
Ask HN: Your experience with realty investment startups like RealtyShares? - gk1
Startups like RealtyShares and Fundrise have been popping up, all promoting great returns and diversification... If you considered or invested with these platforms, how was your experience?
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baccredited
I invested over 40K with RealtyShares and made over 7K. I will NOT be
investing with them any further. Problem is that there is no transparency on
the old deals, so you can't see which ones failed or (more likely) locked up
your capital many months after they were predicted to end.

I have over 50K with both fundrise.com and realtymogul.com and would consider
investing more with both of them.

I also like peerstreet.com as an alternative to lendingclub. I have been
slowly draining all my money from lendingclub over the last few years. Returns
are simply too low for the risk you take on. Also, with peerstreet your P2P
loans are backed by real assets which can be seized and sold to recover your
principal if the borrower defaults.

Better than all of these are stock market index funds, which are over 50% of
my portfolio.

Any questions? Ask me anything.

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mywittyname
> Also, with peerstreet your P2P loans are backed by real assets which can be
> seized and sold to recover your principal if the borrower defaults.

Who handles this, and who is responsible for the legal bills?

~~~
brettpeerstreet
PeerStreet handles the workout situation. Foreclosure fees are applied against
gain on sale, which is why PeerStreet has kept LTV (loan to value) under 75%.

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drsnyder
Most (all?) of these companies have not been through a complete credit cycle
since they were founded after 2008. I would be cautious about putting money
into them that you cannot afford to lose.

Only after they go through a full credit cycle from boom to bust will you know
how well they have managed risk and leverage. If they are transparent enough
for you to be able to do the due diligence on their assets and leverage (and
you have the expertise) you should probably wait and see how they do during
the next recession.

I would also suggest you ask the question why would you would invest in them
as opposed to using more traditional REIT or investing in real estate yourself
if you are so inclined. Is it because you are expecting a greater long term
return and you think they might be able to provide it? Again, I would wait and
see how they do in the next recession (or credit crisis) to get more realistic
view of their long term return profile.

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reverend_gonzo
I put 50k into Patch of Land, 5k into 10 loans. If everything works out, I'll
make about 5k. However, one loan never made a payment and is going to court,
and one other is in default.

Once my money is paid back, or whatever, I will not put any money into them
again, or for that matter, any other realty fund either.

Like baccredited said about RealtyShares, there is a big problem of total lack
of transparency. Another problem is that the majority of loans get extended.
So, in my case, where I put in 50k, thinking the loan matures in 12 months, so
I should get it back then. Well, after those 12 months pass, suddenly the loan
was extended for another 12 months.

Furthermore, I actually talked to them about borrowing money for property I
wanted to buy. The interest rates they wanted were ridiculous and I'm not
really sure how anyone can make a profit borrowing through them.

If I wanted to put it into real estate, and couldn't buy my own, I would put
money into the Vanguard REIT funds, because, while there are issues there too,
at least your money is liquid, and it's Vanguard. (or Fidelity or Schwab would
be fine too).

Lastly, the real place to put funds is into balanced index funds. That's where
most of my savings are anyways. This was a trial that I personally wasn't very
happy with.

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anorborg
Regardless of the platform, if you are considering direct real estate
investment (versus a REIT), the most important thing you can do is educate
yourself. Direct real estate investing can get very complicated very quickly:
You have to potentially evaluate the sponsor/real estate company, the
surrounding market, the assumptions being made that lead to the target
returns, etc. Unfortunately, most "educational" material you find is really
focused on the idea of "getting rich quick" versus real education. I'll
shamelessly plug our podcast
([https://www.realcrowd.com/blog/tags/podcast/](https://www.realcrowd.com/blog/tags/podcast/)).
While we are a direct marketplace, we strive to make our educational material,
including our podcast unbiased education and not a commercial for our
platform. We have received a lot of great feedback.

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johnthomas00
I have not looked at and do not know these companies and have no comment on
these companies. I have been involved in real estate for a long time and these
thoughts only relate to commercial real estate generally, not these companies.

Where to start? I'll just fire off some thoughts as they come to mind. Real
estate is a long term asset. It is complicated and everyone is different, like
your apps, but long term. For example, you could make returns look better by
using short term loans (where interest rates could rise). A rise in rates
would expose this term structure imbalance/risk. On the other hand, single
family production compared to population growth looks good (opposite of when
real estate crashed in 2007 or so), so housing looks good generally (every
market is different). Retail is getting crushed by Amazon, etc. Office is hard
to analyze as it is expensive to replace tenants. Industrial can be made to
look good by building more office space in it, but then getting crushed if
that tenant leaves. Oh, and winning buyers of commercial real estate have to
make the most aggressive assumptions in their models. Every buyer has
basically the same information.

Good luck out there people!

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scardine
The problem with all speculative investments is that you eat like a bird but
shit like an elephant: earnings tend to be additive and losses exponential.

Some gambling is fun as long as you don't bet the family savings.

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feifan
I discovered Fundrise last year and started investing a small amount.
Currently have a bit over $7k invested in Fundrise, ramping up with roughly
$1k per quarter since early 2016. Earnings to date a bit over $500 _without_
reinvestment. I've been happy with the performance so far, and like the
direct-investment model. That being said, I haven't invested more because of
the liquidity lockup and, as others have said, these investments haven't gone
through a down-cycle yet.

Agree with @baccredited re LendingClub — returns have shriveled to nothing for
me; I've also been draining funds from them. FWIW got lucky this year with
great YTD returns on emerging markets and international mutual funds.

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pdog
Here are a couple of financial blogs that have reviewed RealtyShares. (Note:
they may be compensated by companies mentioned through advertising, affiliate
programs, or otherwise.)

[https://www.financialsamurai.com/realtyshares-review-real-
es...](https://www.financialsamurai.com/realtyshares-review-real-estate-
investing/)

[http://nomadcapitalist.com/2015/11/04/my-review-of-
realtysha...](http://nomadcapitalist.com/2015/11/04/my-review-of-realtyshares-
another-bad-us-investment/)

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gk1
I did see those but chose to ignore them because of the affiliation
partnerships. FinancialSamurai.com in particular turns me off because they're
constantly pushing affiliate products, so I can't trust them.

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ceejayoz
I'd need someone to explain why they'd be better than a REIT from an
organization like Vanguard or TIAA-CREF.

~~~
baccredited
I would not say they are better, but they are different. REITs are stocks, so
they tend to rise and fall with the overall stock market. Take a look at what
happened to VGSIX in 2008 (when the SP500 was down over 36%). VGSIX got
crushed as well.

Would that have happened to individual investments at
Realtyshares/Fundrise/Realtymogul had they been around at the time? Doubtful.

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surfearth
It is true that the Realtyshares/Fundrise/Realtymogul holdings may not be
marked to market, and therefore have less apparent volatility. However, it is
highly likely that if you tried to sell your holding during a market downturn
you would need to take a significant discount to the face value to liquidate
your position. The discount would probably be in a very similar range as the
REITs at the same time. Private investments may have low apparent volatility,
but more often than not, their economic volatility is actually greater than
their liquid, publicly traded counterparts.

~~~
baccredited
>if you tried to sell your holding during a market downturn

This is not possible with Realtyshares at least. You have no way to sell your
holding. You just have to wait it out.

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conductr
I always compare these offerings to what I could do on my own in traditional
ways. Leverage at low rates is a powerful thing and I'm not convinced this is
better. Granted, it's not _as_ passive but it doesn't take me away from my day
job either.

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sharemywin
it's also about spreading risk. you buy a single family home and rent it out
and you can't find a renter you default on the loan or what ever your screwed.

you split it up over 10 loans and as long as there isn't a systematic problem
like 2008-2009 just have a lower return.

if you have enough to do 10 rentals on your own well good for you. most people
don't.

~~~
conductr
I get that. But my opinion is if you only have 500-5k you shouldn’t be
investing it at all. Ok maybe in liquid low risk ways. But because of other
life risks if that’s all you can afford, you need to just continue saving it
until you have a cushion and can real estate. It’s actually a pretty low
barrier of entry

~~~
sharemywin
I don't see a problem if you have 50k total in investing 5k in a high risk
thing. as long as 45k of it's in a more secure situation.

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sharemywin
Might want to read this if looking into commercial shopping centers.

[https://news.ycombinator.com/item?id=15653871](https://news.ycombinator.com/item?id=15653871)

[https://www.bloomberg.com/graphics/2017-retail-
debt/](https://www.bloomberg.com/graphics/2017-retail-debt/)

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srehnborg
I invest with Groundfloor.us. So far it's been a great experience and have had
~10% returns. They are for residential only and have varying levels of risk
based on previous success of those looking for the money. I'd recommend
looking into them as well. They only are able to collect money from certain
states.

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stevenmays
Why not just buy a reit and be done with it?

~~~
baccredited
Better returns. VGSIX is yielding 3.8% for example. At that level of return
I'm better off paying off my mortgage.

~~~
buxtehude
VGSIX holds many different kinds of REITs including retail, office, industrial
- so imo not a good example.

The Dow Jones US Residential REIT index is up 7.3% YTD and 12.20% over 1 year.

[https://www.marketwatch.com/investing/index/djusrn?countryco...](https://www.marketwatch.com/investing/index/djusrn?countrycode=xx)

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thisisit
Realty, investment and a startup - all rolled into one? No thanks.

I see these guys have been in business since 2012/13\. The shoeshiner is one
of the oft used analogy on HN. Using the same bar if these guys are getting
enough traction now it means every one wants in on the sky rocketing realty
prices. Though it is difficult to predict when the issues, if any, might
happen.

The best and easiest thing to do is to invest in index funds.

If you really want, invest what you can afford to lose.

