Investing Property Reviews

EquityMultiple Review: Modern Real Estate Crowdfunding

EquityMultiple is a US-based online crowdfunding platform that specializes in real estate investments. Read our Full Review with Pros & Cons
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In a time not so long ago, the private real estate investment arena was reserved primarily for financial institutions with vast resources. Not any more. With the crowdfunding space growing to exponential heights in recent years, Americans can now invest in a range of real estate deals from the comfort of their own home.

Platforms such as EquityMultiple allow you to invest from just $5,000 per real estate deal, with target returns averaging 7-17% annually. This covers lending opportunities in the form of equity or debt, and all investments yield regular income. However, the platform is only suitable for those of you with an accredited status

Nevertheless, if you’re keen to explore whether or not EquityMultiple is the right real estate crowdfunding platform for you, be sure to read our comprehensive review. We’ll explain how the platform works, who is eligible to join, what fees you need to consider, expected returns, risks, and more.

EquityMultiple ReviewEquityMultiple Real Estate Crowdfunding - Visit
Product TypeDebt, Equity, Preferred Equity
Potential Return7 - 17%
Fees0.5%-1.5% Per Year + 10% of Profits on Exit
Min Investment$5000
Property TypesHotels, Multi-Family Complexes, Industrial Buildings,
Office Units, Data Centers, Condos, Townhouses

Visit EquityMultiple

What is EquityMultiple?

EquityMultiple is a US-based online crowdfunding platform that specializes exclusively in real estate investments. In its most basic form, the platform will pool investor funds together, and then lend them out to ‘sponsors’. These sponsors – who are highly vetted, will then use the funds to invest in commercial real estate deals.

This could include anything from a multi-family complex in downtown Brooklyn, or a residential loan to a property developer in Los Angeles. Either way, all of the opportunities listed at EquityMultiple are cashflow generating opportunities. In other words, you’ll receive regular interest payments on the funds you invest, subsequently allowing you to enjoy passive income.

EquityMultiple
EquityMultiple Website

The specifics surrounding the investment structures at EquityMultiple are somewhat complex, as opportunities come in a range of shapes and sizes. For example, the platform lists deals in the form of preferred equity, common equity, and syndicated debt. Each of these structures will come with their own pros and cons that typically center the size of the yield, and the risk of the loan agreement – so we’ll discuss this in more detail further down.

Nevertheless, EquityMultiple allows you to get started from just $5,000 per deal, although most opportunities start at $10,000. Depending on the type of real estate venture that you wish to back, the platform offers returns of between 7% and 17% per year.

While returns of this nature are nothing short of juicy, the underlying risks are much higher in comparison to traditional marketplaces. Since the platform was launched, EquityMultiple claims to have executed more than $1 billion in real estate transactions.

So now that you know what EquityMultiple does, in the next section we are going to explore whether or not you will be eligible to join.

Managing Risk
Managing Risk

Am I Eligible to Invest With EquityMultiple?

First and foremost, EquityMultiple is only available to those with an accredited investor status. This means that you’ll need to have a combined net worth of at least $1 million (excluding your primary property), or have been earning $200,000 or more for at least two years. If this sounds like you, then you meet the minimum criteria at EquityMultiple.

Take note, you will need to submit supporting documentation before you can invest at the platform. This is to prove that you are an accredited investor.

Although the platform is US-based, it also has the legal remit to service non-Americans. However, you will need to be in possession of a U.S. tax identification number and U.S bank account.

How it Works
How it Works

Types of Investments at EquityMultiple?

When you first head over to the EquityMultiple homepage, you’ll likely be overwhelmed by the sheer magnitude of data that is presented. You really need to spend some time reading through the many real estate opportunities that the platform is involved in, as investments can vary quite considerably.

Crucially, deals will either come in the form of debt or equity. Before we explain how your chosen structure will determine your risks and rewards, check out the main real estate projects below that EquityMultiple typically hosts.

  • Hotels
  • Multi-Family Complexes
  • Industrial Buildings
  • Office Units
  • Data Centers
  • Condos
  • Townhouses

Syndicated Debt

Some of the real estate opportunities facilitated by EquityMultiple are in the form of syndicated debt. For those unaware, this is where a debt agreement is funded by multiple parties. In the case of EquityMultiple, this means that your money will not only be pooled together with other members of the site, but also with third-party originators. This is required because of the size of the loans that the end-borrower requires.

For example, the platform recently launched a $3 million fundraising campaign to fund a new data center in Chicago. While EquityMultiple raised the full $3 million, this made up a much larger financing agreement of $16 million. The balance would have been funded by external investors. This is actually a good thing, as it means you and your fellow EquityMultiple members are in partnership with experienced originators. These originators are vetted by the team at EquityMultiple, with less than 5% making the cut.

Syndicated Debt
Syndicated Debt

Nevertheless, syndicated debt opportunities at the platform typically yield between 7% and 12% annually. In order to obtain the required financing, borrowers put the underlying real estate asset up as collateral. EquityMultiple notes that the LTV (loan-to-value) will usually sit between 50%-75% of the asset’s market value. When it comes to the length of the investment, syndicated loan terms start from 6 months, up to a maximum of 2 years.

Syndicate Loans – What you need to know

Syndicate loans at EquityMultiple allow developers to fund new projects. For example, you might be funding the construction of a new condo complex. With that said, you won’t benefit from any appreciation gains that are realized during the term of the loan. Instead, you will merely receive interest on the funds that you invest.

In terms of the risks, syndicate debt holders are first-in-line in the event the end-borrower defaults. As such, were an asset recovery process to involve selling the security at auction, you would be paid before equity holders. On the flip side, syndicated debt typically yields a lower rate of return. However, with an average yield of 7%-12%, this is still highly attractive.

Equity

The second option that you have at your disposal is that of an equity-based investment. The investment process works largely the same at syndicated debt, albeit, the risks and rewards are shifted slightly.

Moreover, EquityMultiple offers two types of structures – common equity and preferred equity. Before we explain the difference, it is important to note that equity is actually riskier than syndicated debt.

Equity
Equity

The reason for this is that were the borrower to default on the loan and thus – have the underlying asset seized and sold at auction, you would get paid after debt holders. As there is no guarantee that the full financing amount will be recovered, this means that you stand a much lower chance of recouping your principal investment – let alone any interest owed.

On the other hand, the returns that come with equity investments at the platform can be more lucrative. Crucially, you will have a legal right to a share of appreciation gains that are realized on your investment.

For example, let’s say that the investment opportunity funds a new office block in New York. If the developer is successful in selling the property on completion, you will not only make money from the interest paid on the loan, but you’ll also get a share of the capital gains.

As such, although the risks of choosing equity over debt are higher, as are the potential returns

Common Equity vs Preferred Equity

It is important that you understand the difference between ‘common equity’ and ‘preferred equity’, not least because EquityMultiple facilitates both.

Common equity deals are riskier than preferred equity, as you will be last in-line if a borrower default were to occur. However, you will have uncapped access to appreciation gains if the deal is successful. The platform notes that this usually offers an annual return of at least 14% or more. Most common equity deals will come with a loan term of between 2-5 years.

Preferred Equity
Preferred Equity

When it comes to preferred equity, you will have a right to repayment before equity holders, as well as third-party sponsors. Although you will still have a chance to benefit from appreciation, your returns will be capped. This will be specified before you invest in a deal, and can range from 11%-17%. Preferred equity terms are usually between 1-3 years.

Note: The conundrum of deciding whether to choose syndicated debt, common equity, or preferred equity is all based on the ‘risk vs reward’ model. In other words, you need to determine how much risk you want to take at EquityMultiple. If you want to gain exposure to multiple markets, you might be best to diversity across all three structures.

Fees at EquityMultiple

As is the case with all crowdfunding platforms active in the real estate market, EquityMultiple is in the business of making money.

As such, you will need to pay fees if you want to invest in a particular deal. Before you get to the stage of paying fees, you can browse the opportunities listed at EquityMultiple for free. This allows you to make an informed decision prior to parting with your money.

  • Nevertheless, if you do take the plunge, you will then be liable for an annual maintenance fee of 0.5%. This is based on the total amount you have invested at the platform.
  • With that said, the largest fee that you need to be made aware of is the 10% profit share. This is charged on any profits that you make from a particular deal after the principal has been repaid.

For example, let’s say that you invest $20,000 in a 2-year deal. If at the end of the deal the full $20,000 has been repaid – plus $3,000 in gains, then EquityInvest would take $300 (10% of $3,000 profit).

We think that this is more than reasonable when you factor in the groundwork that EquityMultiple puts into vetting opportunities. With just 5% of loan applicants successful in making the cut, that’s a significant amount of due diligence.

Deposits and Minimum Investment

The minimum investment at the platform is $5,000 per deal, although most listings start at $10,000. This is why EquityMultiple only services accredited investors. Once you find an investment opportunity that you like the look of, you will need to fund your account.

In order to make a deposit, you will need to transfer money from your bank account. Before you can do this you will be asked to verify two micro-deposits. Once the micro-deposits appear in your account, you will need to enter the specific amounts via your EquityMultiple account portal.

You can then deposit funds via ACH or a standard bank wire.

Sample Investments

When do I get Paid?

If you’ve used a crowdfunding platform in the past, then you should know that the investment process is largely the same at EquityMultiple. Once the financing agreement has been fully funded, the platform will then forward the money onto the originator behind the deal. The end-borrower will then enter into a legal agreement, meaning that it will need to make fixed repayments until the loan is repaid in full.

Depending on the type of structure that you have funded, you will either receive your payments on a monthly or quarterly basis. This will always be for a fixed amount. If you have invested in common equity or preferred equity, then any subsequent appreciation gains will only be realized once the project has been sold.

In terms of receiving your repayments, EquityMultiple will transfer the money straight into your bank account. While at first glance this does remove the need to manually make a withdrawal, you are losing the opportunity to automatically reinvest the payments. As such, you’ll hinder the chance to enjoy the long-term benefits of compound interest.

The only option that you have with respect to automatically reinvesting your gains is to join the EquityMultiple fund. This is where EquityMultiple makes investments on your behalf through a diversified portfolio of real estate holdings.

Can I Sell my Investments Early?

One of the main factors that we look out for when reviewing a crowdfunding platform is the ability to liquidate your holdings. A number of leading peer-to-peer platforms have since launched secondary marketplaces. These allow you to sell your investments on the open market to other members of the platform. As such, this is particularly useful if you have a short-term cashflow crisis.

However, EquityMultiple does not offer a secondary marketplace, nor does it allow you to exit your investment early. Although the platform does note that you might be able to sell your investments privately, there is no guarantee that you will find a buyer. Moreover, the legalities of a private sale are ultra-complex.

This means that you will need to hold onto your EquityMultiple investments until they mature. Depending on the structure, investment terms start at just 1 year, although equity deals can require a holding of up to 5 years.

Crucially, you should refrain from investing in a particular deal if you think that there is a chance you’ll need to liquidate your holdings – as you simply won’t be able to do it.

What are the Risks of Investing at EquityMultiple?

  • Defaults As tempting as double-digit annual gains might sound, it is crucial that you have a firm understanding of the risks. As is the case with any crowdfunding platform that loans money to third-party borrowers, you always stand the risk of losing money. The overarching reason for this is that the borrower could default on the loan. If they do, then you will be relying heavily on the security that is attached to the agreement.
  • Collateral Although in some cases this will be bricks and mortar real estate that is in a ‘for sale’ condition, the security could be a land plot. As such, the value of the security could be worth considerably less than the size of the loan. You also need to factor in the costs of recovering the asset and selling it at auction.
  • Type of Structure Furthermore – and perhaps most importantly, the type of structure that you opt for will dictate whether or not you stand a chance of recouping your original investment. As we covered in greater depth earlier, syndicate debt holders will be first-in-line in the event that a borrower defaults. After that, it’s preferred equity holders, followed by equity holders.
  • Expected Returns All of the yields associated with investment opportunities at EquityMultiple are based on expected returns. As such, there is no guarantee that you will receive the full yield. This risk is especially pertinent if you are purchasing equity, not least because you are relying on the project being a success. On the flip side, syndicated debt holdings will always pay the stated amount as long as the borrower meets their repayments in full.

Customer Support

Whether you’re already a member or you’d like more information about joining, EquityMultiple offers several channels to make contact with its customer service team. The easiest way to speak with a support agent is via the live chat facility.

You can also call EquityMultiple at +1 (646) 844-9918.

Alternative, emails should be sent to help@equitymultiple.com

The customer service team works 7 days per week between the hours of 09:00 and 18:00 (Eastern Standard Time).

How to get Started at EquityMultiple – Quickfire Guide

If you’ve read our in-depth EquityMultiple review up to this point, then it is hoped that you’ve made an informed decision as to whether or not the crowdfunding platform is right for you. If it is, and you want to get started today, follow the quickfire step-by-step guide that we’ve outlined below.

Step 1: Open an Account

You will first need to head over to the EquityMultiple website and open an account. You’ll need to provide a wealth of information pertaining to your identity. This will include your full name, home address, date of birth, social security number, and tax status.

Step 2: Accredited Investor Documents

As the platform only accepts accredited investors, you will now need to upload supporting documentation to prove that you meet this requirement. This needs to show that you have a net worth of at least $1 million, or have been earning $200,000 or more over the past two years.

Signup Process
Simple Signup Process

Step 3: Browse Funding Opportunities

Before proceeding to deposit funds, it’s probably best that you browse through the investment opportunities available on the platform. Each opportunity comes with a full report on the risk and rewards, so spend some time evaluating whether the deal is right for you.

Step 4: Deposit Funds

Once you find a deal that you like the look of, you will then need to deposit some funds. Make sure you know what the minimum investment amount is for the opportunity in question, as this can be as much as $10,000.

Before transferring the funds, you will need to link your U.S bank account. EquityMultiple will deposit two-micro amounts into your account, which you will then need to confirm. Once you’ve verified the account, you can then transfer the funds via ACH or a wire.

Step 5: Complete Investment

Once the funds have been credited to your EquityMultiple account, you can then complete the investment. When the deal has met its funding target, the borrower will then enter into a legally binding financing agreement.

As such, they will be required to meet monthly or quarterly repayments until the loan is repaid in full. The repayments will be sent straight to your linked bank account via EquityMultiple.

EquityMultiple Review – The Bottom Line?

In summary, EquityMultiple appears to be a notable option in your quest to gain exposure to the multi-trillion dollar real estate space. As long as you qualify as an accredited investor – and you’re happy to invest at least $5,000, the platform claims to net average returns of between 7%-12%. If opting for equity deals, this can be as high as 17% or more.

One of the standout features of EquityMultiple is that it has an extremely stringent due diligence team. It claims to select just 5% of loan applicants, with the rest failing to make the cut.

We also like the fact that you get to choose the specific structure of the investment. Depending on whether you opt for syndicated debt, preferred equity, or common equity – you have an element of control on the risks and rewards.

Ultimately, while the risks of investing in a crowdfunding platform like EquityMultiple will always remain present, this is more than reflected in the types of yields on offer.

EquityMultiple ReviewEquityMultiple Real Estate Crowdfunding - Visit
Product TypeDebt, Equity, Preferred Equity
Potential Return7 - 17%
Fees0.5%-1.5% Per Year + 10% of Profits on Exit
Min Investment$5000
Property TypesHotels, Multi-Family Complexes, Industrial Buildings,
Office Units, Data Centers, Condos, Townhouses

Visit EquityMultiple

EquityMultiple

8.8

Ease of Use

9.0/10

Fees

8.0/10

Reputation

9.0/10

Customer Support

9.0/10

Design

9.0/10

Pros

  • Created by Industry Pros
  • Low Fees
  • Minimum Investment $5000
  • Investments Well Vetted
  • Wide Range of Investments

Cons

  • Accredited Investors Only
  • 10% Fees on Profits
Avatar

Oliver Dale is Editor-in-Chief of MoneyCheck and founder of Kooc Media Ltd, A UK-Based Online Publishing company. A Technology Entrepreneur with over 15 years of professional experience in Investing and UK Business.His writing has been quoted by Nasdaq, Dow Jones, Investopedia, The New Yorker, Forbes, Techcrunch & More.He built Money Check to bring the highest level of education about personal finance to the general public with clear and unbiased reporting.oliver@moneycheck.com

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