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Written by Ed Canty, CFP® on November 25, 2020
Category: 
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RealtyMogul Review 2021: Best Crowdfunded Real Estate Platform?

RealtyMogul
  • Pricing & Fees
  • Transparency
  • Investment Selection
  • Historical Performance
  • Due Diligence
  • Low Minimum Investment
3.4

Summary

For those looking for a passive real estate investment, RealtyMogul is a solid pick. While the fees are a bit hard to follow, as they vary from investment to investment, they are reasonable. The two REITs that are available to non-accredited investors have had a solid track record of generating returns.

The Mogul REIT I is geared towards income investors, paying monthly distributions.

The Mogul REIT II is geared towards growth investors as it pays less in distributions and on a quarterly basis.

While the private placements seem interesting, they are for accredited investors only as required by the SEC. Our only real gripe with this service is that the minimum investment of $5,000 is quite high and out of reach for many new investors.

Pros

  • User-friendly dashboard and experience.
  • Gives regular investors access to large scale real estate investments.
  • Quarterly or monthly distributions based on the investment.
  • Invest in both equity and debt real estate investments.
  • You can automatically reinvest your distributions.
  • Over $500 million has been raised through the platform.
  • Solid returns so far.

Cons

  • Non traded REITs are illiquid in nature, they are not easy to sell.
  • A penalty of up to 2% is paid for early redemption.
  • Fees vary by investment vehicle and are rather complicated.
  • The minimum investment of $5,000 is high.

Investing in real estate is one of the best moves an investor can make to diversify. We all have that friend or family member that made it big as a real estate mogul! The only problem is, the barriers to entry are quite high. In order to invest in real estate, you often need a minimum of tens of thousands of dollars to get started.

RealtyMogul is an online crowdfunded real estate investing platform. This is a unique alternative to owning physical real estate that requires a lower barrier to entry and caters to a new audience of potential real estate investors.

Investors can pool their money together and collectively purchase different real estate properties all over the United States. This allows you to be diversified across many different real estate markets within a single investment.

The layout of the platform allows for an interactive experience for investors. You can check the status of your investment, view ongoing updates, and monitor the progress of each project in one place.

RealtyMogul takes a modern approach to real estate investing and aims to give a better investor experience when compared to a traditional REIT investment. In fact, a lot of these crowdfunded platforms see better overall returns than publicly traded REITs! RealtyMogul offers a variety of portfolios consisting of both commercial and residential real estate.

In this RealtyMogul review, we will cover the strengths and weaknesses of the RealtyMogul platform.

RealtyMogul Summary

FeatureExplanation
Minimum Investment$5,000+
EligibilityNon-Accredited Investors (Some Options For Accredited Only)
Fees1 To 1.5% Annually
Early Redemption Fees1 To 2%
Time Horizon6 Months To 5+ Years
Investment TypePrivate REIT
Publicly TradedNo
LiquidityLow Liquidity, Can't Sell On Stock Exchange
Property TypesCommercial, Residential
StructureDebt, Equity, Preferred Equity
Private PlacementsYes, For Accredited Investors
1031 ExchangesYes
Founded2012
Address10780 California Route 2, Los Angeles, CA 90025
Contact Infoinfo@realtymogul.com, 310-907-7129

What Is Real Estate Crowdfunding?

Crowdfunding is the use of small amounts of capital from a large number of individuals to finance a new business venture.

In this case, that new business venture is a real estate project. Crowdfunding is a way for business owners to raise money, not by asking one investor for a huge investment, but by reaching out to a large pool of investors who each contribute a small amount of money.

A key difference between crowdfunding and more traditional methods of raising money is in the platform used, as crowdfunding is usually done online. Real estate investors have adopted crowdfunding as an alternative to more traditional means of financing investments.

For example, large developers are using crowdfunding platforms to attract capital from a large group of smaller investors.

Now, private real estate investment is available to average investors via crowdfunding technology!

What Is RealtyMogul?

RealtyMogul is a crowdfunded real estate investing platform where investors can pool their money together and purchase real estate projects throughout the country. The RealtyMogul platform offers investments in portfolios of properties as well as private placements in individual properties.

Investors can purchase equity investments in both commercial and residential real estate as well as real estate debt investments.

RealtyMogul offers multiple investment vehicles, however, some are only accessible to accredited investors.

When you create an account with RealtyMogul, first you will create your username and password. The minimum investment is $5,000 and you can make any deposits under $100,000 directly using ACH transfers (anything over $100,000 will need to be a wire transfer).

To invest in RealtyMogul Private Placements, you must be an accredited investor. There are a number of options available for non-accredited investors too!

Want to learn the ins and outs of crowdfunded real estate?

Here's our free guide that covers the basics of getting started with this investment.
We will show you how to get started with as little as $500 and explain the basics, like debt versus equity investments.
Get The Guide

You can choose from 4 investment options on the RealtyMogul platform:

  1. Mogul REIT I
  2. Mogul REIT II
  3. Private Placements (Accredited Investors)
  4. 1031 Exchanges

To be eligible to invest in Mogul REIT I and Mogul REIT II, you do not need to be an accredited investor! You can invest in these REITs as long as you meet the $5,000 minimum investment.

Best Real Estate Platforms

PlatformMinimumLink
Groundfloor real estate investing platform$10View Investments
Fundrise real estate investing platform$500View Investments
Streitwise real estate investing platform$1,000View Investments
Realty Mogul real estate crowdfunding site$5,000View Investments

RealtyMogul Investment Options

RealtyMogul offers 4 different investment options. Each has a unique investment objective.

The term or time horizon of RealtyMogul investments depends on the type of asset (debt or equity).

  • Debt investments typically have a 6 to 12 month time horizon.
  • Equity investments typically have a longer-term, on average 3 to 10 years.

Mogul REIT I

The Mogul REIT I is the income focused portfolio. This real estate investment trust owns properties that pay consistent cash distributions which provide income to investors. This includes a mix of both debt and equity investments. The main goal here is providing investors with consistent monthly income.

The total asset value of this REIT is $216 million, spread across 11 investment properties owned by over 5,600+ individual investors.

One unique feature of this REIT is that it pays monthly distributions instead of quarterly. The annualized distribution rate is 6% with a minimum investment of $5,000. Since inception, this REIT has had an annualized distribution rate ranging from 6 to 8% which is very impressive.

As of writing this, this REIT has provided 45 consecutive months of distributions totaling over $11.1 million in returns. 

The goals of this investment are:

  • To pay modest and stable cash distributions
  • Provide investment gains in a manner that also limits downside risk and exposure
  • Offer monthly distributions to investors

Realty Mogul REIT 2 is a real estate investment.

Mogul REIT II

The Mogul REIT II is the growth oriented portfolio. The key difference here is this REIT pays quarterly distributions instead of monthly. The goal of this investment is to realize capital gains or capital appreciation over time by making long term investments in booming real estate markets.

The majority of the money is made from the properties themselves increasing in value, but they also pay distributions on a quarterly basis. They purchase properties and renovate or repurpose them to increase the underlying value. The majority of the money is made when that property is sold.

Total asset value of this REIT is $154 million which includes 8 different property investments. Over 2,100+ investors have chosen this REIT.

The key property type for this investment is multifamily properties. The minimum investment is $5,000 and the annualized distribution rate is 4.5%.

The goals of this investment are:

  • Realizing gains through property value appreciation
  • Paying investors modest quarterly distributions as well
  • Offering a blend of growth and income

Both REITs offer a distribution reinvestment plan to investors. This allows you the ability to automatically put your distributions back into more shares of the REIT and take advantage of the power of compound interest.

Additionally, investors have the option to set up automatic recurring deposits into their REIT investments. You can choose to invest a constant $250+ into your RealtyMogul REIT every month on a fully automated basis.

Private Placements

RealtyMogul also offers a variety of private placement investments which are investments in individual properties instead of portfolios.

These private placements are limited to accredited investors only.

The SEC defines a private placement as a single investment into a specific property or small group of properties.

For the most part, all private placement offerings are slightly different within RealtyMogul. The typical investment time horizon for these private placements is 3 to 7 years with minimum investments ranging from $15,000 to $50,000.

These investments will be less liquid than a REIT investment and you should be prepared to hold them through to maturity.

A collection of real estate projects you can invest in through Realty Mogul.

1031 Exchanges

The last investment offered is 1031 exchange services. A 1031 exchange allows you to defer capital gains from the sale of a piece of real estate by investing in another property within a set window of time.

RealtyMogul offers 1031 exchanges made simple to clients. This is accomplished with no agents, no escrow, and no closing costs. The investment amount ranges anywhere from $25,000 to $50,000,000.

Taking advantage of 1031 exchanges is one of the features that real estate investors find so valuable about investing in properties. By deferring your taxes indefinitely, you can continue to grow your real estate portfolio larger and larger without taxes eating away at your returns.

What Is An Accredited Investor?

An accredited investor is someone who has a recognized level of income, net worth, or professional experience allowing them to invest in higher-risk securities that may not be registered with traditional securities laws. The SEC uses the term accredited investor to describe individuals who show financial knowledge of the risks associated with unregistered security.

In order to stay compliant with the SEC, the companies who issue unregistered securities must verify they are selling to accredited investors only. They may do this by verifying the income and net worth of the investor using tax returns, W-2’s, mortgage statements etc.

An investor must meet the following requirements to meet the accredited status:

  • An annual income of $200,000 ($300,000 if married) over the last 2 years, and reasonably expects to make this much in the future.
  • OR a net worth of at least $1,000,000, not including the value of your primary residence.

Some of the RealtyMogul investments require you to be an accredited investor, such as the private placements. The Mogul REIT I and II do not require you to be accredited.

RealtyMogul Fees

RealtyMogul charges fees based on the type of investment you select. For example, debt or equity investments. These fees include an asset management fee ranging from 0.30% to 0.50% annually. There are also legal fees for certain investment types. These fees can be up to 3% of the initial investment.

For most investments, the total annual fee ranges from 1% to 1.5%. This is one thing we dislike; this platform has a complicated fee structure.

All of the fee information is listed on each deal. However, it can be more difficult to understand than many of the other crowdfunding platforms out there that offer a simpler fee structure.

How To Start Investing With RealtyMogul

Investors looking to get started on RealtyMogul will follow a fast and easy process to get up and running.

Step 1: Create your RealtyMogul account. Creating an account on the platform takes under 5 minutes, and just requires a few pieces of basic information.

Step 2: Select your investment. From here you can browse the various investment offerings on RealtyMogul and find the type of investment that makes the most sense for your situation.

Step 3: Make your investment. You can choose to either make your investment through their secure online portal or contact their investor relations team via phone or email. You can choose the exact amount you'd like to invest and complete your transaction.

Step 4: Track your investments. From your dashboard, you'll be able to see all of the stats on your investments and easily keep tabs on your distributions and tax consequences. With all the information in one place, your RealtyMogul investment can be totally passive.

From there, you're good to go! Sit back and let RealtyMogul do the heavy lifting.

RealtyMogul Dashboard

Frequently Asked Questions

Who Is RealtyMogul Best For?

RealtyMogul is best for the investor who may not have the capital to fund a large real estate investment, but is interested in a crowdfunding service that will do just that.

The Mogul REIT I is designed for income investors who are focused on distributions while the Mogul REIT II provides a blend of both growth and income. This is also a good option for those who want a passive real estate investment instead of actively owning and managing properties.

Private placements and 1031 exchanges are attractive to investors looking to take additional control over their investments.

Early Redemption Fees?

RealtyMogul offers redemption options, however, they are subject to minor fees. For example, if clients are interested in opting out of an investment premature to their specified holding period minimum, they will need to pay a 1-2% fee. For that reason, you should commit to the full duration of the investment.

What Are Taxes Like?

As a general rule, the MogulREIT returns will be counted and filed on Form 1099-DIV and listed as dividends/capital gains.

Taxes are highly variable depending on the client's state tax laws, however. It is important to consult your tax advisor before making an out of state investment that may be taking place in the Mogul REIT.

The difference in your returns being treated in capital gains vs ordinary income could be significant so you'll want to make sure you fully understand the implications before investing.

What Customer Support Do They Offer?

In the “contact us” section of RealtyMogul’s website, clients will find two different ways to contact the firm.

RealtyMogul has a unique phone # and email listed specifically for “general inquiries.” RealtyMogul also has a unique phone # and email for “investor relations."

Both of these methods of contacting RealtyMogul are listed on their website as previously mentioned and operate 9:00 AM - 5:00 PM Monday to Friday.

What Are Returns Like?

RealtyMogul’s target return for distributions is 4.5% to 6%. This is also taking into account fees and costs of the investments. This only takes the cash distributions into account.

While you are paid out consistent distributions, your shares will (hopefully) be appreciating in value. Over time the NAV or "net asset value" of shares of both REITs have increased. This is a result of the underlying properties appreciating in value.

When you go to sell your shares, you'll recognize capital gains on the appreciation in the REIT while you held it.

What Is The Time Horizon?

The time commitment for Equity and Preferred Equity is 6 months for RealtyMogul. However, for some of the other investments, it could be many years. For the most part, expect to hold onto investment for a 3 to 5 year time horizon.

In general, real estate investments have a longer time horizon so investors should be prepared to hold their investments until completion.

What Is The Underwriting Process Like?

RealtyMogul takes the underwriting process very seriously when selecting commercial real estate opportunities. This platform focuses heavily on the risks of investment when determining which are suitable for their funds. RealtyMogul leverages its collective intelligence from the real estate investment platform to remain transparent about potential risks associated with various investments.

Is RealtyMogul Safe?

RealtyMogul delivers on its ability to stay safe and secure. With internal and external reviews of public and non-public services, firewalls and encryptions, and constant monitoring of system infrastructure, investors can feel safe. Risk tolerance is subjective, however, and if you as the investor do not feel comfortable that is your personal decision.

How Much Has Been Invested Total?

Over $500 million has been raised through RealtyMogul, financing over 400 properties worth over $2 billion.

Are Distributions Reinvested?

Clients have the choice of reinvesting their dividends back into the investment or directing the cash to their bank accounts.

How Does RealtyMogul Make Money?

RealtyMogul charges different fees to its clients for access to their services. Depending on the investment, fees will vary.

Generally, a 1 to 1.5% fee should be expected. However, it varies based on the investment.

Pros

  • User-friendly dashboard and experience.
  • Gives regular investors access to large scale real estate investments.
  • Quarterly or monthly distributions based on the investment.
  • Invest in both equity and debt real estate investments.
  • You can automatically reinvest your distributions.
  • Over $500 million has been raised through the platform.
  • Solid returns so far.

Cons

  • Non traded REITs are illiquid in nature, they are not easy to sell.
  • A penalty of up to 2% is paid for early redemption.
  • Fees vary by investment vehicle and are rather complicated.
  • The minimum investment of $5,000 is high.

The Verdict

For those looking for a passive real estate investment, RealtyMogul is a solid pick. While the fees are a bit hard to follow, as they vary from investment to investment, they are reasonable. The two REITs that are available to non-accredited investors have had a solid track record of generating returns.

The Mogul REIT I is geared towards income investors, paying monthly distributions.

The Mogul REIT II is geared towards growth investors as it pays less in distributions and on a quarterly basis.

While the private placements seem interesting, they are for accredited investors only as required by the SEC. Our only real gripe with this service is that the minimum investment of $5,000 is quite high and out of reach for many new investors.

Keep Reading:

realty mogul review
Article written by Ed Canty, CFP®
Ed is a CERTIFIED FINANCIAL PLANNER™. At his day job, Ed helps clients plan for retirement, manage their investments, and navigate their tax situation. In his free time, Ed enjoys golfing, traveling, fishing, and wrenching on his old car.

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