Within the broader investment crowdfunding categories (like real estate, angel investing, and online lending), niche players are emerging with an even narrower focus in order to carve out a corner of the market. For example, some real estate platforms only operate within a particular geography, and some platforms for funding startups only offer investments within a particular industry. As you may have guessed from the name, Hotel Innvestor offers investments in hotel properties. Started in 2014, they’re a relatively small platform, though have partnered with a number of larger players in the crowdfunding ecosystem, including North Capital Private Securities Corp., which is their affiliated broker-dealer.
Types of investments Hotel Innvestor offers
Hotel Innvestor offers both debt and equity investments in hotel properties. The two offerings available at the time of this writing (one only up to seek investor interest, not yet investment) were for between 25-40% ownership in a to-be-built hotel, both near major airports (DFW and PHL). According to their FAQ, hold times vary, but are consistent with other commercial real estate investments, usually 1-5 years.
What do you get when investing with Hotel Innvestor?
When you invest through Hotel Innvestor, 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 Hotel Innvestor, you’ll receive a separate K1 at tax time to report your share of the income received by the LLC.
How does Hotel Innvestor make money?
According to the FAQ the fees vary by investment. A closer look at one of the flowcharts from the Hotel Innvestor website (see screenshots below) shows a 1-3% annual AUM Fee, as well as a 3-5% “success fee”. They state that all projected returns are shown net of fees (you can view the specific projected returns of the available investments once you’ve registered with the site). Some investments may also include a revenue and profit share component, so be sure to read the offering documents carefully.
Potential returns and cashflow
Terms vary by investment, but there is usually a fixed dividend rate (paid monthly or quarterly), and then a pro-rata share of property income and sale proceeds.
Breadth of offerings on Hotel Innvestor
Hotel Innvestor is clearly a relatively small operation, and that’s reflected in their selection of available investments.
As of this writing, there was only one open investment (0% funded), and another looking for initial investment interest.
Regulatory framework and due diligence expectations
Hotel Innvestor has a contractual affiliation with North Capital Private Securities Corp., 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 Hotel Innvestor, the security you are technically purchasing is via North Capital Private Securities. 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 Hotel Innvestor works with North Capital Private Securities) 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 things 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.