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SHOW NOTES FOR EPISODE 097 – PASSIVE INVESTING THROUGH CROWDFUNDING
Introduction
We often talk about being passive real estate investors but did you know there are different levels of passive investor. For example, I, as an owner of multifamily properties in other states, delegate but manage my properties or assets through property managers in the various states I have assets. I call myself a passive investor. But there are investors who are even more passive –passive investors who help fund other passive investors’ like me – who do not deal with the day-today activities of managing the asset but who entrust the profitable management of that asset to someone else generate a nice return for their investment. And there are investors who may not know the asset manager but invest through crowdfunding. That type of investor is precisely who our guest is today.
What You Will Learn
- Why Ian started investing in real estate with his large cash payout from when he sold his tech company
- How and why Ian started investing in single family homes
- What is crowdfunding and how it facilitates real estate investing
- Why crowdfunding is an excellent way to invest in real estate without the hassle of finding properties, buying and managing
- How to evaluate a crowdfunding portal
- What are the top portals?
- Which portals allow you to invest as little as $500
About Our Guest
Ian Ippolito
Ian Ippolito is an investor and serial tech entrepreneur. He has been interviewed by the Wall Street Journal, Business Week, Forbes, TIME, Fast Company, TechCrunch, CBS News, FOX News and more. Ian was impressed by the potential of real estate crowdfunding, but frustrated by the lack of quality site reviews and investment analysis. That’s why he created The Real Estate Crowdfunding Review to fill that gap. More on Ippolito: https://en.wikipedia.org/wiki/Ian_Ippolito
More About Ian
- Two lives as an investor
- Started when he was a W2 employee – invested to grow net worth
- Later became successful tech entrepreneur. Sold company. Large cash payout. Invested proceeds to support his family. Instead of going back to work, he sought to manage his investments full-time
- Grew up in middle-class family – never talked about investing
- Read a book in college (Wealth Without Risk by Charles Gibbons) changed the way he thinks about investing
Investing in Real Estate
- Bought Carlton Sheets real estate program. 20% hype. 80% valuable.
- Bought a condo and lived there for a while, moved to bigger place and rented the condo out
- Did the same with a townhouse but it was more expensive and started losing money. Sold it and didn’t invest in real estate
- Didn’t trust the stock market
- Had financial adviser that encouraged him to invest in the market in 2007 but he didn’t like the instability of the market
- Other Investments
- Peer-to-peer loans but unsecured and high risk
- Liked real estate more because
- More predictable returns
- Slower market changes
- His father-in-law had a plan to buy 20 income properties and that encouraged him to pursue it further
- Bought 8 SFR properties in Tampa, FL last year
- Also, started invested in real estate crowdfunding to diversify
Began to Pursue Crowdfunding
- Likes it for a number of reasons
- You can pick projects that have very experienced managers managing the asset
- Can invest in different types of real estate investments like triple net (NNN) commercial properties (like a Walmart, CVS, Home Depot commercial rental), industrial, storage, etc.
- Diverse
- Can invest smaller amounts ($10,000)
Biggest Mistake
- Invested in a real estate residential fund (made a six figure investment) right around 2008
- It was sort of an “early” crowdfunding portal
- Within less than a year saw things were going bad
- Was being assessed additional fees
- He knew it was because the people managing the fund were having difficulty getting loans
- The Fund decided to switch from residential to multifamily investments
- Waited over 10 years and he still came out with less than he invested
- The good thing about the experience is that for all future investments he became much more discerning and critical – always would look at the “worse case” scenario
- After that experience, he would always ask “what types of protection do I have if this goes south?”
His Assessment of the Real Estate Marketplace
- He looks both nationally and locally
- Nationally he feels we are getting ready for a decline
Biggest Success
- Generating enough income through his investments to not have to go back to a W2 job
- “Living the Dream”
Investing in a Hard Money Loan Fund
- He invests in a hard money lender where he has been yielding 11%
- The fund is called Broadmark Capital — has 2 real estate funds
How he Started Evaluating Crowdfunding Portals
- In the beginning, as he was seeking good real estate investing opportunities, he noticed that there were many crowdfunding sites and it was difficult to assess which ones were the best
- Early on, most of the sites didn’t have that many investments
- He wanted different geographical areas, asset types
- No one site had all he wanted for investment diversity
- Over 100 different sites
- Decided to do a “deep dive” into all of the sites
- Interviewed founders
- Did thorough analysis
- Went into legal documents, disclosures to see how they were set-up
- Some were set up that if the platform went broke, you lost your investment
- Others, your funds would remain safe as long as the investment was OK
- Came up with his Top 10
- People found out and started asking him for the info
- Got tired of emailing the info
- Decided to just post the info on his website – therealestate crownfundingreview.com
- Today’s Top Crowdfunding sites
- Key factor of evaluation today – transparency
- #1 – Peer Street (most transparent) and performance is excellent
- Co-Founded by Google person who created Google Analytics
- #2 – Real Crowd, Realty Mogul & Realty Shares – really good volume, good real estate asset mix, lots of deal
- #3 – Acquire Real Estate – lots of “core” investments, conservative, bedrock investments (institutional investors might pursue)
If You Don’t Have alot to Invest
- There are three National Sites where you can invest but don’t have to be and “accredited investor.” An accredited investor is anyone who has:
- An earned income that exceeded $200,000 (or $300,000 together with a spouse) in each of the prior two years, and reasonably expects the same for the current year, OR
- has a net worth over $1 million, either alone or together with a spouse (excluding the value of the person’s primary residence).
- Investments can be as low as $500 minimum
- The three sites are:
- Rich Uncles – specializing in NNN properties
- Realty Mogul
- Fundrise – almost all investments don’t require accredited investors
Advice for old dawgs who might want to start investing in real estate:
- Start with single family rental to learn, get “hands-on” experience and to understand the business
- Once you understand what is involved, you’ll know what a good manager looks like and can start assessing and selecting good crowdfunding opportunities
Or
- Partner up with a experienced investor who can help you evaluate the deals
What are His Future Plans?
- Has two start-ups in process:
- One is his crowdfunding review site
- Another is a gaming app where you can play against other people for money – skill game
- Coaches start-up entrepreneurs
Rap-It-Up
- Favorite real estate book: Big Shifts Ahead by John Burns and Chris Porter
- Favorite business book: Built to Last by Jim Collins
- Most valuable web sites for success: New York Times, Wall Street Journal
- Favorite app: Uber
- Favorite quote: “The best revenge is just living well”
- If you had to start all over, knowing what you know, and you only had $1,000 to invest, what would you do to grow your investments? I would use it for a down payment on something that would generate income for me.
How Can You Reach Ian
- Website: therealestatecrowdfundingreview.com, http://www.exhedra.com/
- eMail: Ian@exhedra.com
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