It’s our pleasure to share with you that 1031 Crowdfunding recently received accolades as the best real estate crowdfunding site for 1031 exchanges by The Real-Estate Crowdfunding Review.
The Real-Estate Crowdfunding Review engaged in three months of research and analysis to rank more than 100 real estate crowdfunding sites. At the conclusion of this research, they posted Top 100+ Real Estate Crowdfunding Sites: Ranking and Review, ranking 1031 Crowdfunding as 11th overall.
Within the individual review of our company, the Real-Estate Crowdfunding Review gave us accolades as a top site for core and core plus investments and #1 for 1031 exchange investments. It further listed our advantages as offering core and core plus investments, tax advantages for existing landlords looking for a 1031 exchange, low volatility/high safety income-producing investments for buy-and-hold investors.
As the only crowdfunding site within the top 20 sites reviewed for this ranking that funds Delaware Statutory Trusts (“DSTs”), we provide 1031 exchange investors a solution with many benefits that none of the other top crowdfunding sites offers. The purchase of a beneficial interest in a DST is treated as a direct interest in real estate, thus satisfying the requirement of IRS Revenue Ruling 2004-86, allowing DSTs to serve as eligible replacement properties for a 1031 exchange. One of the benefits of a DST as a replacement property is that 1031 exchange investors have an opportunity to pool funds with other investors to purchase higher quality properties. Additionally, these properties are managed by the DST management team, thereby relieving the investors of direct management responsibilities. And also, 1031 exchange investors can close on their replacement properties through a DST within 3-5 days, removing the risk of failing to complete the exchange within the required exchange period.
As considered by The Real-Estate Crowdfunding Review, the DSTs we offer make good core and core plus investments. (Core investments are those investments in a portfolio that are considered more secure. They can be held for longer investment periods because they should continue to produce consistent income for an extended period of time. Typical portfolios may consist of about 75% core investments with the other 25% made up of riskier investments.) Our DSTs make good core investments because they are considered to have lower volatility and higher safety than other real estate investments. The volatility of these DSTs are low because the properties owned by these DSTs are investment-grade properties with long-term, net lease agreements established with reputable, credit tenants. These long-term leases assure consistent income for investors for the course of 15-20 years. The reputation and credit-worthiness of the tenants ensure the tenants will remain able to meet the lease requirements for the term of the agreements. High quality, investment-grade properties increase the potential for appreciation of property value at the time of sale.
In contrast, Patch of Land, the site ranked #1 on the Top 100+ Real Estate Crowdfunding Sites report, specializes in short-term debt investment on residential loans. The individual review by The Real-Estate Crowdfunding Review states, “These are sometimes called "hard money loans". Sponsors are often "flippers" who rehab properties, sell them for a higher price, and use the profit to pay back the loan.” Patch of Land received the top ranking, according to the review, because of “pre-funding, substantial investment volume, $23.6 million in venture capital funding, superior bankruptcy protection.”
The #2 ranked crowdfunding site, Fund Rise, as stated in the individual review by the Real-Estate Crowdfunding Review, “specializes in New York City commercial real estate."Their offerings are split between debt and equity. They have substantial volume and rock-bottom fees that are one of the lowest in the industry (0.3% - 0.5%). Additionally, their easy to use letter-based rating system (A-F) leads the industry in simplicity, and lets you easily compare the risk/reward ratio between every investment on their site.
The Real-Estate Crowdfunding Review’s research included interviews with principals, account reps and support staff; evaluation of legal documents and investment contracts; and interviews of actual investors of the crowdfunding sites. They considered many factors about each site. Based on our interpretation of the individual reviews of the top ranked sites, it appears the most heavily considered factors included: how much venture funding the companies received, whether or not the companies pre-fund their investments, the minimum investment amounts required for their funds, investor fees, whether or not bankruptcy protection is offered, and number of open investments.
From the sites that disclosed their venture funding amounts, amounts ranged from $1.6 million to $45.1 million. The Real-Estate Crowdfunding Review gave higher ranks for larger amounts of venture funding. Preference was given to the 4 sites that participate in pre-funding the investments offered on their site. Minimum investment amounts among the top sites range from $1,000 to $25,000, with one site offering investments that require a $250,000 minimum investment. Sites with lower investment minimums ranked higher than those with higher minimums. Lower investor fees are clearly an advantage to the investor, so sites with lower fees ranked higher. The average investor fee among the top ranked sites is 1%, with sites as low as 0.3% and others as high as 7.0%. Bankruptcy protection is another advantage for investors, giving sites with bankruptcy protection an advantage in the rankings. Many sites, however, such as 1031 Crowdfunding are set up in such a way that if the site went bankrupt, the investor would not suffer. A bankruptcy protection plan for those companies, therefore, is not applicable. Lastly, The Real-Estate Crowdfunding Review gave higher ranks for sites with multiple open investment offerings available on their sites. The average open investment amount was 1. The highest number of open investments during the 30-day monitoring period of the site was 19; the runner-up had 13.
The 100+ Real Estate Crowdfunding Sites report is a very helpful tool for real estate investors to compare crowdfunding sites; however, it is also a great demonstration of how diverse real estate investing actually is. Just as investors can choose from many different property types, investors can acquire real estate through many different types of investment vehicles. As we already stated, we were the only site on the list offering DSTs, most of the other sites form their investments as special purpose entities or LLCs. Though these sites all have different specialties and different vehicles offered to real estate investors, the thing they have in common is that they are all helping the crowd invest in real estate.
The Real-Estate Crowdfunding Review defines crowd real estate investing as “individual investors pooling their money, to reduce risk, boost return and invest affordably in real estate.” The below excerpt from their website “What is crowd real estate investing?” explains the benefits of crowd real estate investing:
“Institutional investors have billions of dollars to safely diversify into hundreds of properties. Individuals might only afford one or two huge, undiversified investments. One failure implodes the entire portfolio, and is just too risky.
But this changed in 2013 with the JOBS Act and the legalization of crowd investing real estate. Crowd investors pool their money into a single investment, which dramatically lowers the price of entry. Normally, a single apartment complex might cost a few million dollars. But in a crowdfunding investment, investors might only have to pay $5,000 each.
This lower-cost lets investors diversify over dozens or hundreds of investments. And this protects against the failure of one or two properties. So investing in real estate is much safer, and boosts returns.”
It’s a great honor for us to be listed among other top-ranked real estate crowdfunding companies. Since our main objective has always been to help 1031 exchange investors complete efficient and successful exchanges in the midst of a competitive exchange market, we are especially pleased to be recognized for our superior services to 1031 exchange investors. How can we help you achieve your real estate investing goals?