5 ms·

> Hooper says this is less than the fees an investor would pay to participate in a REIT, or real estate investment trust, where 15 percent might go toward fees

> Hooper says this is less than the fees an investor would pay to participate in a REIT, or real estate investment trust, where 15 percent might go toward fees before investing in the property. It should be noted that he is almost certainly referring to non-traded REITs, which are very different beasts than publicly-traded REITs. RealCrowd's FAQ states: RealCrowd is fundamentally different from a Real Estate Investment Trust (REIT) in that you are owning units of an LLC whose sole purpose is to own and operate one asset. Ownership of REIT shares are not physical ownership of real estate, more like a derivative of a real estate, since what you own is a piece of the company that owns real estate. Not only are you subject to the whims of that company, their strategy and the properties they choose to purchase, you are subject to the tremendous volatility of the stock market. By investing on RealCrowd, you are able to control your own portfolio, which assets you choose to invest in and ultimately own the real estate itself, not a financially engineered product that can be wiped out if the stock market goes into a tailspin. This is somewhat confusing: 1. I fail to see how ownership of units of an LLC differs substantially from ownership of shares of stock of a REIT. 2. Each LLC will have a RealCrowd-controlled managing member which "will have the sole and exclusive right to manage, control and conduct the affairs of the LLC" so I fail to see how investors in a RealCrowd vehicle are any less subjected to the "whims" of a third party than investors in a REIT. 3. An investment in a single property may or may not be a good idea. 4. Non-traded REITs are not subject to the volatility of the stock market. 5. Referring to shares of stock in a traded REIT a "financially engineered product" seems a bit over the top. They're no more a "financially engineered product" than units of an LLC. RealCrowd's approach is interesting, but I'm not sure it's drastically different from real estate investment vehicles already out there except in how it's being branded ("just add crowd!").

adamhooper 13y ago
Hooper here, answers below: 1) REIT shares are ownership in the operating company that derives its income from owning real estate. With a single asset LLC you own that specific building and only that building for your investment 2) We are partnering with experts in their respective micro markets that know the ins and outs of their space better than anybody. You get to choose which buildings you invest in and understand the asset specific business plan before you invest. In a REIT, you have no control over how they invest your money, what buildings they buy or how your portfolio is built. 3) If you put all of your money into one deal, there could be concentration risk. However, that's what we're solving. The ability to diversify over multiple buildings with far lower minimum investment amounts 4) Correct, but you're paying 15% load off the top in most cases and are likely going to be subject to stock market volatility as the end goal is usually to convert to public 5) Up for debate :) Where we're drastically different is in providing access for investors to institutional real estate that they would never have before. A typical deal gets funded by one institution or maybe 5-10 ultra high net worth investors, people don't have access to invest in the best real estate deals. We're changing that.
- 7Figures2Commas 13y ago
  1. In a REIT, you have an ownership stake in a company that owns real estate. In a RealCrowd LLC, you have an ownership stake in a company that owns real estate. The number of properties owned by the company may differ, but that's no justification for implying that there's a real structural difference in what the investor actually owns. 2. Every REIT will tell you the same thing about their managers. 3. I'm not sure that's solving anything. You're asking your investors to perform the same function as experienced professionals who get paid to manage real estate investments. Might some of your investors do well with this approach? Sure, but there are plenty of individual traders who handily beat hedge fund managers too (not hard these days). But that doesn't mean it's a good idea for the average investor to become an active trader. 4. The goal is not always to go public and not all non-traded REITs are successful in going public even if they want to, but it should be noted that recent liquidity events for non-traded REITs have generally been boons for the investors. Even so, at the end of the day, unless you're buying and managing property on your own, you should feel confident that the people managing your investment are going to do what's best for your investment or you shouldn't invest. Generally speaking, the more options they have, the better. I could easily argue that a vehicle with no option to entertain a public listing is potentially disadvantaged. 5. Fair enough, but calling shares in a REIT a "financially engineered product" is an odd angle for a company targeting investors who are likely to be more sophisticated than average. REITs are not exotic financial instruments so in my humble opinion, this description is over-the-top and doesn't help your positioning.
  - adamhooper 13y ago
    At the end of the day, both are viable investment alternatives, right? REITs provide liquidity, but you pay for that liquidity through lower returns and less control over those investments. Our structure provides you the control to choose which assets you invest in, can provide substantially higher cash returns than REIT yields and allows the investor control over where they put their money. In addition, our structure requires a substantial amount of money co-invested by the real estate operator so their interests are financially aligned to maximize the value of that asset as well. The better the asset performs, the better we all do. -ah
oillio 13y ago
I think item (3) is the key here. When investing in RealCrowd, you are choosing a single property in which to invest. In REITs, you are investing in a management team which will use your money to trade in and out of many different properties. The "manager" of the RealCrowd LLC's has one job, to maintain and manage a singe piece of property and the business structure. The manager of a REIT is also responsible for choosing when, how, and where to invest the money in the found. This additional responsibility is the "whim" in which they are referring. As you said, one is not better than the other. You may be better able to deploy a small amount of capital into a limited number of deals. Or, a professional manager managing millions or billions of dollars may be better able to find profitable real estate investment. Options are almost always good.

adamhooper 13y ago

Hooper here, answers below: 1) REIT shares are ownership in the operating company that derives its income from owning real estate. With a single asset LLC you own that specific building and only that building for your investment 2) We are partnering with experts in their respective micro markets that know the ins and outs of their space better than anybody. You get to choose which buildings you invest in and understand the asset specific business plan before you invest. In a REIT, you have no control over how they invest your money, what buildings they buy or how your portfolio is built. 3) If you put all of your money into one deal, there could be concentration risk. However, that's what we're solving. The ability to diversify over multiple buildings with far lower minimum investment amounts 4) Correct, but you're paying 15% load off the top in most cases and are likely going to be subject to stock market volatility as the end goal is usually to convert to public 5) Up for debate :) Where we're drastically different is in providing access for investors to institutional real estate that they would never have before. A typical deal gets funded by one institution or maybe 5-10 ultra high net worth investors, people don't have access to invest in the best real estate deals. We're changing that.

7Figures2Commas 13y ago
1. In a REIT, you have an ownership stake in a company that owns real estate. In a RealCrowd LLC, you have an ownership stake in a company that owns real estate. The number of properties owned by the company may differ, but that's no justification for implying that there's a real structural difference in what the investor actually owns. 2. Every REIT will tell you the same thing about their managers. 3. I'm not sure that's solving anything. You're asking your investors to perform the same function as experienced professionals who get paid to manage real estate investments. Might some of your investors do well with this approach? Sure, but there are plenty of individual traders who handily beat hedge fund managers too (not hard these days). But that doesn't mean it's a good idea for the average investor to become an active trader. 4. The goal is not always to go public and not all non-traded REITs are successful in going public even if they want to, but it should be noted that recent liquidity events for non-traded REITs have generally been boons for the investors. Even so, at the end of the day, unless you're buying and managing property on your own, you should feel confident that the people managing your investment are going to do what's best for your investment or you shouldn't invest. Generally speaking, the more options they have, the better. I could easily argue that a vehicle with no option to entertain a public listing is potentially disadvantaged. 5. Fair enough, but calling shares in a REIT a "financially engineered product" is an odd angle for a company targeting investors who are likely to be more sophisticated than average. REITs are not exotic financial instruments so in my humble opinion, this description is over-the-top and doesn't help your positioning.
- adamhooper 13y ago
  At the end of the day, both are viable investment alternatives, right? REITs provide liquidity, but you pay for that liquidity through lower returns and less control over those investments. Our structure provides you the control to choose which assets you invest in, can provide substantially higher cash returns than REIT yields and allows the investor control over where they put their money. In addition, our structure requires a substantial amount of money co-invested by the real estate operator so their interests are financially aligned to maximize the value of that asset as well. The better the asset performs, the better we all do. -ah

oillio 13y ago

I think item (3) is the key here. When investing in RealCrowd, you are choosing a single property in which to invest. In REITs, you are investing in a management team which will use your money to trade in and out of many different properties. The "manager" of the RealCrowd LLC's has one job, to maintain and manage a singe piece of property and the business structure. The manager of a REIT is also responsible for choosing when, how, and where to invest the money in the found. This additional responsibility is the "whim" in which they are referring. As you said, one is not better than the other. You may be better able to deploy a small amount of capital into a limited number of deals. Or, a professional manager managing millions or billions of dollars may be better able to find profitable real estate investment. Options are almost always good.