This HoneyBricks Review will help you learn more about HoneyBricks's investment offerings, including how the alternative investments on HoneyBricks are structured, and what your potential returns might be. You can read more about the criteria we use to review investment platforms here.
Honeybricks is an investment crowdfunding platform for fractionalized commercial real estate investing. They are among the first to leverage Blockchain technology and “smart contracts” for administering and tracking investments through ‘tokenization’. HoneyBricks’ tokens are securities registered with the SEC under Regulation D and are only available to accredited investors.
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Types of investments HoneyBricks offers
HoneyBricks offers commercial real estate investments in multi-family apartment complexes located near major metropolitan areas like Seattle and Salt Lake City.
Once you’ve registered with HoneyBricks and have verified your accreditation status, you can review details of each prospective investment, including information about the property and a business plan from the sponsor showing existing property details and amenities, anticipated improvements as well as any planned rent increases.
What do you get when investing with HoneyBricks?
When you invest through HoneyBricks, as with many real estate investment crowdfunding platforms, what you actually receive is a membership interest in a Special Purpose Entity (typically 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.
What makes HoneyBricks unique is that your LLC interest is “tokenized”, which means it’s recorded and trackable on a public Blockchain (no one can see any of your personal information on the blockchain, and could only identify your specific tokens if they knew your wallet address).
A benefit of tokenization is that it will make it easier for HoneyBricks to offer a secondary market for shares in each offering, either directly themselves or through 3rd-party cryptocurrency exchanges.
It’s worth noting that with the exception of creating a Polygon-compatible cryptocurrency wallet (such as MetaMask), there’s not a significant difference in the mechanics of investing on HoneyBricks compared with other real estate investment crowdfunding platforms. As the smart contract ecosystem matures, investors should see additional benefits from tokenized investments compared with their traditional counterparts.
For each investment you make with HoneyBricks, you’ll receive a separate K1 at tax time to report your share of the income received by the LLC.
How does HoneyBricks make money?
There are no direct fees for investors to sign up or to invest with the HoneyBricks platform. Investors should review the offering docs for each offering to see the various fees paid to both HoneyBricks and the offering Sponsor (the real estate developer). For example, fees listed on current HoneyBricks offerings include:
- 1-1.5% acquisition fee to sponsor
- 1% annual management fee to sponsor
- Disposition fee (may be waived in certain circumstances)
- Construction management fees
- Property management fees
HoneyBricks also charges the sponsor an up-front fee to tokenize the offering and for use of the HoneyBricks platform, as well as an annual platform management fee of 1% of the invested equity.
All projected and actual returns shown on the HoneyBricks website are net of all fees.
Potential returns and cashflow
The projected return varies based on the specific offering, but current offerings on the HoneyBricks Marketplace advertise cash-on-cash returns of 4-5%, with the potential for additional upside on equity deals when the property is sold or refinanced, for an overall target IRR of 12-17%.
As with many real estate investments, investors receive regular cashflow from rental income (net of fees, and distributed quarterly), and then a pro-rata share of the profits when a property is sold.
Investors should review the offering documents carefully before investing in a specific property to be sure they understand how the returns are distributed. For example, on one of the properties currently listed, investors receive 100% of proceeds after expenses until an annual target return of 6% is achieved, and after that 80% goes to investors and 20% to the sponsor. For another investment, 95% goes to investors until an 8% return is achieved; 80% to investors until a 14% return is achieved; 65% to investors after that.
Breadth of offerings on HoneyBricks
As of this writing, only 2 projects are currently live for investment on the HoneyBricks marketplace.
Each available offering includes detailed financial models and information about the property, including photos, site plans, and tenant profiles.
Regulatory framework and due diligence expectations
HoneyBricks claims that less than 1% of opportunities reviewed make it to the HoneyBricks marketplace. Their review process includes assessing the property for things like demographic trends, walkability, and access to amenities. Background checks are conducted on sponsors, including reviewing their track record on prior offerings. You can find more details about the HoneyBricks diligence process on their website
HoneyBricks offers investments only to accredited investors, under SEC Reg D.
This review was first published on 20 September 2022.