Realty Mogul Launches Second REIT, MogulREIT II

Just one year after celebrating the first anniversary of its first real estate investment trust (REIT), Realty Mogul has unveiled its second REIT offering: MogulREIT II. The trust will invest in multi-family apartment communities that have shown “consistently high occupancy and income levels across market cycles,” according to the company’s press release.

Calling multifamily housing “a great sector for investment,” Realty Mogul CEO and co-founder Jilliene Helman pointed to how consumers – especially millennials –  are shifting from buying a home to renting. She highlighted this generation’s preference for lifestyle flexibility, but added “we’re even seeing an emerging demand among baby boomers, who are moving back into city centers from their home in the suburbs.”

“The response to MogulREIT I overwhelmingly reinforced our view that retail investors are looking for a better way to invest in real estate,” Hrach Simonian, General Partner at Realty Mogul investor, Canaan Partners, said. “Multifamily is one of the most requested products by our customers and we have tailored this fund to that category.”

Founded in 2012 and headquartered in Los Angeles, California, Realty Mogul demonstrated its technology at FinovateSpring 2013. The company enables accredited, non-accredited, and institutional investors to invest in a variety of real estate properties through its secure, private, online platform. Investors can search and review investment opportunities on the platform, as well as examine due diligence information, and sign legal documents in a secure environment.

Finovate research analyst Julie Muhn profiled Realty Mogul in her look at Real Estate Investing Tech earlier this year, and interviewed CEO Helman in her feature “Why PropTech and MortgageTech Are the Future of Fintech.” Realty Mogul has raised more than $46 million in funding, and includes Sorenson Capital and Canaan Partners among its investors.

Finovate Alumni News

On Finovate.com

  • German Challenger Bank N26 Deploys Banking Technology from Mambu.
  • Realty Mogul Launches Second REIT, REIT II.

Around the web

  • Baker Hill NextGen Statement Spreading to bolster commercial lending underwriting for People’s Bank and Trust.
  • Fenergo adds Michele Shepard as Chief Revenue Officer and Greg Watson as Managing Director of Sales and Strategy.
  • LendingTree partners with Benzinga for its Fintech Innovation Challenge.
  • eToro Platform Adds Trading Support for Five Cryptocurrencies.
  • BioCatch to power Fraud Prevention Solutions for HoneyTek Systems
  • SmartX (formerly HedgeCoVest) Announces the Addition of BlackRock, Morningstar Investment Management, and Nasdaq Dorsey Wright.

This post will be updated throughout the day as news and developments emerge. You can also follow all the alumni news headlines on the Finovate Twitter account.

Finovate Alumni News

On Finovate.com

  • Roostify Celebrates Growth, Role of External Developers on its Platform.
  • Emirates NBD Enlists Efigence for UX/UI Makeover.

Around the web

  • Icon Solutions initiates functional testing between the Instant Payments Framework and EBA Clearing’s RT1 platform.
  • Infosys to acquire product design and CX specialist, Brilliant Basics.
  • TechCrunch: Coinbase to provide support for Bitcoin Bash in 2018.
  • RealtyMogul.com celebrates the first anniversary of the first crowdfunded REIT, MogulREIT 1.
  • AutoGravity announces reaching 500,000 download milestone for its app.

This post will be updated throughout the day as news and developments emerge. You can also follow all the alumni news headlines on the Finovate Twitter account.

What’s in it for Me? Real Estate Investment Technology

For those looking to diversify out of the stock market and into asset-backed or alternative investments, real estate has long been a popular choice. In 2014, things changed significantly for these investors; historically if they didn’t have $40,000 for a down payment on an investment property loan or $4 million to spend on commercial property development, they would be out of luck. Recently, however, we have seen successful startups looking to lower the barrier to entry for novice real estate investors.

Earlier this year, we examined the breakdown of proptech and where its four separate divisions fit into fintech. Today we’re taking a closer look at one of those categories, real estate investment technology, and 15 startups in that sector. Companies in this area are as diverse as the real estate industry itself, but they can easily be categorized under three major business models:

  • Crowdfunding
  • Cash flow share
  • Match-making platform

Here’s a quick comparison chart of companies working on crowdfunding and cash flow share models (right click to enlarge):

Here’s a more in-depth look at each company’s model:

Crowdfunding
Think of it as Kickstarter for Real Estate— it’s the most common model for real estate investment platforms. While many companies in this category take a different approach and host a variety of offerings, all rely on a crowdfunding model.

  • Cadre
    Cadre caters to a range of high net worth accredited investors and institutional investors who are willing to commit a minimum of six figures per deal. The company focuses on commercial, retail, and multifamily properties in all major U.S. markets. Cadre undertakes all sourcing and due diligence on properties before presenting the opportunities to investors. When users find a deal they like, they request their desired allocation to a specific property (or across multiple properties) and fund the deal. Investors receive quarterly distributions along with performance reports.
  • EquityMultiple
    EquityMultiple offers accredited investors debt and equity investments in commercial real estate projects. The company has raised $10 million since launching in 2015. Its partnership with Mission Capital – a national loan sales and commercial real estate advisory firm – has helped it access institutional projects, closing 25 and comprising over $300 million in total capitalization since launch. Its debt deals range from six to 18 months while the term for equity projects ranges from two to five years, during which time investors receive a share of the cash flow.
  • Fundrise
    Fundrise allows users to build a diversified portfolio of eREITs, a real estate investment trust built on the Fundrise platform that cuts out the middlemen often involved in traditional REITs. The REIT consists of commercial real estate investments and earns returns through rental income and property appreciation. Investors start with a minimum of $1,000 and select from three different U.S. geographies. Returns and distributions are specific to each listing, as is the term of each investment.
  • Groundfloor
    Groundfloor is open to accredited and non-accredited investors in eight U.S. states. The company sells debt securities called Limited Resource Obligations (LROs) to investors with a minimum investment of $10. Once investors purchase an LRO, they become a creditor to Groundfloor. Each LRO is paid back to investors when the borrower repays the loan, which ranges from a term of 6 to 12 months. If a loan fails to fully fund within 45 days, the company relinquishes the funds back to the investor.
  • LendingHome
    Lending Home is open to accredited investors looking to fund real estate investment projects for a term of 12 months or less. The company funds mortgages for real estate professionals and makes them available to investors as fractional notes. Each note sells for as low as $5,000, but LendingHome requires a $50,000 minimum investment to start. Lenders receive interest on a monthly basis and when borrowers repay the loan at the end of the 12-month term, the investor receives their principal.
  • Patch of Land (FF 2014 demo)
    Patch of Land uses a crowdfunded approach by matching borrowers in need of short term financing for a real estate project, with lenders looking for real estate investment opportunities. The company vets each property purchase and project (refinance, rehab, or flip) and curates information such as financials, appraisals, and project details. Under Patch of Land’s model the investor doesn’t own the property nor the title. Instead, users invest in a borrower payment dependent note– a contract with Patch of Land in which they receive interest for the term of the loan and then repayment of their principal once the term is complete.
  • PeerStreet
    PeerStreet enables accredited and institutional investors to invest in private real estate loans secured by first liens on real estate (in other words, not refinances or second mortgages) through partnerships with top-tier originators. The investments are short term, ranging from six to 24 months and are intended to fund a real estate project. Investor funds are held in an Investors Trust Account with City National Bank and in the event of default, the funds are FDIC insured up to $250,000. Users invest in mortgage-dependent promissory notes issued by PeerStreet. The minimum investment is $1,000.
  • RealtyMogul (FS 2014 demo)
    Founded in 2012, RealtyMogul operates under a crowdfunding model that matches sponsors and borrowers searching for capital with individual investors looking for a higher return. The company offers two investment types: joint venture equity investments, and a real estate investment trust (REIT).Joint venture equity investments focus on properties with existing cash flows (rented real estate). Throughout the term of the investment, which ranges from one to 10 years, investors receive a monthly return from the cash flow and a share of the proceeds when the property is sold. RealtyMogul offers a 1031 exchange option for investors for a tax-friendly funding option. The MogulREIT is an SEC-registered LLC formed to invest in and manage a diversified portfolio. The REIT requires a minimum investment of $1,000 and is open to both accredited and non-accredited investors and is generally more liquid than debt and equity funding, as it generally allows for redemptions once per quarter.
  • RealtyShares
    RealtyShares offers a minimum investment of $5,000 with monthly or quarterly cash flow options. The company enables accredited and institutional investors to invest in commercial (office, industrial, self-storage, retail, medical office and hospitality facilities) and residential (used for investment purposes, not owner-occupied) properties. RealtyShares sells securities related to secured real estate loans, equity investments in commercial properties, and preferred equity investments based on investor preferences. With equity investments, the company sets up individual LLCs for each property. Under this structure, investors own shares in the LLC. Interest distributions for equity investments are paid out on a quarterly basis depending on cash flow. When the property is sold, investors receive any appreciation realized over the term of the loan. For debt and preferred equity investments, users invest in notes corresponding to the loan and typically receive payouts monthly. The company does not offer a 1031 exchange but it does offer self-directed IRA investments through five preferred custodians.
  • Yield Street
    Yield Street sells a variety of asset-backed offerings– from real estate, to commercial equipment, to lawsuits– to help accredited investors diversify their portfolios. The company is also set up to handle larger opportunities for money managers and institutional investors. Yield Street manages the investments, which are divided into Special Purpose Vehicles (SPV’s) available for a minimum of $5,000. Interest payment frequency and the term of the loan vary per investment.

Cash flow share
These companies offer investors returns on the cash flow of the property. They do not cater to borrowers and instead own the properties themselves.

  • CK Mack (FF 2012 demo)
    CK Mack is a Montana-based startup that allows users to invest in the cash flow of rented real estate in $25 increments for a minimum of 12 months. The company maintains ownership and responsibility for the properties themselves and takes care of all property management responsibilities.
  • Brickx
    Australia-based Brickx divides the purchase price of houses into 10,000 units, or bricks, and places each unit for sale on its marketplace. At the end of each month, members receive their share of the net rental income of the house. Brickx takes care of all property management.

Match-making platform
These are Lendio-type platforms that simply serve as a matchmaking platform for borrowers and investors. They are not a party to the transaction.

  • CrediFi
    CrediFi offers a platform that matches borrowers, brokers, and lenders. The company does not invest on the users’ behalf.
  • Crowd Street
    Crowd Street hosts a marketplace that matches accredited commercial real estate investors with borrowers, which the company refers to as sponsors. It was created to offer investors easy access to private equity real estate operators, such as commercial real estate developers and managers.
  • RealCrowd
    RealCrowd allows accredited investors to browse, compare, and invest with professional, private, commercial real estate companies. The platform simply serves as a matchmaker for investors and real estate professionals and is not involved in the transaction.

Our proptech series continues next week with a closer look at mortgagetech players.

Finovate Alumni News

On Finovate.com

  • Coca-Cola Credit Union Chooses Bankjoy as New Mobile Banking Partner.
  • What’s in it for Me? Real Estate Investment Technology: A comparison of Realty Mogul, CK Mack, Patch of Land, and other real estate investment platforms.

Around the web

  • GMC Software announces new partner advantage program.
  • Uniken appoints Nishant Kaushik as Chief Technology Officer.
  • i-exceed earns Gartner Magic Quadrant recognition as notable vendor in Asia Pacific for mobile app development platforms.

This post will be updated throughout the day as news and developments emerge. You can also follow all the alumni news headlines on the Finovate Twitter account.

Finovate Alumni News

On Finovate.com

  • Pindrop Receives Investment from Cisco’s John Chambers.
  • SecureKey Wins Funding to Build Blockchain Digital Identity Network.

Around the web

  • Wealthify publishes first-year performance data, reporting benchmark-beating returns for customer plans.
  • RealtyMogul.com opens its MogulREIT I fund to IRA investments.
  • Best of Show winner CREALOGIX named one of the “10 Swiss growth champions” by Swiss economic newspapers. [in Swiss]

This post will be updated throughout the day as news and developments emerge. You can also follow all the alumni news headlines on the Finovate Twitter account.

Why PropTech and MortgageTech Are the Future of Fintech

If this is the first time you’ve heard the term proptech, it won’t be the last. Proptech (also known as real estate tech or REtech) and its subset mortgagetech have been around since 2014. Here’s why 2017 is poised to place proptech among the ranks of wealthtech, insurtech, regtech.

This year has already been favorable to mortgagetech and proptech companies. SoFi, for example, is about to close a massive, $500 million round, its competitor LendingHome topped $1 billion in mortgage loan originations last year, and RealtyShares has seen over $300 million raised on its platform. According to CB Insights, since 2012 the real estate technology sector has closed 817 deals worth $6.4 billion. Of that amount, $2.6 billion closed in 2016 alone, which represents a 40% increase from that sector’s funding in 2015.

In the U.S., there are a handful of reasons 2017 will be favorable to real estate. Interest rates are projected to rise for the second time, millennials are starting to buy their first homes, and investors are looking to diversify out of the volatile stock market. On top of all of this, regulations are slated to loosen under the Trump administration, and changing in regulation brings opportunities for innovation.

Players

The broader category of proptech can be broken down into four basic segments.

1- Mortgagetech
These are mostly B2B companies specifically focused on facilitating part of all of the mortgage application process. They do not lend or service the loan.

2- Digital mortgage lending companies
These online lenders facilitate the mortgage application process and service the loan.

3- Real estate investment tech
Companies in this category are focused on the investment aspect of commercial and residential real estate.

4- Pure property plays
These don’t have a fintech angle but play a role in the broader proptech industry. Since this category is out of scope for this blog, this list only encompasses a fraction of companies in this category. Check out CB Insights’ coverage of commercial real estate technology for more.

What’s ahead in 2017

  • Expect to see more mortgagetech-bank partnerships along the lines of Roostify’s recent deal with JP Morgan Chase. As banks try to gain a competitive edge for market share, more established banks will need to leverage mortgagetech offerings.
  • We’ll see more niche alt-lending solutions such as SoFi that facilitate the application process and save borrowers on closing costs.
  • Expect to see more players offering real estate investment technology, coupled with some consolidation in real estate crowdfunding companies.
  • Outside of fintech, we’ll see more platforms aimed at cutting out the middle person, the realtor; and more business models such as Knock and GoldenKey that make the selling process easier.

You don’t have to take my word for it

We posed the question, How do you see proptech/ mortgagetech growing in 2017? to these Finovate alums working in the space. Here’s how they responded:

BhatRajesh Bhat, CEO and cofounder of Roostify:

“We expect to see further widescale adoption of digital mortgage solutions – to the point where one should expect it to be table stakes in 2018. We should also expect to see more players emerge in the space as investors see larger market adoption and validation.”

 

Screen Shot 2017-02-23 at 9.52.53 AMLinda Schicktanz, Chief Advisor of CK Mack*:

“If there is one area ripe for fintech innovation, it’s real estate investing. Why put 30% down just to gain massive management headaches when you can now invest in rental cashflow online with very similar returns? Fintech and Real Estate are like peanut butter and jelly, they just go together!”

Screen Shot 2017-02-23 at 8.30.31 AMNima Ghamsari, cofounder and CEO at Blend:

“There is going to be an explosion in the use of data driving the mortgage process in 2017. Both Freddie Mac and Fannie Mae have announced their data initiatives toward the end of 2016, and lenders are starting to push consumer financial data aggregation into the core components of their customer experiences. This ties in nicely to the industry-wide push forward to a more digital, end-to-end process that started in 2016.”

Screen Shot 2017-02-24 at 4.07.54 PMJilliene Helman, CEO at RealtyMogul

“The impact of digital technology on the real estate industry and mortgage technology is still in its infancy, but I see both less experienced and more sophisticated investors, alike, moving toward a process that takes place entirely online. With over $250 million of capital invested and 100,000 registered investors on the platform, RealtyMogul.com is a testament to this change. The more that technology can offer real estate borrowers and lenders transparency, as well as the efficiency of process and convenience, the faster both sides will adapt.”


*Full disclosure: I’m related to Linda Schicktanz. Yup– she’s my mom.

Finovate Alumni News

On Finovate.com

  • “Finovate, FinDEVr Alums Earn AWS Financial Services Competency Status”

Around the web

  • FIS and Trunomi team up to build a data protection solution to help FIs comply with new EU regulations.
  • PYMNTS.com looks at Concur and its partnership with China DataCom Corporation.
  • Comarch to integrate EyeVerify into its Smart Finance and Corporate Banking solutions.
  • FinDEVr alum Symbiont hires Dr. Lisa Yin as new chief security officer and chief cryptographer.
  • D3 Banking adds more than a million users to its digital banking platform.
  • Hypepotamus interviews CTO Amala Duggirala, Kabbage’s new chief technology officer.
  • Cachet Financial Solutions develops new prepaid banking platform for CereTel.
  • Tuition.io wins 2016 Best In Biz Awards.
  • Financial Brand: Moven promotes financial health with ‘Smart Savings Account’
  • RealtyMogul.com unveils new lower minimum of $1,000 for investment in its online REIT, MogulREIT I.
  • Business Standard profiles MarketsMojo and its algorithm-based approach to stock market analysis.

This post will be updated throughout the day as news and developments emerge. You can also follow alumni news headlines on the Finovate Twitter account.

Finovate Alumni News

On Finovate.com

Around the web

  • RealtyMogul.com surpasses $50 million milestone in distributing returns and principal to investors.
  • Roostify teams up with Equifax to ease and accelerate mortgage-decision processing.
  • FinDEVr alum Worldpay launches new, omnichannel payment platform, Worldpay Total.
  • Modo Payments to provide Bank of America Merrill Lynch with access to its COIN Operated Digital Payments Hub as part of new strategic relationship.

This post will be updated throughout the day as news and developments emerge. You can also follow all the alumni news headlines on the Finovate Twitter account.

Finovate Alumni News

On Finovate.com

  • Kreditech Taps mBank Veteran Michal Panowicz to Lead on Products, Technology

Around the web

  • TransferTo partners with Eurogiro to enable mobile money transfers.
  • Sberbank and MasterCard launch Apple Pay in Russia.
  • AcceptEmail announces integration with Salesforce.
  • TransUnion unveils its Fraud Prevention Exchange.
  • PaySimple launches the first e-commerce platform for service providers.
  • Ethoca teams up with Lean Industries to improve dispute processing for card-issuing banks.
  • RealtyMogul.com announces 8% dividend payout for new REIT, MogulREIT I. Read more in our coverage about MogulREIT I.
  • Overbond wins spot in Canadian Innovation Exchange (CIX) 2016 Top 20.

This post will be updated throughout the day as news and developments emerge. You can also follow all the alumni news headlines on the Finovate Twitter account.