AlphaFlow is an exceptional value for gaining broad diversification into up to 100 loans across 15 states for just $10,000.
- Wide selection of loans via AlphaFlow Exchange
- Managed Portfolio offers broad diversification
- Responsive service and in-depth reporting
- Only open to accredited investors
- It's a good value, but $10,000 may be a high barrier to entry for many retail investors
- No current way to get equity investments through Managed Portfolio
- Company Description: AlphaFlow helps investors build diversified real estate portfolios across the crowdfunding industry. Make informed decisions, faster.
- Website: https://alphaflow.com
- Founded: 2015
- AlphaFlow on Twitter (@alphaflow)
- AlphaFlow on Crunchbase
- AlphaFlow (or their affiliated partner) on the SEC's Advisor Search
AlphaFlow has quite a crowdfunding pedigree: Co-founder Ray Sturm was a founder at RealtyShares, and AlphaFlow itself was financed in part using FundersClub (for more, check out our Q&A with Ray from the blog). Like FundersClub, AlphaFlow is a graduate of famed incubator YCombinator, and it shows in how quickly they evolve and shift course in pursuit of maximal product-market fit.
I first discovered AlphaFlow while looking for a way to search and track investments and opportunities across multiple real estate crowdfunding sites. (Personal Capital is a great tool for tracking your finances, but they don't have connections in place with most of the smaller platforms.)
Types of investments AlphaFlow offers
Although they've flirted with other parts of the crowdfunding and alternative investing ecosystem (like P2P lending), their focus now seems squarely in Real Estate. AlphaFlow aggregates deals across 9 other platforms, offering investors useful ways to search and sort deals (and even invest directly without leaving the AlphaFlow UI).
AlphaFlow also offers an "Optimized Portfolio" option, with a minimum investment of $10,000, giving investors broad exposure to dozens of loans, diversified both across platforms and by geography. Proceeds can be automatically re-invested to reduce cash drag (or automatically withdrawn into your bank account for deployment elsewhere).
What do you get when investing with AlphaFlow?
AlphaFlow aggregates offerings from 9 other crowdfunded real estate platforms, including both debt and equity investments. (The equity investments typically have higher minimum investments, often $25K or more). Although with many of the investments you can initiate the investment without leaving the AlphaFlow UI, ultimately the investment itself is with the other platform. Offerings vary, but in most cases the investments are either ownership interest in a special-purpose LLC, or a Promissory Note between the investor and the platform or borrower.
When you invest using AlphaFlow's Optimized Portfolio feature, you receive a membership interest in an LLC, which then invests the funds into various loans. A big benefit to this approach is that you receive only one K1 at tax time, even though under the hood you're investing in dozens of different loans.
AlphaFlow fee structure
For their own managed funds, AlphaFlow charges a 1% annualized asset management (“AUM”) fee. There are no additional charges to self-invest in other platforms via their AlphaFlow Exchange feature.
Potential returns and cashflow
When using the AlphaFlow Exchange to invest in other platforms, the rate of return and cashflow frequency will vary by investment. With the Optimized Portfolio feature, you receive payments 1-2 times each month (and you can choose whether to have the payments re-invested, withdrawn into your bank account, or just kept in a Cash Reserve account with AlphaFlow. The advertised rate of return for the Optimized Portfolio at the time of this writing is 8-10%.
AlphaFlow's reporting has improved quite a bit over the past year, and while no doubt they are using the data they collect from loan performance to inform their own business and investment choices, it's nice to see them surface a fair amount of data back to individual investors as well. But while it's nice to get a high-level picture, in most cases the individual platforms have a lot more info to offer in terms of reporting, including detailed project status updates. They've recently added some more ways to view the breakdown of investments, which is nice (see screenshots below).
Breadth of offerings on AlphaFlow
While I wish they included more platforms, AlphaFlow's ability to search and filter across nine is quite useful (and they do seem to add new ones every couple months), and is a fantastic way for someone just starting out to get a sense of what kinds of deals are out there, and to compare terms. (And you don't need to have accounts on the platforms to see the search results.)
AlphaFlow strikes a nice balance between offering a large inventory of investment choices for the self-service investor, while making it simple to get low-cost diversification for an investor looking for a more hands-off approach.
Regulatory framework and due diligence expectations
AlphaFlow is a Registered Investment Advisor, registered with the SEC. Their investments are offered under SEC Reg D. While they do review platforms before adding them to the AlphaFlow exchange, as far as I know they do not do any further review of the individual investments made available there.
For the Optimized Portfolio feature, AlphaFlow uses their own algorithms and analysis to select loans, aiming for a blended 75% LTV across the loans.
While the dashboard and aggregation is nice, in the long term I think the real value here will be from what AlphaFlow is able to learn by tracking performance across multiple platforms. I'd love to see them offer more public insight into what the data is telling them about loan (and platform) performance along with market conditions (they do provide some of that for their funds, but I haven't seen much more shared publicly based on the overall data they are no doubt collecting).