Money Done Right may be compensated if you make a purchase after clicking on a link.
Ever since the first caveman charged his buddy a few animal skins for a seat by the fire, real estate has made a lot of people rich. Commercial real estate can be particularly lucrative. However, it can be difficult to know where to begin. That’s where RealtyMogul comes in.
The service promises to remove all of the hassle of investing in commercial real estate while allowing you to sit back and enjoy the passive income. Since 2012, RealtyMogul has paid out more than $120 million to its investors. Find out whether or not you should join them in our RealtyMogul review.
What Is RealtyMogul?
RealtyMogul is a real estate crowdfunding service that lets you invest in real estate for far less money than what you’d need for a property on your own. It lets you buy shares in a diverse portfolio of pre-vetted commercial properties. These include office units, apartment buildings, and retail developments. (However, accredited investors can also purchase individual properties as well.)
The founders of the company are Jilliene Helman and Justin Hughes. Previous to become RealtyMogul’s co-founder and CEO, Jilliene worked in the wealth management industry. She noticed a few things that her wealthiest clients had in common:
- They were real estate investors
- There was no relationship between their income and how much time they spent working
- They received passive cash flow via their real estate investments
Jilliene decided to create a way for all investors to profit from passive real estate, just like the uber-wealthy do. That goal led to the founding of RealtyMogul.
How Does RealtyMogul Work?
RealtyMogul allows investors to profit from commercial real estate deals worth millions of dollars for only a fraction of that amount of money. Currently, the minimum investment on the platform range is $5,000. (Find out lower-priced real estate opportunities here.)
You don’t need to be an accredited investor to take advantage of RealtyMogul’s main attraction, the MogulREITs.
In essence, a REIT is a legal business entity that owns and usually operates income-generating real estate. It owns the land and/or building and rents it out.
Investors treat REITs just like stocks. They buy shares in a REIT (just like they’d buy shares in a company). When the REIT collects the rent money, it distributes the income to shareholders in the form of dividends.
You can find some REITs listed on the public stock exchanges. That makes them a safer and more liquid way to invest in real estate than more traditional methods.
RealtyMogul’s first REIT, MogulREIT I, requires a $5,000 minimum investment. Its focus is on paying monthly cash distributions and currently reflects a total asset value of $272 million.
There are 15 investments currently held in the REIT, which is diversified across geography and property type. Since the REIT became available in 2016, it has consistently paid monthly distributions, equalizing 7.81% of the purchase price on an annualized basis. (Note that past performance is in no way indicative of future returns.)
Then there’s the MogulREIT II. It also requires at least $5,000 to become an investor. It pays its dividends out on a quarterly basis and currently has a total asset value of $128 million. This REIT holds seven apartment buildings. It has paid out distributions equating to 4.5% of the purchase price on an annualized basis. (Again, past performance isn’t indicative of future returns.)
Accredited investors can also purchase equity investments in individual properties. The minimums here range from $15,000 to $50,000. You’ll find a diverse selection of properties, from office highrises to industrial parks, to apartment communities. The terms for these private placement deals range from three to seven years.
RealtyMogul also offers 1031 exchanges for accredited investors. These are passive investment opportunities that basically involve swapping one real estate investment for another in a way that avoids capital gains taxes. It’s a complicated concept with many rules. You can read more in-depth information here.
Remember, these private placement equity deals are available only to accredited investors. The SEC defines this category of investors as individuals who:
- Have had an income of at least $200,000 or the last two years (or $300,000 when combined with a spouse) and
- Have a net worth of more than $1 million (excluding the value of your personal residence).
RealtyMogul Review: Fees
RealtyMogul’s fees vary depending on the product.
Neither MogulREIT I nor MogulREIT II charges a performance fee. However, each requires a 3% organizational fee that is due when you make a deposit.
For the sake of comparison, competitor Fundrise charges 0.15% in annual advisory fees, plus an annual 0.85% flat management fees, for a total of 1.0% each year. (Read our Fundrise review.)
You won’t be able to withdraw your money from either MogulREIT until a year has passed, after which you will be charged withdrawal fees according to this schedule:
|Time Before Withdrawal||Fee|
|3 or More Years||No Fee|
Fees on equity investments, on the other hand, vary per project. You’ll have to see each individual listing for more information.
Who Is RealtyMogul Best For?
RealtyMogul is a great investment platform for anyone who wants to focus on commercial or multifamily real estate without becoming a landlord or accredited investor. It does this through its pair of MogulREITs, which allow you to get started for as low as $5,000. That might sound like a hefty investment, but it’s a fraction of what you would pay to buy these properties outright.
For accredited investors, RealtyMogul’s private equity opportunities look appealing. However, you must examine the prospectus for each one and ideally speak with RealtyMogul’s investor support team before jumping in.
Is RealtyMogul Safe?
Although your investments with RealtyMogul aren’t guaranteed, the company does do a thorough job of vetting each property before it becomes an available investment. The RealtyMogul team uses algorithms and combined years of experience to scrutinize every minutia of every potential asset.
On average, only one in every 1,000 offered projects is accepted for the platform.
When it comes to keeping your personal data safe, RealtyMogul uses up-to-date encryption and electronic safeguards. The company also reports that its site has been built on “a secure infrastructure with multiple layers of protection.”
RealtyMogul Review: Pros
Commercial Property Focus:RealtyMogul places a focus on commercial real estate, historically a very lucrative investment.
Vetted Investments: RealtyMogul’s team expertly vets all potential investments to ensure its offerings are as low risk as possible. Only one in 1,000 suggested properties are accepted.
Easy-to-Use Platform: The RealtyMogul platform is easy to navigate, and it’s also easy to find information about each of the projects. Although there’s no mobile app, the site has been optimized for mobile use.
REITs for Non-accredited Investors: Some real estate platforms exclude all but accredited investors. The MogulREITs provide opportunities for anyone who can afford the $5,000 minimum.
Individual Property Investments: If you’re an accredited investor, you can take part in private equity deals. RealtyMogul’s offerings are diverse and include everything from urban office buildings to suburban apartments.
1031 Exchanges: 1031 exchange investments can help you avoid paying high capital gains taxes.
RealtyMogul Review: Cons
No Secondary Market: Currently, there’s no secondary market for equity positions. You must hold them until their maturity date, which typically ranges from three to seven years.
No Flat-Rate Fees for Private Deals: The fees for equity deals vary from project to project; you’ll need to study the prospectus for each to determine how much you’ll pay.
RealtyMogul Review: The Bottom Line
Overall, if you’ve got a minimum of $5,000 to spend and are interested in the potentially lucrative field of commercial real estate investing, RealtyMogul could be a great choice for you. Thanks to its duo of private REITs, you don’t need to be an accredited investor to take part.
The company combines its real estate expertise with streamlined, easy-to-use technology for a great customer experience. If you thought investments of this type were beyond your abilities, RealtyMogul just might prove you wrong.
Earn. Save. Grow.
Sign up for updates on ways to make, save, and invest money.