Real Estate Investing Is No Longer A Private Club

Apr 2 2014, 10:52am CDT | by

Real Estate Investing Is No Longer A Private Club
Photo Credit: Forbes Business

Jilliene Helman had a track record in real estate. She had underwritten more than $1 billion and was a vice president in wealth management at Union Bank. She knew what to invest in and what not to. A friend asked if he could invest alongside her when she made real estate investments. Then another friend asked, and another, and another. You get the picture.

The global real estate market is estimated at more than $5 trillion, according to IBISWorld. When the JOBS Act passed in April 2012, it gave Helman the ability to formalize the friend-to-friend process online and tap into this huge market. She started Realty Mogul in March 2013, but was only able to offer investment opportunities to people she knew or were referred to her who were accredited investors. Accredited investors have a net worth, excluding their homes, of at least $1 million or an annual salary of at least $200,000 if single and $300,000 if a couple.

“I realized that the highest net-worth clients had made their money in real estate, and it’s still an old boys’ club,” said Helman. “It’s a hard asset class to get into in a way that’s simple.” In Sept 2013, when Title II of the Act passed, it cleared the way for Realty Mogul to promote property investments to any accredited investors. Within its first year, Realty Mogul has attracted 7,000 clients in 14 states who have invested $15 million in 58 properties, including a shopping center, a self-storage facility, apartment buildings and single-family homes, which are value at more than $100 million.

Helman is part of an impressive group of women who are using crowdfinancing to redefine Wall Street. Crowdfinancing pools money from a group of investors via the internet and social media. It provides access to money beyond the traditional debt and equity products that are funded primarily by institutions.

Realty Mogul provides like-minded accredited investors with the ability to pool their money to make pre-vetted real estate investments for as little as $5,000 without the headache of managing the property. Unlike equity investments that may pay off five or 10 years down the road, real estate generates a steady income stream almost immediately. Realty Mogul does an analysis of the real estate company, properties, and the principals using proprietary due-diligence methodology but, like any investment, the chance of losing your money is still a reality. Investors should always do their own due diligence.

As soon as the SEC implements its proposed Title III rules, unaccredited investors will also be able to invest in real estate deals on Realty Mogul. The company has raised $9 million in Series A funding, led by Canaan Partners, bringing its total funding to $10 million. The money will be used to increase deal flow and operations. Both the technology platform and excellent client service are key. Some investors want to talk to someone knowledgeable and well-trained. Others will do everything online and need no in-person support.

Canaan Principal Hrach Simonian — whose firm also backed Lending Club, which matches investors with loan applicants — said in The Wall Street Journal that he looked at several crowdfunding startups for real estate, and found that Realty Mogul was the largest and farthest along. He said the key to success is not just the technology platform. Its having a two-sided marketplace that attracts both investors and places to invest. Simonian predicts that Realty Mogul will be the next disruption in a massive asset class just like Lending Club has been for the consumer credit market

Many entrepreneurs complain that being head of a company is a very lonely job. Not so for Helman. She finds support in many ways. She has an incredible advisory board, is mentored by three CEOs, and was part of Techstars, a three month accelerator program. She also has an extraordinary network that she has no qualms about tapping when she needs help. But, truth be told, she is more likely to be helping than asking. She’s a busy woman. Her commute in L.A. traffic has become her time to contemplate Realty Mogul’s big picture and to map out what looks to be a promising future.

What’s your dream for disrupting the status quo?

Source: Forbes Business


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