Jilliene Helman, CEO of RealtyMogul

April 23, 2013

Overview

I had the pleasure of sitting down with Jilliene Helman, the CEO of RealtyMogul. RealtyMogul is an accredited crowdfunding platform for real estate, and we discussed how crowdfunding is going to re-imagine this asset class. I highly encourage watching the interview in its entirety as Jilliene provides great insight into her company’s structure and ambitions. (Apologies for my softened voice, I’ve been fighting a nagging cold. 3 Naked juices/day isn’t even cutting it!)

For additional context here’s a brief overview.

Founded in 2012, RealtyMogul officially opened its doors to accredited investors in March this year, and has since closed on three transactions. The company’s platform facilitates two types of investments (to-date, all three have been debt):

  1. Loan Purchase for Residential Fix and Flip [Debt] The loan is tied to a residential property that is being rehabilitated and the property is intended to be sold directly after rehabilitation. The loan is secured and investors earn monthly interest on their money with a balloon payment at the end. The average hold for a loan like this is 6-9 months.
  2. Equity Purchase for Commercial Buy and Hold [Equity] Investors pool their money to purchase a piece of a specific commercial property. That property is acquired and managed by a professional investment company with a track record of success. Investors are entitled to a share of the cash-flow from rents and a share of the proceeds when the property is eventually sold. The average hold for an investment like this is 3-5 years.

It’s notable that RealtyMogul offers both debt and equity investments. These are two financial products with very different risk/reward profiles, and if the Company achieves a highly liquid marketplace, it will be capable of serving investors of all risk appetites, at scale. It’s not a reach to imagine RM investors designing blended debt & equity portfolios, across tens, if not hundreds, of investments to reflect individual risk tolerance. And the unique cash flow attributes of debt vs. equity also opens the door to all sorts of creative investing strategies. (Notably, without leaving RM’s platform.)

In context of crowdfunding, the real estate vertical is incredibly attractive. The market is ginormous, $150bn if sized by real estate private equity funds; has highly attractive cash flow properties; serves a spectrum of risk appetites (debt to equity); and has historically been ridiculously exclusive.

Opening this asset class up—bringing efficient and direct access to investors of all geographies—is a juicy opportunity, and there is no shortage of platforms competing for it. I’ve appended a list of other real estate crowdfunding platforms below.  To be sure, they’re not all apples to apples, some taking varying approaches to varying markets. (Fundrise, for example, is specifically focused on local.)

Fierce competition awaits platforms competing to become the de-facto gateway of direct real estate investment. Trends will likely track similar to the peer-to-peer industry (and mostly all online marketplace industries) where a few key players emerge to dominate the broad market (i.e. LendingClub, Prosper); others capitalize on verticalized opportunities (i.e. SoFi); and marketplaces are largely transactional (auto-bidding, participation from institutional capital).

Jilliene and her team are off to an exciting start. RealtyMogul is targeting a curation rate of 2%, and with hundreds of applications in the pipeline, the Company is busy vetting opportunities for investors to directly participate in. Real estate investing today is an “old boys’ club.” But no longer, if RealtyMogul et al. have their way.

So what do you think? Will private real estate be in your portfolio in three years :-)? We’d love to hear your thoughts on real estate crowdfunding, or any questions for Jilliene, in the comments!

Highlights

  • RealtyMogul: Founded in 2012, launched in March 2013, a real estate crowdfunding platform for accredited investors
  • Facilitates both debt (lower risk, lower reward, avg. duration 6-12 months ) and equity (higher risk, higher reward, avg. duration 3-5 yrs) transactions
  • Has closed 3 debt transactions to-date; plans to do its first equity deal in coming months
  • The company closed a $500k seed round in March; angels included David Rose, CEO of Gust, and Gordon Stephenson, Zillow board member
  • Currently open to properties in California and Washington
  • Targeting a curation rate of 2%
  • “Hundreds” of deals in the pipeline; “thousands” of users on the platform;
  • Users can invest as little as $5k; many of the early investors have a tech background
  • A partnership with Gust allows its users to natively access and invest in RealtyMogul deals (a la SecondMarket + Circleup/Angellist)
  • Offline-to-Online: RealtyMogul is partnering with local investor groups to reach, educate and onboard new users

Real Estate Crowdfunding Platforms

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