RealCrowd is an entirely free service for investors. We don't charge fees for joining up, accessing opportunities, or making investments.Other online real estate investment platforms structure themselves as intermediary LLCs or as funds. It's indirect ownership in an asset, and the middleman takes a substantial cut. Management costs are subtracted from investor returns as expense fees, significantly cutting into investor profits.
The negative impact that additional fees levied by platforms structured as funds or LLCs have on returns is worth considering. Take a common example: An investor pays a fee upfront of 3% on money invested. Following that, 2.5% of the initial investment cuts into returns as an annual asset management fee.Say you pony up $100k for a deal with an annual return of 8%. Right out of the gate, $3k immediately vanishes into fees. That leaves $97k to do the work. At this point, you would end up with a distribution of $7,760, but the additional asset management fee of 2.5% drags that down to $5,260.Just like that, an 8% return dives to an effective 5.26%.
Unfortunately, that might not be the end of it.
In addition to being saddled with acquisition and asset management fees, the investor is often subjected to a “double promote.” In other words, the middleman often imposes an additional “promote”—i.e., a take of the profit upon sale—reducing potential returns even further!But these onerous additional fees also directly impact the quality of deal flow. Because they eat into returns, riskier assets must be considered by middleman platforms to cover those fees while providing a return that an investor act on. Hard money loans, residential fix-and-flips, specialized assets with short-term leases and other high risk assets can provide higher returns, but they also carry a higher probability of loss.
Giving up nearly half the points on a return to middlemen can be devastating to your portfolio. And so can the need to consider riskier opportunities to compensate for additional fees and promotes.We structured RealCrowd to allow capable investors to invest capital directly into real estate. Rather than using our members as a source of revenue, we've chosen to provide them a way to achieve unmitigated returns.
Efficient Tools for Operators, Better Opportunities for Investors
If RealCrowd isn't extracting fees from its investor members, how are we monetizing our platform?In short, by supplying the nation's best commercial real estate operators with tools to work more efficiently and improve deal flow.
Traditionally, to grow and manage an investor network, operators had to devote considerable resources. This was costly, time consuming, and detracted from activities that would otherwise add value to assets. The suite of tools we've built sharply compresses those costs.
Our platform attracts best-in-class CRE operators because it allows them to reallocate resources into maximizing the value of assets under their management.
Operators are given the tools to access and manage an active, sophisticated investor network, and automate document distribution, communications and transactions. The solutions we offer operators are more efficient than anything else in the industry, new and old, by a long shot.
They pay us for use of this technology, and as a result, their deal flow grows in quality and profitability.
The value of the resources that our platform frees up for operators substantially out weighs the cost. Because of this, far from trickling down to investors behind the scenes, the use of our technology instead has a positive impact on the value of invested properties. Operators channel time and money right back into the assets, creating more value for you, their investors:
RealCrowd yields a net benefit to every member of our network: Operators do more deals, of higher quality, in less time, and investors gain access to better opportunities, with a significantly higher take of potential returns.