor
• Access to a minimum of $5,000 (some projects require higher minimums).

To be an accredited investor, you must either have an annual income of $200,000 ($300,000 with a partner) or have a net worth of $1,000,000 (this could be shared with a partner but must exclude the value of your primary residence). Knowledgable investors who work in the financial markets pass the accredited investor threshold.

This requirement prevents many small investors from investing with EquityMultiple.

 

Who Should Invest With EquityMultiple?

Provided that you qualify as an accredited investor, you should consider investing with EquityMultiple if you are:

• Looking to diversify your investment portfolio. EquityMultiple offers an opportunity to add institutional-grade real estate to your portfolio.
• Aiming to get into commercial real estate deals that are otherwise inaccessible. Investing in prime commercial real estate was traditionally the domain of the very wealthy. EquityMultiple is changing this; provided you are an accredited investor, you can access deals previously closed to smaller investors. 
• Able to cope with risk. With any investment, there are risks. EquityMultiple investments are illiquid. Investors should be prepared to leave their money invested for several years. 
• Wish to benefit from a robust due diligence process without carrying it out yourself. Often success in real estate investing hangs on robust due diligence; still, few of us have the time, skill, dedication and will to carry it properly.  
• Seeking a passive investment. Investing with EquityMultiple is, apart from the initial selection, largely passive.
• Looking for regular cash flow. Some of the investments offer monthly or periodic cash flow, frequently with higher yields than are readily accessible from the public financial markets. 

EquityMultiple Review: Key Features

Here’s an overview of the company’s key features to help you decide whether EquityMultiple is a suitable investment.

EquityMultiple Investment Options 

EquityMultiple divides investments into three categories. Learn how the investments work with sample examples of real investments either active or previously close. 

Earn – Commercial real estate with cash flow and a relatively shorter holding period.

The sample offering below offers an 8% monthly cash flow and 7% return paid from the proceeds of a refinance of property sale. 

Grow – Commercial real estate investments with appreciation potential. These properties are typically bought at a discount, with the opportunity to create value by the managers. Here’s an example of a “Grow” property with an expected five year holding period.

Keep – Keep offers are predominantly debt offers with shorter terms and attractive yields. This Sample investment has a $5,000 minimum investment requirement and a nine month term, after which you can withdraw your initial investment or roll it over into another. 

Debt investments carry lower risk and common equity real estate deals are the highest risk. You can hedge the investment risk by selecting several projects and diversifying across the type of investment and projects.

EquityMultiple Opportunity Zone Funds and other types are also available periodically.

Realized returned since inception and 1st quarter 2023

EquityMultiple Investment Returns

Here are the target investment returns for the three types of investments EquityMultiple offers:

• Syndicated debt: Target rate of 7-12% 
• Preferred equity real estate: The current return of 7-12% and preferred return of up to 17% 
• Equity real estate: Target annual cash return of 6-12% and target internal rate of return of 14%+.

The overall default rate is 3.7% between inception and 1st quarter 2023. Your returns may be lower or higher. Syndicated debt has delivered approximately 5.8% a year. EquityMultiple’s fully-realized investments have yielded a net 17% IRR, on average. 

 It’s wise to understand that past and expected returns are not equivalent to future returns.

EquityMultiple Review of Fees

The EquityMultiple fees vary per offer and category. The fees are clearly stated in the investment offering document. Here is a clear breakdown of the expected fees for each type of investment. The reported returns are net of fees. 

EquityMultiple is entitled to charge an Administrative Expense to cover tax document creation, annual filings, and legal company formation for individual offers. The fee is shared among investors and ranges from $30 to $70 per year.

Equity

• Annual monitoring and reporting fee – From 0.5% to 1.5% of invested capital.
• Profit participation fee – After the investor receives return of principal and promised IRR, EquityMultiply might receive a percent of the excess profit. 

Debt and Preferred Equity

• Servicing fee – Typically one percent, but might be more or less. 

Funds

• Upfront origination fee – Paid upfront and varies per fund, and might be levied in addition to other fees. 

Fees on debt and preferred equity investments are pretty straightforward: Typically, a single percentage point assessed annually.  EquityMultiple charges two types of fees for equity investments: A management fee and a fee on investment returns.

EquityMultiple Data Security

EquityMultiple collects information about you, your investment preferences, and your financial situation. This is customary for all financial platforms. 

This naturally raises questions about the security of this information. Rest assured that investor information security is a top priority for the company, and the provisions that have been made match those in the banking sector. All information is encrypted, and the company uses bank-grade protocols to store and transmit data.

EquityMultiple Review of Customer Service

The company offers week day phone and email customer service by their investor relations representatives. The company purports easy access to customer service representatives. We appreciate phone customer service, as some platforms lack this basic feature. 

In scanning the internet for external customer service validation, we were somewhat disappointed. TrustPilot, received seven, rather negative reviews. In the company’s defense, seven is a very small sample.  The company is not rated by the Better Business Bureau. The non-biased real estate crowdfunding website, run by serial Ian Ippolito,  made several negative allegations about the company. 

We suggest that investors interested in the company, call them directly and perform your own due diligence.

EquityMultiple Investment Risks

Investing in EquityMultiple presents the following risks:

• You have very little control over your investments beyond the initial selection when crowdfunding. 
• EquityMultiple is a start-up company and comes with the risks of start-up companies. 
• Investments in EquityMultiple are illiquid, and you can’t sell your securities; you must hold them until the end of the term. 
• The short tenure of the company suggests performance results should be taken with a grain of salt. 

How to Sign Up for EquityMultiple

To start investing with EquityMultiple, register on the online platform. It’s a very efficient process that took me 6 minutes (yes, I timed it, and at least a minute was taken by verifying my email address). 

First, you’re asked to provide your contact details, including your address, and to verify your email address. After that, you must be prepared to answer questions to establish your accredited investor status, employment situation, investing experience, and investment objectives. 

Once this has been done, you’re either accepted or not on the platform. If approved, you can create an investment account (I suspect this will take a bit longer), and you can view the project offerings.

You can get assistance from the customer support team at any sign of trouble.

EquityMultiple Real Estate Review Summary

This summary of the key features of EquityMultiple will help you decide whether to add any of the platform’s commercial real estate offers to your portfolio. 

	Syndicated Debt	Preferred Equity Real Estate	Equity Real Estate
Accredited investor	Yes	Yes	Yes
Minimum investment	$5,000	$5,000 – $10,000	$5,000 – $10,000
Term of investment	6-24 months	1-3 years	2-5 years
Expected returns	5-12%	7-12%	Up to 14%
Fees	~1%	~1%	~0.5-2% plus ~10% of the excess profit
Risk estimate	Low	Low to Medium	Medium to High
Historical default rates	0.00%	4.17% of investments with unrecovered principal	0.00% of investments with unrecovered principal

The summary details are subject to change. 

Pros and Cons – Is Real Estate Crowdfunding With EquityMultiple for You?

EquityMultiple Pros

• EquityMultiple offers commercial real estate investment opportunities previously unavailable to the mass affluent investors.
• The company is a versatile commercial real estate platform offering opportunities for diversification across investing instruments, classes, markets, and, most importantly, projects.
• Syndicated debt investments have collateral: Loan default will lead to foreclosure on the property, which will pay your loan. However, the total return of the principal isn’t guaranteed.
• The company is transparent about fees, expected returns, and risks. There’s a very comprehensive section on FAQ on the website, and we recommend reading it before investing.
• Weekday phone customer service..
• Good user experience and website is easy to navigate.

EquityMultiple Cons

• The requirement to be an accredited investor to invest with EquityMultiple prevents many smaller investors from benefiting. 
• Investments with EquityMultiple are illiquid, and securities cannot be sold before term (except in exceptional circumstances).
• Investing with EquityMultiple means that you have low control over your investments.
• You might be required to file an additional  state tax return, if the property that you’ve invested in is located outside of your home state. 
• Fees are high.
• Several  online complaints about non-performing investments. 

FAQ

Is EquityMultiple the Right Real Estate Crowdfunding Investment for You?

EquityMultiple is considered an alternative investment to typical publicly traded stock and bonds and funds. Investing in private market real estate has high return potential and higher risk. Investing in only one offer is riskier than divrsifying by purchasing a variety of offers.

The platform is transparent with its fees and projected and historical returns. If you fit the accredited investor benchmarks, can handle a degree of risk,  have $20,000 or more to diversify across the platform, and can leave your money invested for a few years, you might consider investigating EquityMultiple. It’s a simplified path to investing in commercial real estate assets, creating a diversified investment portfolio, and leveraging crowdfunding power all in one place.

With the popularity of crowdfunding for accredited investors, you might compare EquityMultiple with other investments for accredited investors. 

Finally, evaluate your existing investment portfolio, goals, and timeline. Then consider the opportunities and drawbacks of EquityMultiple to make the best investment decision for you. 

Related

• Learn About Real Estate Crowdfunding And How To Diversify With REITs
• How To Invest A Million Dollars For Income
• Fundrise vs Diversyfund vs Groundfloor
• 10 Best Alternative Investments Right Now
• Investing In Real Estate Notes Guide
• Pros And Cons Of REITs – Should I Invest?

Sources: 

• ADV – https://files.adviserinfo.sec.gov/IAPD/Content/Common/crd_iapd_Brochure.aspx?BRCHR_VRSN_ID=842227
• https://app.equitymultiple.com/
• Track  record – https://equitymultiple.com/wp-content/uploads/2023/02/EquityMultiple_Track-Record_Q1-23.pdf
• Website – https://equitymultiple.com/
• Frequently asked questions – https://equitymultiple.com/faq
• Fees – https://equitymultiple.com/blog/fees

Disclosure: Please note that this article may contain affiliate links which means that – at zero cost to you – I might earn a commission if you sign up or buy through the affiliate link. That said, I never recommend anything I don’t personally believe is valuable.

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