RealtyMogul Review 2020: Pros, Cons and How It Compares

RealtyMogul allows both nonaccredited and accredited investors to invest in commercial real estate online. According to RealtyMogul, the company has paid out over $136 million to its investors, financed more than $2 billion in property value and has over 190,000 registered members.

RealtyMogul says it prioritizes cash-flowing properties to help create passive income in the form of dividends. All RealtyMogul investors have access to two public nontraded REITs, and accredited investors have access to joint venture equity investments and 1031 exchanges as well.

RealtyMogul is best for

• Nonaccredited investors who want access to public nontraded REITs.

• Accredited investors who want access to private placements.

RealtyMogul at a glance

RealtyMogul features you should know

Open to nonaccredited investors: RealtyMogul offers nonaccredited investors access to their public nontraded REITs: MogulREITs I and II. Accredited investors are able to invest in any of RealtyMogul’s offerings.

Accredited investors are 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) for each of the last two years. Accredited investors must also have the expectation of maintaining that income level going forward.

Investments: RealtyMogul offers public nontraded REITs and joint venture equity investments. Here are the details on its two REIT products:

• MogulREIT I: MogulREIT I is an LLC that invests in and manages a portfolio of commercial real estate investments. It is a public nontraded REIT, which means it is registered with the Securities and Exchange Commission but isn’t traded on stock exchanges like publicly traded REITs are. MogulREIT I invests in commercial real estate-related equity and debt assets across several property types, including multifamily, office, industrial, self-storage and retail. This REIT typically pays monthly dividends.

• MogulREIT II: MogulREIT II is also a public nontraded REIT. MogulREIT II invests in common and preferred equity investments in multifamily apartments and typically pays dividends quarterly. While its historical dividends are lower than MogulREIT I (more on that below), RealtyMogul notes on its site that this REIT also aims for “significant value appreciation” over time (in other words, gains in share prices).

Joint venture equity investments are open only to accredited investors and offer private placements. These are investments offered for sale to a group of private investors, generally under exemptions from SEC registration requirements and state securities registration laws. Joint venture equity investments offer several property types, such as multifamily, office, industrial, self-storage, retail and medical offices. Investors buy shares in a RealtyMogul LLC that in turn invests in an LLC or LP that holds the actual property title.

RealtyMogul also offers 1031 exchanges. Open to accredited investors only, a 1031 exchange is a strategy for deferring the capital gains tax from the sale of a property. If you’re interested in a 1031 exchange, be sure to consult a certified public accountant, as these kinds of investments can get very complicated.

High investment minimum: The minimum varies by investment, but the lowest is $5,000. Each investment’s prospectus documents will note its investment minimum.

REIT buyback program: Many real estate crowdfunding platforms are highly illiquid, meaning the money you invest can’t be taken out for a given time frame, typically at least a few years. RealtyMogul does deal in illiquid investments (public nontraded REITs), but it offers a program that may allow shareholders to sell their MogulREIT I and MogulREIT II investments back to RealtyMogul quarterly for a reduced price after the first year. The company cautions that these buybacks are “subject to availability of capital,” however.

RealtyMogul may buy back investments at a percentage of the lesser of two figures: the investment’s purchase price or its current net asset value. That percentage is based on how long you’ve held the investment:

• 98% if you held the investment for one year but less than two.

• 99% if you held the investment for two years but less than three.

• 100% if you held the investment for three years or more.

• 0% if you held the investment for less than a year.

While losing that 1% or 2% from your investment may hurt, the buyback program offers at least some flexibility in an emergency. Still, it’s best to invest money in RealtyMogul that you won’t need for the full period specified in your particular REIT’s liquidation schedule. This document specifies when you can sell your shares back to RealtyMogul and for how much.

High return targets: The following RealtyMogul returns are calculated net of fees. As with all investments, actual returns vary and there is no guarantee that you will earn a return, or even preserve your initial investment.

• Joint venture equity: Generally pays distributions each quarter (though the exact schedule varies by investment) with a goal of at least a 15% internal rate of return.

• MogulREIT I: According to RealtyMogul, MogulREIT I has paid distributions monthly between 7.7% and 8% annualized since its inception.

• MogulREIT II: Has paid distributions quarterly equating to roughly 4.5% annualized since Jan. 1, 2018, according to RealtyMogul.

Fees: Each asset class has its own fees, and each specific investment within those asset classes has more specific fees. Before investing, review each investment’s Offering Circular. Here are some of the typical fees that come with RealtyMogul’s offerings:

• Joint venture equity: Joint venture equity investments charge an asset management fee that’s generally between 1% and 1.5% of the amount raised, according to RealtyMogul. There are also fees that are split among investors on a one-time basis at closing. These can include an acquisition fee of 1% to 3% of the purchase price and a broker-dealer fee of 4% of equity raised.

• MogulREIT I: Comes with an asset management fee of 1% based on average investment value of the assets and a servicing fee of 0.5% for debt and preferred equity. There may be deal-specific fees such as an acquisition fee when an asset in one of the REITs is acquired or sold. There is also potentially a special servicing fee of 1% for any asset deemed in special servicing.

• MogulREIT II: Comes with an asset management fee of 1.25% based on net asset value. There may also be deal-specific fees such as an acquisition fee when an asset in one of the REITs is acquired or sold.

Customer service: RealtyMogul’s website offers an FAQ section, phone and email support, but no chat option.

Short track record: Real estate crowdfunding is getting more attention today, but beneath the sleek marketing is a relatively new model. RealtyMogul formally launched in 2013, meaning it has had many years of a booming real estate market and no major economic downturns. All investments carry risk, but new platforms may carry new risks. It’s wise to look into real estate crowdfunding in general before you invest in a platform.

» Want to compare other platforms? Read our reviews for Fundrise, DiversyFund, EquityMultiple and Crowdstreet.

Is RealtyMogul right for you?

RealtyMogul offers investors a way into otherwise inaccessible real estate deals with a little more liquidity potential than some other real estate crowdfunding platforms. If you would like to diversify your portfolio and can comfortably meet RealtyMogul’s investment minimums without over-allocating to real estate, RealtyMogul may help you do that.

» Curious about other options? Check out our guide on how to invest in real estate.

RealtyMogul deals mostly in nontraded REITs. These investments are far riskier than publicly traded REITs. If you’re interested in any real estate crowdfunding platform, it’s worth reading this warning from the Financial Industry Regulatory Authority on what to watch for with nontraded REITs.

And if nontraded REITs feel just too exotic for you, the online brokers below offer publicly traded REITs and REIT mutual funds: