•  Real Estate

EquityMultiple Review -- Vetted commercial real estate investments

EquityMultiple stands out among real estate crowdfunding investment platforms because they’re primarily funded by a major commercial real estate investment firm (Mission Capital) rather than VCs. They offer fewer investments than some other platforms, but that’s a deliberate choice, both to ensure sufficient due diligence, and to keep the choices simple for their primary customer base, which remains small retail investors.

EquityMultiple

  • Investment Types: Real Estate
  • Sectors: Commercial Real Estate
  • Minimum Investment: $5,000
  • Advertised Returns: 6-14%
  • Must be accredited
 Pros
  • Strong Commercial Real Estate pedigree via financial backers (Mission Capital) and co-founders
  • Mix of debt, equity, and preferred equity offerings
  • Detailed due-diligence on investments prior to offering them (accept fewer than 5% of potential deals)
  • Responsive customer support
 Cons
  • Only open to accredited investors
  • Generally lower number of active investment compared with some other platforms

Overview

This EquityMultiple Review will help you learn more about EquityMultiple's investment offerings, including how the alternative investments on EquityMultiple are structured, and what your potential returns might be. You can read more about the criteria we use to review investment platforms here.

While many of the real estate crowdfunding platforms are VC-backed, EquityMultiple’s primary investor is Mission Capital, a traditional commercial real estate financing firm. And while many platform founders come from the tech world, EquityMultiple CEO Charles Clinton was a practicing real estate lawyer working in private equity before co-founding EquityMultiple alongside chief investment officer Marious Sjulsen. Yet despite that heritage, and while many other platforms aggressively chase institutional money, EquityMultiple is focusing squarely on individual investors. (After working through several flavors of real estate debt investments, I made my first real estate equity investment through EquityMultiple.)

Hear more from EquityMultiple CEO and co-founder Charles Clinton in our Q&A over on the blog.

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Types of investments EquityMultiple offers

EquityMultiple offers a variety of commercial real estate investments, including hotels, multi-family apartment complexes, condo conversions and even some industrial real estate. EquityMultiple is only open to accredited investors, and the the minimum investment is $5,000 (though some offerings have higher minimums).

What do you get when investing with EquityMultiple?

When you invest through EquityMultiple, as with many crowdfunding investment platforms, what you actually receive is a membership interest in an LLC created specifically for the investment. The LLC in turn is what actually holds the equity, preferred equity, or debt interest in the property. For each investment you make with EquityMultiple, you’ll receive a separate K1 at tax time to report your share of the income received by the LLC.

How does EquityMultiple make money?

The fees on EquityMultiple vary slightly depending on the type of deal:

Equity Deals

  • 2% Placement Fee (EM Commission) – Paid by Sponsor
  • 0.5-1.0% Annual Fee - Paid by Investors Annually

Preferred Equity Deals

  • 2% Placement Fee (EM Commission) – Paid by Sponsor
  • 1% spread off total preferred return – Paid (or Accrued) by Investors Monthly

Debt Deals

  • 2% Placement Fee (EM Commission) – Paid by Sponsor
  • 1% spread off interest rate – Paid (or Accrued) by Investors Monthly

Potential returns and cashflow

The projected return varies based on the type of investment (for example, debt investments offer lower returns but also lower risk as compared with equity or preferred equity), but EquityMultiple advertises returns in the 6-14% range, with the potential for additional upside on equity deals when the property is sold or refinanced.

As with many real estate investments, investors typically receive some form of regular cashflow, such as from interest payments or rental income. The amount and frequency will vary depending on the particular investment, though are usually monthly or quarterly.

Breadth of offerings on EquityMultiple

Browsing past investments, you can see a diverse selection of investments, both in terms of category (multi-family, retail, industrial) as well as geographically. Unfortunately, there’s usually only a few investments available at any given time, so if the particular investment doesn’t meet your needs, you’re on hold until a new deal comes along. EquityMultiple is catering to the individual investor (especially those relatively new to real estate) so it’s understandable that they want to limit the choices to avoid overwhelming investors, but it would be great to see more active choices available as they scale up the business

Regulatory framework and due diligence expectations

EquityMultiple is a Registered Investment Advisor (RIA), which means they are registered with the SEC.

EquityMultiple emphasizes their role in curating and selecting investments, stating that they accept fewer than 5% of proposed deals. While that should not be a substitute for your own due diligence before making any investment, it is a different approach than some other platforms offering similar investments, and which function more like marketplaces.

This review was first published on 24 March 2017.


Our Rating

Excellent

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Active Offerings from EquityMultiple

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Forest at Fenwick

An 80-unit multifamily property located in the high income, Charleston suburb of John’s Island, South Carolina. This is the third EquityMultiple offering with Rowin Capital, an experienced sponsor who has a strong track record in Southeast multifamily. The Sponsor plans to conduct light interior and exterior renovations, and push significantly discounted rents to market rates.

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Ideal Industrial Building

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Flint Creek and Rosemount Campgrounds

Invest in a first mortgage loan position that will facilitate the acquisition and repositioning of two campground resorts located in Middlesex, NY and Tamaqua, PA. The Properties benefit from strategic positioning as they are located under a three-hour drive from New York, Pennsylvania and D.C, representing over 40M in population concentration. Proceeds from the Investment would fund an interest reserve for the first mortgage loan and a light value-add business plan associated with the redevelopment of the two campgrounds to ultimately optimize the property for its highest and best use.

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Tower Place Apartments

EquityMultiple is pleased to offer an $8.9M common equity investment (the “Investment”) in the acquisition and repositioning of Tower Place Apartments, an existing 204-unit institutional quality multifamily property in the Center City neighborhood of Philadelphia, Pennsylvania (the “Property” or “Tower Place”). The Property was originally built in 1959 as an office building and was redeveloped into a luxury apartment building in 2012 consisting of 204 one and two-bedroom units.

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Alpine Note Series XIV - Six Months  offering thumbnail image}}
Alpine Note Series XIV - Six Months

EquityMultiple is pleased to offer investors a short-term alternative for their savings earning a target annualized interest rate of 6.0% over a 180-day term (the “Alpine Notes”). The proceeds of Alpine Notes will be used to prefund a portion of the investments available on the EquityMultiple platform. Since 2018, EquityMultiple has utilized either a financing facility or its balance sheet capital to fulfill this important function. Typically, these prefunded investments are held for less than 60 days.

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