Is EquityMultiple Worth It? In-Depth Platform Review
12 min read.
It seems like diversifying your portfolio with real estate investing is still considered an "alternative" investment, but with the roller coaster of the markets these days, what was once considered an “alt” has now become an essential component in ensuring that your portfolio stacks up against the uncertainty associated with stocks, bonds, and crypto.
The traditional 60/40 portfolio simply isn't enough anymore, not with all the news of banks going belly up... The benefits of the real estate investment market for building your portfolio are clear, but the roads to access them? Not so much.
However, the emergence of real estate crowdfunding platforms allows individual investors to pool their money together to invest in real estate projects, making it easier than ever to diversify. Let’s review one of the leading platforms in this space: EquityMultiple.
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EquityMultiple Review 2023: Summary
EquityMultiple launched in 2015 and has quickly become a popular choice for working professionals to connect with high-quality commercial real estate investment opportunities, without the hassle of having to purchase and maintain a physical property.
EquityMultiple offerings are categorized into three main investment pillars — Keep, Earn, and Grow — which offer further diversification and the ability for individuals to tailor their investments to their portfolios and investing goals.
One of the notable benefits of this real estate crowdfunding platform is that it requires a minimum investment of only $5k, making it easy for investors to diversify their investments by spreading them across multiple properties.
With a low initial investment and a variety of real estate projects, individual investors can diversify their investment types and get the most bang for their buck — while minimizing risk and maximizing potential returns.
Investment options on the EquityMultiple platform are offered in several different asset classes and product types, including multi-property funds and short-term notes.
EquityMultiple differentiates itself by singlehandedly offering access to opportunities across the capital stack, such as senior debt and preferred equity deals, LP equity investments, and fund investing.
EquityMultiple’s complementary investment offerings form a unique wealth generation ecosystem, tailored to your goals. Get Started Today.
How Is EquityMultiple Different From Other Real Estate Crowdfunding Investment Platforms?
One of its main differentiating features is an in-house Asset Management Team that works from close to exit of each investment to protect the principal, address unforeseen risks, and provide timely updates for each offering on their real estate investment platform.
Other crowdfunding investment platforms might follow more of a marketplace operating model and are generally not a party to investments and don’t have operation control or management of the investments they offer.
EquityMultiple, conversely, is a party to 95% of the investments made through its platform through its manager-affiliated entities.
Another way EquityMultiple investment options stand out from the crowd is by enabling investors to put their money into untraditional, niche real estate investments across the United States such as car washes and campgrounds.
By offering these diverse real estate deals, individuals can build a diversified portfolio, accessing various regions and asset classes, thus reducing their risk while potentially amplifying their returns.
Interested in commercial real estate investments, or particular investment funds? Check EquityMultiple Live Investments.
EquityMultiple Review 2023: The Cons
Now let’s take a look at some of the cons of EquityMultiple as a real estate investment platform. Perhaps the biggest turnoff for investors is the accreditation requirement – as of now, EquityMultiple offerings are only available to accredited investors.
These income or net worth requirements are in place to protect investors from losses they may not be able to withstand, but they are also an annoying barrier to entry for experienced non-accredited investors.
A more general con is that real estate investments tend to be illiquid, meaning that it can be a hassle to sell your investment and gain access to your funds once you have chosen to invest them.
It's crucial to carefully consider your investment goals and time horizon before investing with any real estate companies since many require you to hold for the duration of the project.
Along a similar line, investors may want to research the tax filing process associated with real estate investments, as there are additional nuances to consider when filing annual tax returns.
EquityMultiple Review: Three Ways Real Estate Investments
EquityMultiple presents a distinctive ecosystem of investment offerings that seamlessly complement one another. This ecosystem is meticulously designed to cater to individual financial objectives, ensuring a tailored approach to building wealth.
Keep - Savings Account Alternatives
These diversified, short-term notes provide compelling yield - well above the typical CD - and a flexible way to manage cash.
One of their most popular investment opportunities is the Alpine Note, which offers investors the opportunity to earn an attractive rate of return, fee-free.
Alpine Notes bear a contractual fixed APY of 5.85%, 6.9%, or 7.4% - higher than rates currently offered by leading high-yield savings accounts and CDs.
One of the main differentiators is the Note’s short duration. Real estate investments are typically illiquid assets, meaning investors’ money can be tied up for years, until the sale of the property or another capital event.
Alpine Notes, however, allow accredited investors to get their principal back quickly. While the Note is not as liquid as a typical savings account, it has a maturity date much shorter than the typical CD, while offering a rate that is significantly higher than the typical CD.
In a persistently low-interest rate environment, many investors will rejoice at an opportunity for attractive current yield from a relatively liquid investment.
You can invest in Diversified Notes for as little as $5,000 if you are an accredited investor. Elevate Your Savings.
*Alpine Notes is not a savings account and returns are not guaranteed. This product is not offered by a bank and as such it is not FDIC insured. The Alpine Note is not a CD and any relative comparisons of yield or return are strictly for purposes of comparison.
Earn - Income Focus Commercial Real Estate Investments
EquityMultiple specializes in catering to income-focused accredited investors seeking commercial real estate (CRE) opportunities that provide attractive current yields, payment priority, and relatively shorter terms.
The platform offers a range of investment types tailored to these preferences, including senior debt with targeted returns ranging from 8% to 12%, preferred equity with target preferred returns spanning 10% to 14%, and yield-focused funds.
This array of investment options underscores EquityMultiple's commitment to meeting the income-centric needs of its investors within the realm of CRE.
View these real estate funds and find your next investment opportunity. Start building a more diversified portfolio today.
Grow - Grow Focus Commercial Real Estate Investing
With compelling commercial property projects that promise substantial upside potential, EquityMultiple opens the door to taking your investment endeavors to new heights.
Their diverse range of investment options includes value-add and opportunistic equity deals, with targeted net internal rates of return (IRRs) surpassing 23%.
In addition, the platform offers upside-focused funds and growth-focused portfolios that further emphasize the pursuit of significant growth opportunities.
With these investment avenues, EquityMultiple empowers investors to tap into the world of CRE and unlock its promising potential for enhanced returns and portfolio advancement.
How Do I Start Investing With EquityMultiple?
Starting to invest on EquityMultiple is a straightforward process. First, visit the EquityMultiple website and click the 'Sign Up' button to create a new account.
You will be prompted to enter basic personal information, including your name, email address, and phone number. As EquityMultiple is currently only available if you're an accredited investor, you'll need to demonstrate a certain level of income or net worth.
After that, you will need to complete an investor questionnaire to assess your investment objectives and risk tolerance. Once your account is approved, you can view available opportunities on the platform such as preferred equity investments, debt deals, or professionally managed commercial real estate projects.
Each opportunity includes detailed information about the deal, potential investor profits (returns), and the risks involved. To invest, select the particular deal that aligns with your investment goals, click 'Invest Now', and follow the instructions to complete your transaction.
What Is the Minimum Investment Required for Equitymultiple?
The minimum investment required for EquityMultiple varies depending on the types of investments.
The 'Keep' pillar, anchored by the Alpine Note offering, provides a compelling cash management tool and means of tapping into attractive yield over a short hold period - with a $5k investment minimum.
For individual commercial real estate deals - whether they are debt, equity, or preferred equity investments - the minimum investment typically starts at $10,000.
However, for funds and portfolios, EquityMultiple may require a higher minimum, often starting at $20,000 or $50,000.
It is always recommended to review each specific investment opportunity on all real estate investment platforms to ensure an understanding of the investment commitment and potential returns.
What You're Investing in
EquityMultiple offers a rich variety of investment opportunities tailored to cater to a broad range of accredited investor preferences:
- Senior debt investments: involve loans that have the highest priority of getting repaid in case the borrower defaults. Debt investments usually offer attractive returns ranging from 8% to 12% and come with relatively shorter terms, making them a lucrative option for income-focused investors.
- Preferred equity investments: hold a higher claim on earnings and assets than common stock but lower than debt deals. They come with targeted preferred returns spanning 10% to 14%, making them an attractive choice for accredited investors looking to balance risk and reward.
- Yield-focused funds: a pool of different types of investments that aim to generate a specific return. These funds often aim for an aggressive growth strategy that could enhance an investor's portfolio.
- Growth-focused portfolios: designed to maximize capital appreciation. They often include high-risk, high-reward investments like value-add and opportunistic equity deals, targeting net IRRs surpassing 18%. This option is ideal for investors with a greater risk tolerance seeking substantial growth in their investment.
- Since 2021, EquityMultiple has diversified its offerings to include a flexible cash management tool with compelling rates and shorter terms — The Alpine Note Series with 3-, 6-, and 9-month hold period options, which has now become the most popular offering for new investors of EquityMultiple.
Your next real estate investment could just be a click away - Get Started on one of the most popular real estate investing platforms.
How Much Does It Cost To Use EquityMultiple?
The financial services industry is currently experiencing a fee revolution that originated from trading platforms like eToro and expanded with firms such as Vanguard and the more recent Robinhood.
While this revolution initially benefited the stock market, it has been slower to reach real estate and alternative investments due to historical barriers to entry.
EquityMultiple is actively working to change this by leveraging technology and promoting transparency to enhance investor returns. Here are how fees break down across all types of investments:
- Short-term notes: this alternative to savings is fee free to accredited investors.
Direct Investments (investments into distinct commercial properties): typical annual fees on direct investments are 1% or less and, in some cases, are fee free to investors.
- Lending investments* – Typically a 1% annual asset management fee.
- Equity investments – Typically a 1% annual asset management fee or a flat annual service fee of $250, depending on the particular structure of the investment. In some cases, this investor fee is paid by the project and is therefore fee-free to investors.
- Fund Investments: typically have similar fee structures to equity investments.
Join EquityMultiple in embracing this transformative movement within the financial sector!
*This includes senior debt, mezzanine debt, participation interests, and preferred equity investment.
Does This Mean You Don’t Need To Conduct Due Diligence?
Absolutely not. While EquityMultiple provides extensive details about its investment opportunities and ongoing investor reporting, investors must conduct their own due diligence.
This can involve researching the underlying real estate property, the sponsor, the market, and fully understanding the terms of the deal.
Even with a platform as transparent and information-rich as EquityMultiple, all investments come with inherent risks. Hence, due diligence is a fundamental step in the investment process to ensure your investment decisions align with your financial goals and risk tolerance.
What’s the Average Return With EquityMultiple?
As of the Q2 of 2023, EquityMultiple has delivered investors a 17% net total return.
Actual returns can be higher or lower, depending on a variety of factors including the performance of the real estate market and the specific project. As such, while pursuing these potentially attractive returns, investors should also be mindful of the associated risks.
How Does EquityMultiple Make Money?
EquityMultiple generates its revenue through a dual-fee structure.
Firstly, there is an origination fee that ranges from 0.5% to 2%, charged to the project sponsor. This fee is based on the total capital raised for a specific investment offering.
Secondly, there's an annual servicing fee of up to 1% of the total investment amount, charged to the accredited investor. This fee covers the cost of maintaining the investment, including investor reporting, distributions, and tax documentation.
Additionally, for some investment types, EquityMultiple may earn a performance-based profit share, aligning their interests with those of the investors.
This fee structure encourages EquityMultiple to select high-quality investment opportunities, as their success is directly tied to the success of their investors.
Can I Invest Through an IRA With EquityMultiple?
Yes, EquityMultiple welcomes investments made through Self-Directed IRAs. Investing through your Self-Directed IRA allows you to pursue the attractive returns offered by real estate companies while enjoying the tax advantages associated with IRA investing.
EquityMultiple has even partnered with a handful of Self-Directed IRA providers to streamline the process, making it as seamless and efficient as possible for investors.
However, it's important to consult with a tax advisor or financial professional before proceeding, as there are specific IRS rules and regulations associated with IRA investing that must be strictly adhered to.
Can Non-Accredited Investors Invest on EquityMultiple?
Currently, EquityMultiple is only accessible to accredited investors, following SEC regulations.
An accredited investor is defined as an individual with a net worth of at least $1 million, not including the value of their primary residence, or an individual with an income of at least $200,000 each year for the last two years (or $300,000 combined income if married) with the expectation to make the same amount in the current year.
While this does limit access to many potential investors, it is part of EquityMultiple's commitment to responsible investing and protecting its investor community.
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Is EquityMultiple Available to Non-US Citizens?
Yes, EquityMultiple is accessible to non-U.S. citizens who are accredited investors.
However, international investors need to understand that the platform operates under the regulatory framework set forth by the U.S. Securities and Exchange Commission (SEC).
Therefore, international investors must comply with their home country's regulations as well as U.S. regulations before investing. All investments are denominated in U.S. dollars, which could have implications for currency conversion and transfer fees.
It's recommended that non-U.S. investors consult with a financial advisor or legal expert to fully understand any potential implications before investing with EquityMultiple.
What Happens if You Invest in a Deal That Doesn’t Get All the Funding Needed To Start?
If you invest in a deal that doesn’t gather all the necessary funding to start, your investment will not be lost.
EquityMultiple operates on an 'all or nothing' funding model, which means the deal will only proceed if it reaches the full funding target.
If the deal fails to attract sufficient investment, all committed funds are returned to the investors. This ensures that a project has adequate financial support before it commences, safeguarding the interests of all investors involved.
This approach underscores EquityMultiple's commitment to investor protection and the sustainable execution of real estate holdings and projects.
EquityMultiple 2023 Review for Accredited Investors
To conclude this EquityMultiple review, it is a great platform to start with for accredited investors looking to diversify into real estate investing, without the headache of being a landlord or handling property management.
Forget the hassle and the paperwork – real estate crowdfunding platforms offer a wide selection of investment opportunities that are accessible and at a reasonable price point - some with only a $5k investment minimum.
The EquityMultiple platform is especially attractive with its high-quality real estate deals across the United States, its in-house underwriting team of experienced professionals, and diverse investment types.
For real estate investors, adding top-notch real estate investments has never been easier. Discover your path to true financial freedom with EquityMultiple! Get started now or schedule a call for more information.
Further Reading on Real Estate Investment
If you found this article helpful and are interested in exploring more about real estate, check out the following articles:
The Pros and Cons of Turnkey Properties - Looking for a hassle-free way to build a real estate portfolio? Turnkey properties offer fully renovated homes that are ready to rent out. No need to deal with property management or tenant issues – just sit back, collect rental income, and enjoy stress-free investing.
How To Get the Best Loans for Your Investment Property Overseas - Explore financing options for buying property overseas in this comprehensive guide. Learn about different types, eligibility requirements, and more to make your dream of owning a holiday villa in Spain or a cozy apartment in Paris a reality.
The 30 Best Real Estate Movies - Discover a collection of captivating real estate movies that showcase the intricacies and trials of the industry. From historical dramas to romantic comedies, these films offer valuable insights for both seasoned agents and aspiring investors. Laugh, cry, and learn as you delve into this list of top real estate movies.
No Investment Advice. This article does not provide financial advice and has been prepared without taking into account any person’s investment objectives, financial situation, or particular needs.