Update: We are keeping this review up for historical purposes, but First RealFund is no longer active or is otherwise no longer accepting investments.
Broadly speaking, there are two common categories of real estative investment crowdfunding platforms. One category is companies with a primarily tech heritage entering real estate. The other, where First RealFund fits, is experienced real estate operators applying a crowdfunding technology platform to their established expertise. Founder Daniel Drew comes from an underwriting background including stints at Deutsche Bank, Carlton Group, GE Capital, and Cantor Fitzgerald. The website and tech platform aren’t as polished as you’ll see from some of the larger real estate platforms, but the co-investing model and depth of diligence documents makes First RealFund worth a closer look, though the selection is limited at this time.
Types of investments First RealFund offers
First RealFund offers commercial real estate investments, primarily in the NYC metro area. Offerings to date include value-add rehab projects (including adding square footage) targeting high-end buyers in hot neighborhoods, as well as multi-unit apartment buildings. Investment terms have target hold times of 1-3 years (and sometimes as short as 9 months).
What do you get when investing with First RealFund?
First RealFund lists both debt and equity as target opportunities, though offerings to date have been preferred equity in the form of LLC interests. Prospective investors should be sure to read the offering documents carefully, and in the case of the preferred equity investments in particular, be aware the investment is unsecured and there is no underlying interest in the property.
How does First RealFund make money?
For the currently available offerings, there are no direct fees for investors. Prospective investors should be sure to review the specific offering documents in detail to be sure they understand how each of the parties involved is compensated.
Potential returns and cashflow
Details vary by investment, but typically include a fixed quarterly distribution along with an accrued preferred return. For example, an offering might have a 10% annual return paid quarterly, with an additional 8% accrued through the term of the investment and paid out when the property is sold.
Breadth of offerings on First RealFund
First RealFund is relatively new and selection is limited, with four posted offerings as of this writing. FirstRealFund has plans to expand nationwide, with indications that gateway cities are a likely target for near-term expansion.
First RealFund has a contractual affiliation with North Capital Private Securities, a Broker-Dealer registered with the SEC (you can see their entry in FINRA’s Broker Check service here). That means that when you invest with First RealFund, the security you are technically purchasing is via North Capital. Broker-dealers are subject to specific due-diligence requirements to ensure an investment is “suitable” for their registered customers, or they can face fines and civil action. (That does not of course provide any guarantees about investment return or performance!)
So while a broker-dealer platform (or one that has a contractual affiliation with the one, the way FirstRealFund works with North Capital) will typically disclaim that they do not offer formal financial advice (even though they are entitled to), you can still expect that the investments they offer have been thoroughly screened, including thing like criminal background checks on key executives and a detailed review of financial statements. You should of course do your own due diligence (including research outside of what you find on the platform.) There’s more about broker-dealers and other platform types over on our blog.
This review was first published on 22 December 2017.