Equity Multiple Real Estate Crowdfunding Platform Overview
Commercial real estate (CRE) represents a more lucrative investment opportunity than residential real estate and a better hedge against the stock market’s volatility. The possibility for considerable returns on longer lease contracts makes CRE investment highly attractive for investors.
An investment marketplace aimed at commercial real estate financing is a decent business model which has been tested by the leading platforms like Equity Multiple, CrowdStreet, RealtyMogul and others. In this article, we’ll review the Equity Multiple crowdfunding platform which focuses on commercial real estate projects and is often referred to as an industry-standard CRE crowdfunding portal.
What you will learn in this post:
What Is Equity Multiple?
Equity Multiple is a CRE crowdfunding platform offering all three capital structures: senior debt, preferred equity, and equity. It allows accredited investors to access CRE projects such as offices, industrial buildings, hotels, and mixed-use buildings. The Equity Multiple real estate platform also offers qualified opportunity zone funds and 1031 exchange properties. This company claims to have returned $39.2 million to investors.
Charles Clinton and Marious Sjulsen, two experienced real estate professionals, founded the Equity Multiple crowdfunding platform. The company takes its name from the term ‘equity multiple,’ which represents the money an investor can make on their initial investment in commercial real estate.
Equity Multiple is likely the only real estate crowdfunding platform in the United States backed by a leading national real estate and debt capital markets firm: Mission Capital Advisors. This partnership provides Equity Multiple with a vast network of sponsors, lenders, and investors.
The following table summarizes the Equity Multiple’s features:
| Minimum Investment | $5,000 |
| Account Fees | 0.5-1.5% annually for common equity investments, plus 10% of all profits upon exit |
| Time Commitment | 12 months |
| Accreditation Required | Yes |
| Private REIT | No |
| Offering Types | Senior Debt, Preferred Equity, Equity |
| Property Types | Commercial |
| Secondary Market | Yes |
| Self-Directed IRA | Yes |
| 1031 Exchange | Yes |
| Pre-Vetted | Yes |
| Pre-Funded | No |
Who Can Invest on the Equity Multiple Platform?
To invest on this platform, individual investors must qualify as accredited investors. An accredited investor must meet at least one of the following two requirements:
- A net worth, or joint net worth with a spouse, of more than $1 million, excluding the investor’s primary residence.
- An individual annual income of more than $200,000 in each of the two most recent years, or a joint annual income with a spouse of more than $300,000 in those years. The investor should demonstrate reasonable expectations to reach the same income level in the current year.
An investor interested in using the Equity Multiple platform should provide basic details about their financial situation and investing experience. After approval, an investor can see the offerings available with all the necessary information to evaluate deals. Sponsors must provide documents of the deal progress, such as tax documentation and performance reports, to which investors can have access. Equity Multiple’s Investor Relations team can assist self-directed IRA investments with a single tech-enabled workflow.
Minimum Investment and Time Frames
The minimum investment with Equity Multiple is $5,000, but this amount varies by project. The more common minimum investment is $10,000. This amount applies for investments through self-directed IRA using one of Equity Multiple’s preferred IRA partners. Moreover, additional shares are usually offered in increments of $5,000 above the minimum.
The investment time frame is different for each investment structure offered by Equity Multiple. Typical hold periods are:
- Senior Debt (flat rate of return): nine to 24 months
- Preferred Equity (flat rate of return): 12 to 26 months
- Common Equity: three to seven years
- Opportunity Zones: at least 10 years to reap maximum possible tax benefits
- Funds: vary
Equity Multiple also offers alternatives to savings with short-term hold periods of three, six, and nine months.
How Equity Multiple Works
The primary focus of Equity Multiple is institutional commercial real estate. It offers multiple opportunities nationwide from experienced lenders and sponsors. Equity Multiple’s target minimum is around $500,000 per deal, although this sum can be as high as $6 million. The focus of this company is on fixed-rate offerings with returns ranging from 8% to 14% annual percentage rate (APR). Equity Multiple’s target rates of return vary by type of investment and associated risk.
Distribution schedules are usually monthly or quarterly, depending on the deal. Equity deals do not have a fixed cash flow since the frequency and amount vary depending on the performance of the underlying investment. In contrast, preferred equity deals offer a fixed rate of return throughout the investment’s term. It could provide an accrued return when the investment is paid off, and the principal returned. Debt deals offer a fixed rate of return. The principal is returned at the maturity of the loan.
Equity Multiple’s Fees
Equity Multiple does not charge any fee for registering, browsing deals, and initiating an investment. However, it charges an annual management fee that ranges from 0.5% to 1.5% of the total amount invested for investments. In most cases, this fee lands at 1% and is paid periodically to cover documentation relating to the investment, such as ongoing investor reports and tax preparation. Each investment listed on Equity Multiple is unique with its particular fee structure. Some investments may include additional fees. Additionally, Equity Multiple gets 10% of profits from each investor after they have received their initial investment back.
Benefits for Investors: Opportunity Funds
The Equity Multiple’s offering can be summarized as follows:
- Senior debt.
- Mezzanine debt
- Preferred equity
- Common equity
- Funds
- 1031 exchanges
- Opportunity zones
At the moment, this company also offers short-term notes. Of the list above, the last offering brings additional benefits for investors. Opportunity zones are designated by the state and federal government as tracts of land for economic development. Investors can invest in opportunity funds, which are tax-advantaged investments for opportunity zones.
Summary
Equity Multiple provides individual investors with the opportunities to access lucrative CRE projects. It is an easy way to diversify their real estate investment portfolio across markets, asset classes, and project types. Equity Multiple offers ample commercial investment opportunities from real estate companies with verifiable long experience and lenders with low default rates. Investments in individual equity projects offer unlimited upside, and investors can reap high returns if a project performs well. The partnership with Mission Capital gives Equity Multiple a significant advantage over other similar platforms.
On the downside, investors must be accredited, which means that only high-income or high-net-worth investors can benefit from Equity Multiple’s offering. Likewise, the minimum investment of $5,000 is higher than is required on other platforms. All in all, Equity Multiple caters to more experienced investors rather than beginners.
How to build a real estate investment platform like Equity Multiple
If you would like to build a commercial real estate crowdfunding platform like Equity Multiple, check out the LenderKit real estate investment software. The LenderKit solution is equipped with Reg CF, Reg A and Reg D modules for the US market, but we also work with the UK, EU and MENA regions.
LenderKit software provides a comprehensive back-office as well as the investor portal. You can rely on the out-of-box solution or have it customized on-demand to fit your specific business needs.
