RealtyShares Residential Funds Offer Unique Value Proposition to Sponsors and Investors
The announcement from our Founder and CEO Nav Athwal that RealtyShares reached $200 million funded on the platform is an amazing accomplishment, not only for the RealtyShares team, but also the great partners we work with on the real estate investor side. These real estate operators and developers boldly stepped out of the traditional funding models and embraced marketplace lending. That is not easy to do.
One area of focus here at RealtyShares is to provide our sponsors and investors with the highest-quality products possible, and that sometimes requires us to be bold. We’re continuously seeking new ways to innovate in an effort to further solidify our position as the leading online marketplace for real estate investing. Our residential fund offerings are the end result of the merger of those two goals.
Birth of the RealtyShares Residential Fund
The inspiration to develop these funds evolved organically. Among our sponsors, we saw and continue to see mounting demand for the ability to raise capital quickly, which is a reflection of the rate of speed at which the residential space operates. From an investor perspective, the
demand centered on gaining access to a diverse set of residential properties within a set geographic area with potentially strong fundamentals and investing with a residential operator of institutional quality.
Our residential funds are designed to meet the most pressing needs on both sides of the equation. These funds offer investors the ability to diversify their portfolios with minimal fees, while seeking to realize a solid return performance. Because of the way the funds are structured, investors are able to choose which markets they want to be in, based on their individual investment strategies.
For example, a single fund may invest in dozens or even hundreds of residential assets across multiple submarkets. Investors in these funds have exposure to all of these assets, allowing them to spread out risk in the event that one of the assets underperforms.
Becoming a Partner with Elite Sponsors
Beyond the diversification factor, our investors also have the benefit of knowing that they’re working with top-shelf sponsors. Preferred equity entails a higher degree of risk compared to debt and one way we mitigate that risk is by being extremely selective about who we work with. Our expert team subjects each potential sponsor to an extensive vetting process, with the goal of partnering with operators in each market that have a demonstrated and verified track record of completed projects. Keep in mind though that all investment involves risk of loss and past performance is not indicative of future results.
We support investors even further through a well-defined operating agreement. The agreement ensures that our sponsors are following proper protocol for reporting and that each fund has a prescribed wind-down period prior to reaching maturity. This provision outlines how and when capital is repaid, based on the fund’s profitability, giving both investors and sponsors a measure of built-in protection.
With that being said, the benefits of these funds are not one-sided. These offerings provide an avenue to efficient capital for our sponsors, allowing them to execute deals within a more compressed time frame. They have the potential advantage of being able to buy properties at a discount or even below market value, in some instances. That’s something that’s completely unique to RealtyShares.
Why it is Making a Difference
While there are larger sources of capital available, they’re typically structured as a credit line. What RealtyShares offers is a turnkey solution for sponsors who want to remain focused on their business. We make it possible for sponsors to raise capital on demand in a streamlined way and we manage investor relationships on their behalf. Sponsors do pay a fee but the fund structure doesn’t require them to sacrifice a substantial share of the profits.
We’ve raised tens of millions of dollars for dozens of funds around the country on behalf of our sponsors. On an individual basis, we’re raising between $1 to $3 million per fund, allowing us to keep investment minimums low. Our investors are able to participate in deals with as little as $10,000 versus the $50,000 that other platforms may require. In terms of speed, we’ve seen $3 million raises completed in as little as 24 hours, which is a testament to the popularity of these funds.
Our Preferred Equity funds, along with the wide range of investments RealtyShares already offers, get us closer to the goal of being a one-stop shop for real estate investment. We’re raising capital with a firm business objective in place. Our investors have a solid understanding of what they’re investing in while our sponsors are able to connect with the capital they need in less time. In short, these funds are proving themselves to be a potentially viable and extremely unique offering for our community.
