EquityMultiple Review

We’ve all heard it before: “Just put your money in real estate”, they say. “I did it, and now I’ve got more than enough for retirement!”

Easy to say, you think – but how exactly do you know what properties to invest in, and how do you get enough scratch together to buy into lucrative deals? 🤔

The truth is, learning the ins and outs of the real estate investment market is something we don’t all have the time for. Which is why many of us are very interested in the crowdfunded real estate investment market.

It’s exactly what it says on the tin: crowdfunded real estate investment involves groups of accredited investors pooling their money together for vetted investment deals. Everyone wins with crowdfunded investment – even Uncle Sam.

Platforms like EquityMultiple ostensibly provide said vetted investment deals and a neutral marketplace where investors can pool their resources by buying-in directly with sponsors.

How does EquityMultiple actually measure up to these lofty ambitions?

Let’s find out.

What is EquityMultiple?

EquityMultiple is a New York-based real estate crowdfunding company. It uses modern technology to connect investors with real estate projects and investment sponsors, providing a secure and neutral marketplace to facilitate lucrative business deals for both parties.

Compared to many other crowdfunding real estate companies, EquityMultiple enjoys significant backing from companies like Mission Capital Advisors.

They provide three types of investments for investors that reach certain capital or net worth thresholds. They also provide a relatively large network of sponsors compared to many competing crowdfunding sites, and they are extremely transparent about fees and costs.

Furthermore, they do plenty of due diligence regarding the investment opportunities they allow onto their marketplace. Projects go through several layers of vetting before showing up as options for investors, which adds another layer of investor safety and confidence.

A Brief History of EquityMultiple

EquityMultiple was co-founded by Charles Clinton, a real estate lawyer, and Marious Sjulsen, who had lots of experience in the real estate private equity industry. Together, they founded EquityMultiple as a commercial crowdfunding real estate investing platform. They used their considerable industry experience and clout to get a backer of national repute: Mission Capital Advisors.

How Does EquityMultiple Work?

EquityMultiple is a type of real estate crowdfunding company. But it’s not just another crowdfunding platform — it’s one of the top real estate crowdfunding sites you can find.

In a nutshell, it provides a website through which real estate investors can meet up with sponsors – these are investors that want to borrow money to invest in real estate. In exchange, they’ll pay back EquityMultiple’s individual investors (the “crowd) as they get returns on the property.

The crowdfunding platform works by pooling money together (i.e. the crowdfunding part) so that investment projects and opportunities that would otherwise be inaccessible by a single person can generate returns for a larger group. Such platforms are becoming more popular now that their effectiveness can’t be refuted.

Since EquityMultiple is partnered with Mission Capital, they have access to a huge variety of sponsors. While the number of actual investments can be a bit thin at times, those investments will almost always be from a diverse collection of sponsors and so represent different investment possibilities and return potentials.

To use the platform, sponsors have to report to EquityMultiple directly and give detailed information on every project. EquityMultiple then does lots of due diligence and background checks, including neighborhood evaluations. Furthermore, they check each potential property with Growth Capital Services, a partner who performs yet another layer of investigation.

Growth Capital Services basically helps EquityMultiple decide how much risk is involved in a given sponsor or project. If a project passes all these levels of diligence, it’s finally offered on the platform and investors can decide whether they want to dip in.

How EquityMultiple’s Deals Work

Most of EquityMultiple’s investment opportunities come from experienced sponsors and lenders. They target a minimum of around $500,000 per deal. However, some projects can reach well into the millions of dollars.

They distribute returns monthly or quarterly, with the distribution schedule depending on a given deal’s specifics. Returns are also usually fixed.

Average annual returns for most of their offerings are around 9%, although this is expected to go up significantly in the near future as many of the company’s equity offerings are still in relatively early stages.

Investor Safety

One of the big benefits of investing with EquityMultiple is its LLC-based investing method. In short, EquityMultiple creates a new LLC every time an investment opportunity is posted on its platform. Investors actually purchase ownership interest in the LLC attached to a given project whenever they put their money into an investment deal.

This makes every investor an LLC partner, entitling them to shares of income or losses generated by that real estate investment. As anyone with some investing experience will tell you, this provides great protection for investors. It insulates individual investments from financial hazards or instability that might affect other real estate deals or even EquityMultiple itself.

As a result, EquityMultiple is a crowdfunding real estate investment platform that places a particular emphasis on investor protection.

Does This Mean You Don’t Need to Conduct Due Diligence?

Of course not. While EquityMultiple puts a lot of effort toward confirming that the deals they offer are legitimate and worthwhile investments (less than 5% of those offered actually show up on the marketplace), you still need to do your own due diligence just to be sure.

After all, only you know the details of your portfolio and your investment objectives. Taking charge and looking deeply into every deal you consider will go a long way toward ensuring that you only invest in worthwhile properties.

EquityMultiple Compared

What Type of Investments Does EquityMultiple Offer?

EquityMultiple offers three types of investment, each of which is a type of “senior debt”, or investments focused on commercial real estate. Many other competitors offer real estate investment trusts (REITs), but EquityMultiple does not.

Basically, EquityMultiple allows you to invest using one of the three below types of debt.

Syndicated Debt

This investment is backed by a company with a particularly long history in real estate investing. For you, this essentially means that you’ll be taking on debt backed by industry professionals who ostensibly know what they’re doing.

You loan your money to one of the big partners involved in a project. The loan originates and is funded by another third-party lender with some experience. It’s an added layer of diligence for uncertain investors.

It’s another way that EquityMultiple brings investor confidence and security to the forefront, particularly if you don’t have a lot of real estate experience and don’t know what to invest in. Such syndicated debt deals usually only last between six months and two years, and they are typically a little shorter than the other deals you can find on the platform.

Preferred Equity

These types of deals are much truer to the crowdfunding spirit of the platform; they don’t involve big business partners but are instead funded entirely by individual investors. This means they’re a little riskier on average, although they tend to be a little more rewarding with returns of between 10 and 14% instead of around 7 to 12%. Many people believe these types of investments are still safer than stocks or bonds.

More importantly, investors in these deals get preference over other investors when it comes to cash flow distribution. Profits are given to all preferred investors after necessary debts are paid.

These are still relatively short-term investments, offering terms between one and three years depending on the deal at hand.

Equity

These are the riskiest types of investments offered by EquityMultiple because you, the investor, are the last party paid back. They also span the longest length of time, but accordingly offer the best potential rewards. These investments feature time frames ranging between three and seven years and are usually paired with return rates of over 14%, and sometimes up to around 20%.

Note that investors of this type still get paid after the preferred equity investors mentioned above. 

How Do You Become an Investor with EquityMultiple?

EquityMultiple may allow crowdfunded investing with many individuals pulling together to create a large investment pot, but only some people are allowed to make an account. 

Who is Eligible to Invest on EquityMultiple?

You need to be an accredited investor in order to make an account on EquityMultiple. An accredited investor is defined as:

• someone who has a net worth or a joint net worth with their spouse of more than $1 million (this value can’t include the worth of their home), OR 
• someone who has an annual income of over $200,000 or $300,000 with their spouse across each of the last two years and a reasonable expectation that their income will be the same or greater going forward.

This means that EquityMultiple, like many other crowdfunding real estate investment platforms, may not be the best choice for beginning investors who don’t have significant startup capital or net worth. The company has said they may look into investment options for non-accredited investors at some point, though it’s impossible to say when this may come about.

Furthermore, EquityMultiple is somewhat exclusionary since you need to put down a minimum investment of $5000. Investment minimums of $10,000 are more common, and if you want to make an investment through a self-directed IRA you need to put a minimum investment of $20,000 down.

How Do I Start Investing on EquityMultiple?

Getting started with EquityMultiple is fairly simple if you’re already an accredited investor. You’ll need to prove this point when you create your account, which involves providing personal information like:

• your first and last name
• email address
• a password

Confirming your eligibility as an accredited investor is pretty fast and can be done within three minutes, according to the website. Identity verification is also required, plus any information about the entity you’ll use for your investing.

This can be an LLC, a trust, a sole proprietorship, a corporation, or anything else. You’ll link your bank account in the final step.

However, getting all this taken care of is arguably the hardest part of the whole process. Once you log into the site, you’ll able to browse live investment offerings using the intuitive user interface. The website is fairly responsive and is even mobile browser friendly, although EquityMultiple doesn’t offer a mobile app at this time.

Regardless, checking out various investment opportunities is a simple as clicking on a deal and reading through all the details. You’ll be able to download pertinent documents that tell you everything you want to know about an investment deal to see if it’ll be a good match for your portfolio.

If you do find a deal that you want to invest in, it’s also quite fast. You’ll be given a series of documents to sign electronically, plus another opportunity to verify your accreditation. Once all the ducks are in a row, you can fund the investment and you’re all set.

After funding an investment, monitoring it is straightforward. There’s a dedicated “My Portfolio” page you can access at the top.

This gives you a comprehensive overview of your current open investments and a history of your prior investments (once you’ve used the site for longer). You can look at a dedicated activity feed to manage your assets, or check your earnings.

Most importantly, you’ll feel relatively hands-on with your assets by checking out quarterly investor updates. These can give you some insight into how the project is going: particularly valuable information if you sign up for a new investor deal with property that hasn’t been built at the time of your investment.

How Does EquityMultiple Make Money?

EquityMultiple makes money primarily by charging fees for its services as an investment middleman. However, there isn’t a flat fee paid by investors; these are instead determined by the type of deal placed.

For equity deals, fees are:

• 2% flat placement fee for sponsors
• 0.5-1% annual fee for investors

For preferred equity deals, fees are:

• 2% flat placement fee for sponsors
• 1% spread off total preferred return paid by investors monthly

For debt deals, fees are:

• 2% flat placement fee for sponsors
• 1% spread off interest rate paid by investors monthly

Who Should Use EquityMultiple?

EquityMultiple offers a relatively unique collection of investment opportunities to accredited investors. This provides a fantastic way for long-term thinking investors to diversify their portfolio through real estate: one of the most trustworthy investment assets ever.

Furthermore, they provide deals with potentially high returns on investment, especially in the long-term. EquityMultiple’s focus on vetting their various deals for legitimacy and doing tons of due diligence means that accredited investors can feel relatively safe that the available ventures are worthwhile.

EquityMultiple is also excellent thanks to its transparency. It does feature somewhat high fees for investors, but they’re upfront about all these costs; indeed, all the prices are listed on the deals on the main browsing page.

Even better, their interface tells investors the actual dollar amount that each attached fee will take out of their overall returns, meaning you don’t have to do the math yourself. This honesty can be refreshing compared to the many other, shiftier investing platforms out there.

Investing in real estate has been a solid strategy for ensuring long-term passive income for quite some time. If you have the capital to start making investments and the patience or financial stability to handle how long it might take some of these deals to produce valuable returns, you might find a great platform in EquityMultiple.

EquityMultiple is a good choice for:

• investors looking for long-term, lucrative returns
• accredited investors looking to diversify their portfolio
• investors who want a little extra security/legitimacy for the deals they browse
• investors who want to invest in real estate but don’t especially know where to look or what to invest in

Who is EquityMultiple Not Great For?

EquityMultiple has a lot going for it, but it offers distinctly illiquid investment opportunities; this means that investors won’t be able to get their investment cash back in the short term (and not for a few years in most cases). Thus, it’s not a platform for short-term investing by any stretch of the imagination.

Furthermore, EquityMultiple has relatively high barriers to entry, including both its requirement that you be an accredited investor and its relatively high average investment minimums. It’s not a great platform if you don’t have significant startup capital and aren’t looking for long-term passive income.

In other words, it’s not conducive to short-term financial goals, like you might find with the top investment apps which facilitate active investing.

EquityMultiple is not good for:

• short-term investors
• non-accredited investors
• investors who are more comfortable with liquid investments

Final Thoughts

All in all, EquityMultiple is a great choice compared to plenty of other crowdfunding investment platforms out there. They offer decent average returns and there’s a great deal of confidence that they’ll become an even better platform over the next few years.

But we’re interested to hear the experiences of other people. Let us know if you’ve given them a shot and whether you made any money so far!