The bottom line: EquityMultiple blends crowdfunding with a more traditional real estate investing approach that can lead to high returns. Unfortunately, it’s available only to accredited investors.
Pros & Cons
Access to commercial real estate investments.
Possible high rates of return.
Only open to accredited investors.
High investment minimum.
Complex fee structure that varies by investment.
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EquityMultiple is an online real estate company that allows accredited investors to invest in professionally managed commercial real estate. Accredited investors can use EquityMultiple's online platform to access real estate investments in different markets. EquityMultiple says its team has closed over $80 billion in real estate transactions, and that it stands out from other real estate investing platforms by offering equity, preferred equity and syndicated debt investments.
EquityMultiple is best for:
Accredited investors looking to diversify through real estate.
Those who can invest $10,000 or more.
Individuals who want access to commercial real estate.
EquityMultiple at a glance
EquityMultiple features you should know
Accredited investors only: EquityMultiple may open up commercial real estate investments to individual investors, but those individuals need to be accredited. Accredited investors are defined as individuals with a net worth, or joint net worth with a spouse, of more than $1 million (excluding their home’s value), or an annual income of more than $200,000 ($300,000 with a spouse) in each of the past two years, with the expectation of maintaining that income going forward. The company says it may add investment opportunities for non-accredited investors in the future.
High investment minimum: The minimum varies by project, but starts at $5,000. A $10,000 minimum is more common, and additional shares are typically offered in increments of $5,000. The minimum for investments made through a self-directed IRA is $20,000.
Specialized investments: Unlike several of its competitors, EquityMultiple doesn’t offer real estate investment trusts, or REITs. Instead, the company offers investors access to preferred equity, common equity and syndicated debt investments (also referred to as senior debt) — all focused on commercial real estate. EquityMultiple recently started offering Qualified Opportunity Zone investments, which offer potential tax incentives.
Investors in preferred equity are given preference over other investors in terms of cash flow. Once all debt has been paid, profits are given to preferred investors until the “preferred return” is met.
Common equity investments carry the highest risk-reward ratio of EquityMultiple's asset types. Since the other classes (like preferred equity) get paid first, these investors are lower on the priority list of getting paid. However, expected returns of common equity investments are higher to account for the additional risk.
Syndicated debt allows investors to loan their money (in a pool that also includes money from other investors) to one of EquityMultiple's partners for a project. The syndicated debt is part of a loan that was originated and funded by a third-party lender, and EquityMultiple claims that those experienced lenders — who are well-versed in their local area and projects — create another layer of diligence for investors.
High returns: The targeted rates of return are fairly high and depend on the type of investment:
Syndicated debt: 8% to 13% annual rate of return.
Preferred equity: 8% to 12% current preferred return; 10% to 18% total preferred return.
Common equity: Internal rate of return of 14% or higher.
All of EquityMultiple's rates of return are presented net of fees. Of course, actual returns will vary and there is no guarantee that your investment will earn a return at all.
Distributions are typically paid monthly or quarterly, though EquityMultiple stresses that each investment will differ, and it says to refer to specific investment documents to know each investment’s distribution timeline.
Investment time frames: Each type of investment has a target hold period as well: Preferred equity is typically 1 to 3 years, syndicated debt is typically 9 to 24 months, and common equity is usually 2 to 5 years (though common equity investments tend to vary more than the other assets in terms of time frame). Opportunity Zone investments target a hold of 10+ years in order to secure the maximum possible tax incentives for investors. Keep in mind that these assets are illiquid, so if you may need the money before the time frame is up, it may be best to consider other investment options.
Easy-to-use platform: Accredited investors start by creating an account. After receiving an email confirmation, you can register (which includes self-certifying that you are, in fact, accredited — though you won’t need to provide documentary evidence of this) and immediately start reviewing the investment offerings. Signing up for an account doesn’t require making a deposit, but if you decide to invest, you can link the funding source online.
Complex (and high) fees: Most equity investments on EquityMultiple are charged an annual fee of 0.5%. EquityMultiple also receives 10% of an investor’s profits after they have recovered their initial investment (what they call profit sharing).
Preferred equity and debt investments are charged a servicing fee that is typically 1% of the invested capital — this fee is charged as a spread, or the difference between the interest rate paid by the loan sponsor and the interest rate paid to investors.
Because each investment listed on EquityMultiple’s platform is unique, each investment has its own fee structure. To know exactly how much you would pay in fees for each investment, read the specific disclosure and registration statements. If you don’t understand the fee information, contact one of EquityMultiple’s representatives.
Newer investment platform: Like many of its real estate crowdfunding competitors, EquityMultiple is a newer company. Since the company was founded in 2015, investors have invested in more than $1.3 billion of commercial real estate through EquityMultiple. Despite this, the company itself is still quick to remind investors that every investment carries risk, and that investors should read each specific investment’s documents carefully before making an investment. EquityMultiple provides a prospectus for each investment.
Is EquityMultiple right for you?
EquityMultiple’s unique set of investment opportunities gives accredited investors an easy way to diversify the real estate within their portfolio.
If you’re interested in investing in real estate, we recommend allocating a small portion of your overall portfolio. If you can do that and meet EquityMultiple’s investment minimums, which range from $5,000 to $10,000, you might find a good fit in the platform.
However, it is important to note that EquityMultiple's investments are illiquid — meaning you won’t be able to get your investment back immediately, or in some cases for several years. Investing in real estate this way is a long-term game, and if you’re not prepared to wait it out, you may want to consider more liquid assets like publicly traded REITs.
» Curious about other options? Check out our guide on how to invest in real estate
on EquityMultiple's website