Financial Freedom with Real Estate Investing

Yes, crowdfunding is out of reach for the average newbie syndicator. But if you’ve got a great deal and a willingness to hustle, it is possible to partner with a larger real estate company and take advantage of the capital available through crowdfunding. Platforms like Realty Mogul are looking for sponsors with a track record, so if you don’t have one—find someone who does.

Jilliene Helman is the CEO of Realty Mogul, the premiere online marketplace for real estate investing. The platform employs cutting-edge technology to connect its network of 130,000 registered investors looking for passive investments in commercial real estate with established real estate companies looking to acquire and operate commercial properties.

Realty Mogul is a marriage of Jilliene’s affinities for financial services and technology. She founded the company in 2013 to take advantage of the opportunities around crowdfunding afforded by the JOBS Act. Today she discusses why Realty Mogul chose to focus on the commercial space, the types of investments the platform offers, and the Realty Mogul definition of a good deal. Learn about the evolution of the crowdfunding industry, and heed Jilliene’s advice about partnering for aspiring syndicators.

Key Takeaways

[2:33] How the crowdfunding industry has evolved

  • Started five years ago with passage of JOBS Act
  • Has become more and more mainstream
  • Began with donation-based sites (e.g.: Kickstarter, Indiegogo)
  • Evolved into investment-based crowdfunding (i.e.: commercial real estate)
  • Since 2013, Realty Mogul has raised $300M online
  • Will continue to grow, scale
  • Over $1B in invested capital through crowdfunding this year alone
  • Provides investors access to private transactions

[3:55] Why Realty Mogul chose to focus on the commercial space

  • Huge opportunity in single-family space early on (2013-2015)
  • Banks off-loading residential properties
  • Not easy to make money doing fix and flips
  • Chose to focus on existing properties, tenants and cashflow
  • Less risky than vacant residential property being renovated

[4:54] The types of investments Realty Mogul offers

  • Joint venture (common) equity investments
  • Paid last (riskiest part of capital stack)
  • Gets piece of appreciation
  • Preferred equity investments
  • Paid before joint venture equity
  • Receives flat, pre-negotiated rate (doesn’t get any of appreciation)
  • Mezzanine debt investments
  • Senior mortgage debt investments

[6:54] What Realty Mogul is looking for in a sponsor

  • Don’t do business with first-time sponsors
  • History, track record of success
  • Real estate company with experience in market, property type
  • Investors want to work with sophisticated real estate companies
  • Typically don’t work with solo operators
  • Looking for full-time sponsors with own company, employees
  • Serious and professional about execution in investing in real estate

 [8:34] Jilliene’s advice for aspiring syndicators

  • Do a transaction
  • Raise capital from friends, family
  • Add value, build a track record

[10:12] Jilliene’s guidance around partnering with a larger real estate company to employ crowdfunding

  • If have solid deal, no reason you can’t partner
  • Will have to pay real estate company
  • Won’t have control of transaction
  • Realty Mogul requires one sponsor to have final say

[11:47] What Realty Mogul defines as a good deal

  • Every deal is different
  • Focus on cashflowing real estate (existing tenants)
  • Majority of deals are Class B assets in secondary markets
  • Look for opportunity to value-add
  • 7-8% average cash-on-cash return to investors
  • 15% IRR net to investors

[14:13] The requirements for passive investors on Realty Mogul

  • Public, non-traded REIT open to all investors (diversified pool of commercial real estate investments)
  • Private transactions limited to accredited investors (income above $200,000 or net worth above $1M)

[15:28] The process of becoming a passive investor with Realty Mogul

  • Sign up for user account
  • Select transaction
  • Entire experience is digital
  • REIT is blended vehicle
  • Accredited investors pick and choose specific properties

[16:40] The benefits of working with Realty Mogul

  • Track record
  • Over $300M invested in commercial real estate
  • Real estate companies do multiple transactions (speaks to experience)
  • Network of 130,000 investors

[17:23] How Realty Mogul came to be

  • Jilliene worked in banking (wealth management)
  • Wealthiest clients were real estate investors
  • With JOBS Act, Jilliene saw opportunity
  • Blends her passions—financial services and technology
  • Mission to help people generate wealth via real estate investing

[18:22] Jilliene’s take on the future of crowdfunding

  • Will continue to grow
  • More and more mainstream
  • Investors more comfortable with doing transactions on internet
  • Billion-dollar industry

Connect with Jilliene

Realty Mogul

Resources

 Deal Desk

Free eBook: The Secret to Raising Money to Buy Your First Apartment Building


What gives a 27-year-old with no experience in apartment building investing the audacity to swing for the fence?

Patrick Duffy grew up in Southern California before heading east for college. After graduating from Harvard in 2013, he returned to SoCal to work as a commercial real estate banker and later for a hedge fund, buying non-performing mortgages. He grew up around real estate, his family owning a multi-family property since the 1950’s, and he had always intended to invest in apartments—as soon as he had the money to do so.

Before long, Patrick was unhappy at his job, so he started reaching out to investors he had lent to in order to get clarity on how to analyze deals. Despite his lack of experience on the principal side of real estate, Patrick started studying LoopNet and set the goal of securing 100 units in two years. Eventually, he discovered Michael’s Deal Desk resource, and used the Syndicated Deal Analyzer to get feedback on a 69-unit property in Memphis. The deal met Michael’s criteria, and the two forged a partnership.

Today Patrick explains the steps he took to research the Memphis market, how he made use of the act ‘as if’ approach to secure a letter of intent, and his best advice for working with investors. Listen in as he shares the mindset that helped him swing for the fence on a multi-family deal and how doing his first deal has changed the game for Patrick, as he aspires to reach 1,000 units in the next 12 months.  

Key Takeaways

[3:30] How Patrick landed on the partnering strategy to finance multi-family

  • Briefly considered flipping single-family
  • Preferred multi-family, but biggest block was capital
  • Looked at creative financing options
  • Partnering seemed like most feasible route
  • Goal to secure 100 units in two years

[6:04] How Patrick found the Memphis deal

  • Clarity re: how to analyze deals
  • Practiced via LoopNet (comparing markets, packages from brokers)
  • Underwriting to get feedback
  • Memphis market seemed ideal (cap rates, unit sizes, price)
  • Reached out to learn about Memphis market
  • Found 69-unit deal on LoopNet
  • Submitted to Syndicated Deal Analyzer
  • Positive feedback from forum
  • Called broker on New Year’s Eve

[9:23] Why Patrick continued to move forward

  • Nothing to lose
  • Deal met criteria for partnering via Deal Desk
  • Act ‘as if’ approach to secure LOI

[11:13] Michael’s partnership with Patrick

  • Impressed by Patrick’s thorough research
  • Surprised by return (Memphis not one of published geographies)
  • Got contract from seller, proposed changes
  • Built team as went (property manager, lawyer)
  • Patrick took initiative
  • Under contract with seller
  • Wire EMV
  • Collect due diligence docs
  • Financial due diligence process
  • Create investor package
  • Met in Memphis to look at property
  • Michael sent sample deal package to investors
  • Acquired financial commitments
  • Hired SEC attorney
  • Started appraisal process

[13:18] Patrick’s experience working with investors

  • Michael’s network eager for deals that fit criteria
  • Addressed questions about specifics of market
  • SEC attorney had drafted necessary documents
  • Used DocuSign to track eSignatures

[15:23] The closing process for the Memphis 69-unit deal

  • Loan approved, investors wired funds
  • Patrick received acquisition fee of $23,000
  • Also reimbursed for expenses incurred during due diligence

[16:25] The impact of doing your first deal

  • Only so much can be taught re: what to expect
  • Once learn to partner, can scale quickly
  • Feel more comfortable and taken more seriously
  • Brings down barriers
  • Patrick under contract on 196-unit deal two weeks later
  • Expects to hit 1,000 units in next 12 months

[19:50] Why size isn’t a factor for Patrick

  • It’s about process
  • Anything under 500 units is viable
  • Don’t worry about equity
  • Finding deal is the issue (not money)

[21:35] Patrick’s advice for aspiring multi-family investors

  • Take advantage of Deal Desk resources
  • Does require high level of commitment
  • Hard work is worth it

Connect with Patrick

Email: pduffy32@gmail.com

Resources

Deal Desk

Syndicated Deal Analyzer

Ultimate Apartment Investing Course

The Financial Freedom Summit Live

LoopNet

DocuSign

Free eBook: The Secret to Raising Money to Buy Your First Apartment Building


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