Streitwise Review 2020
Real estate investing is one of the most common ways that people begin to build wealth. In the past, this meant going out and purchasing a rental property. Then, you would roll the income from one property into the next and so on.
The only downside is many real estate investments require a large amount of up-front capital. In order to buy a rental property, you typically need to put 20% down which is likely tens of thousands of dollars.
Today, we have crowdfunded real estate sites that make this process a lot easier, and a lot cheaper! You certainly do not need tens of thousands of dollars to get started.
In this article, we will review Streitwise, a real estate investing platform that allows investors to get in on private real estate deals.
- Streitwise takes a different approach when compared to a traditional REIT.
- When you invest with Streitwise, they will make the selection of the investment property for you.
- Both accredited investors and non-accredited investors have the ability to invest with Streitwise.
- There are limitations if you are non-accredited.
- Streitwise aims to invest in office buildings throughout the US.
- Investors may earn returns through capital appreciation or rent payments as dividends.
- Streitwise fees vary and can be up to 5% depending on the deal, but they try to be as transparent as possible with all fees.
- The Streitwise minimum investment is $1,000.
- Your investment in Streitwise will initially be locked in for a 1 year holding period.
- Because of the nature of the investments that Streitwise offers, liquidity is not guaranteed.
- After one year you can redeem your Streitwise investment on a quarterly basis, redemption fees may apply.
- Overall, we find that the fees are quite high but the investment minimum is low.
- They have a limited operating history since just 2017.
- They do have a good performance history, earning on average 10% annualized returns.
What Is Streitwise?
Streitwise is a platform that you can utilize if you want to diversify your portfolio with revenue-earning real estate assets.
Since 2017, the company has run on the principle of giving access to real estate investments to everyone, instead of high net worth individuals.
While they don’t give exact numbers, their 2020 outlook states that their investor base grew by over 100% in 2019 and they are expecting it to be similar this year as well.
Though Streitwise is a smaller company at the moment, they have been making significant updates to their system to improve the user experience.
The Steitwise website also states that even though they are growing and looking to add new features “our thesis remains the same: We believe that buying quality, stabilized office buildings in desirable suburban-urban locations at high cap rates will result in outsized risk-adjusted returns over the long term.”
How Does Streitwise Work?
Streitwise is a company that falls into the category of a REIT. To understand this more thoroughly, it will be helpful to know what a REIT is before we continue.
What Is A REIT?
REIT stands for Real Estate Investment Trust. This is a company that both owns and manages revenue-earning real estate. Typically, these companies own properties such as apartment buildings, hotels, warehouses etc. However they can also own less common assets like cell towers and malls.
In the case of Streitwise, this means owning office buildings.
These types of companies give investors the ability to own a fraction of the property instead of shelling out the cash to buy the whole thing.
Unlike other real estate investment platforms out there, Streitwise is not crowdfunded with an online marketplace. With their system, you will be providing the funds and Streitwise will choose the investment for you.
The minimum that you can invest with Streitwise is $1,000.
Streitwise has historically paid dividends on a quarterly basis. You may also realize capital gains if you sell your shares of the REIT for a gain later to earn money from the investment.
However, not all of these opportunities are available to everyone. If you are an accredited investor, then you will have access to their entire platform.
But for the non-accredited investors, you are still able to invest but there are boundaries. The total amount a non-accredited investor can invest cannot exceed 10% of their net worth and 10% of their annual income.
International investors can apply to invest with Streitwise, but there are limitations Streitwise must follow in this regard.
High Quality Properties
Streitwise focuses primarily on commercial office buildings, not residential real estate.
They believe finding quality real estate with high quality tenants who have thriving businesses is a profitable investment strategy. So far, they have been correct!
Streitwise owns office buildings which are leased out to well-known companies such as New Balance and Panera Bread.
Options For Non-Accredited Investors
While there are limitations on the amount non-accredited investors can invest with Streitwise, they still have the opportunity to do so.
Many investment platforms are completely unavailable to those that are not accredited. Streitwise allows non-accredited investors to access their platform.
Also, having a low minimum deposit of $1,000 makes it much easier for a newcomer to get into the industry.
This can be a double-edged sword depending on your investment style, but if you find yourself being more passive and less hands-on in your investments it may suit your needs.
Since Streitwise does not have a marketplace and distributes your capital where their advisors find a fit, it means you have to make fewer decisions.
This, of course, means that you have to trust the advisors at Streitwise to make the correct decisions. While they do not have a long track record they do have a good performance history, earning on average 10% annualized returns.
Because of the nature of the investments that Streitwise offers, liquidity is not guaranteed.
A lot of the time your money is illiquid for 5 years or more depending on the deal.
Streitwise does offer some amount of liquidity through their redemption plans. The amount you can receive back is dependent on your net asset value or NAV.
- If you have held an investment for less than a year there is no redemption available.
- One to two years: 90% of net asset value.
- Two to three years: 92.5% of net asset value.
- Three to four years: 95% of net asset value.
- Four to five years: 97.5% of net asset value.
- Any time over five years is 100% of your net asset value.
For this reason, it is important for investors to understand Streitwise is a relatively long term investment. Investors should be prepared to hold on to their investment for multiple years.
The dividend reinvestment plan is a new feature on the Streitwise platform that investors can take advantage of.
Dividend reinvestment, or DRIP, means that you will be investing your earned dividends back into your Streitwise investments.
Reinvestment allows you to compound your returns by adding to your investment position.
Streitwise claims in 2019 an estimated 40% of their members took advantage of the dividend reinvestment program.
Is Streitwise Safe?
Because Streitwise is a new company and is relatively small in comparison to other platforms, it can have some red flags. Upon doing a bit of research on sites like Crunchbase, it appears they only employ about 10 or so people.
Obviously, with a newer company, you have a less tested business model and not much of a track record to go on.
So far they have stated that their dividends have been paying out 10% annually, though for 2020 they project it to be somewhere between 8%-9%.
But of course, they cannot guarantee future returns.
You also have the inherent risk of investing in real estate, if the market falls then you do stand to lose money.
We would not recommend investing your life savings, but it could be a good platform to test out and returns have been solid so far. One benefit of working with a small company is that you can email them directly with any questions or concerns you have!
How Does Streitwise Make Money?
Streitwise makes money in a few different ways, of course, they own the properties that their members invest in.
But to their members, the most important thing to take note of is obviously the fees associated with investing in their platform.
- Right up front, you have a fee of 3% of your investment just for using their platform.
- There is also an annual management fee that sits at 2% of your total investment amount.
- This will total to 5% of your total investment and that does seem quite high, and it is higher than some of the other options out there.
- However, there are no hidden fees or commissions like other online real estate investing platforms.
If you are switching from another similar service, you will have to weigh the pros and cons between the two and decide which will end up being cheaper for you overall.
- Invest in high-quality office building real estate
- Transparent about fees
- Open to non-accredited investors
- Passive investing
- Dividend reinvestment program
- Redemption plans offered
- Low number of properties
- Only office buildings available
- Short track record
- Illiquid investments
- Redemption fees
- Higher initial investment fees
Streitwise set out on a mission to bring commercial real estate investing, particularly in office buildings, to the masses. And so far they have done a pretty good job of it.
Although they haven’t been around for that much time, they have had great success and have a track record of 10% annualized returns so far. However, they expect that to be 8 to 9% in 2020.
They have also taken extra steps to make your investments a bit more liquid with their redemption plans. Though for the first few years, the penalties are significant. In general, you should not invest in a real estate investment like this unless you have a time horizon of 5 years or more.
Right now, their portfolio is very small with only two properties to date and both of them are office buildings.
If you are considering taking the dive into office space real estate investing, Streitwise may be a good place for you to start. You may want to compare it with other larger and more well established platforms before investing.