EquityMultiple specializes in private real estate investments, primarily in the mid-market commercial space. It offers a range of opportunities, from senior loans on commercial properties to equity investments in development projects.
In this detailed EquityMultiple review, we’ll examine how the platform works, the types of investments it offers, its fee structure, and the potential returns you can expect. We’ll also compare EquityMultiple with other real estate investment platforms.
Summary of our analysis: EquityMultiple offers accredited investors a diverse range of commercial real estate investments. It has a strong track record, yielding a net return of 15% on realized investments since 2015. However, investments are typically illiquid, and fees vary. For investors seeking portfolio diversification who are willing to commit to longer holding periods, EquityMultiple is a viable option. Other alternatives may be more suitable for those seeking liquidity or lower fees. Overall, it's a solid platform for the right investor profile.
- Low minimum ($5,000) compared to the competition in the accredited investor space.
- Offers several types of commercial real estate investments varying in length, risk and expected returns.
- Allows you to invest in both managed funds and individual projects.
- Fees vary based on investment type.
- Investments are illiquid.
- Has a positive but relatively short track record of performance.
10 Things Investors Should Know Before Signing Up
- The 17% rate of return, mentioned on their homepage and throughout their marketing materials, is their performance from 2019 through the end of 2022. This is after fees and expenses, and only accounts for realized investments. Since its inception in 2015, the platform has yielded a net return of 15% on realized investments. Their stated reason for breaking out the returns in this manner is that 2019 is when they formed their investment committee.
- Ongoing investments in EquityMultiple are projected to yield a 13.80% return. This estimate is derived from an annual internal review. If an investment is anticipated to result in a loss. it’s assigned a null rate of return (XIRR) until the total loss is quantified (meaning it’s considered to have no return until the loss amount is confirmed). I asked EquityMultiple about this, and it was stated that 3.7% of their investments on their current balance sheet have an expected principal loss.
- EquityMultiple sets different return targets for various types of deals. The platform aims for a net annual percentage rate (APR) of 7-12% for debt deals. In the case of preferred equity deals, the target is a net current preferred return of 7-12%. For equity deals, the platform seeks a net cash-on-cash return of 6-12% and a net internal rate of return (IRR) in the mid-teens.
- EquityMultiple partners with outside sponsors (typically real estate companies or developers) to present investment opportunities. These sponsors identify and manage real estate projects. After passing EquityMultiple’s evaluation process, the project is listed on the platform.
- EquityMultiple categorizes its investment opportunities into Grow, Keep, and Earn. “Grow” investments are equity investments in larger projects with higher potential returns and longer holding periods. “Keep” investments are typically debt investments that aim to preserve capital while providing consistent income. “Earn” investments are preferred equity and mezzanine debt investments that offer a balance of income and growth potential.
- EquityMultiple charges different fees based on the type of investment. Common equity investments have an annual fee between 0.5% and 1.5% of invested capital and profit participation after achieving a full return of the invested principal and the IRR hurdle. A servicing fee of typically 1% is charged for debt and preferred equity investments. Additionally, all offerings incur an administrative expense, which is typically $30 to $70.
- Investments made through EquityMultiple are generally illiquid due to the absence of a secondary market. You should expect to hold securities until they mature or a liquidation event occurs.
- The minimum investment amount on EquityMultiple can start as low as $5,000, but this varies depending on the specific offering. Typically, the investment minimum falls between $10,000 and $30,000. Once the minimum investment is made, investors can purchase additional shares in increments of $5,000.
- You can choose between investing directly in specific real estate projects or funds. Funds offer a diversified portfolio of various investments across the platform.
- EquityMultiple doesn’t invest alongside you. Their role is to bring qualified investments to the platform.
Since its inception in 2015, EquityMultiple has facilitated over $4.4 billion in real estate investments and returned $298 million to investors.
After signing up for the platform, you can browse various vetted and curated real estate projects from outside sponsors and lenders, each with comprehensive due diligence materials.
EquityMultiple then manages the distribution of returns and keeps you updated on the project’s progress.
Once you’ve chosen a project, you can invest directly online.
The platform offers a variety of investment types, each with its own risk and return profiles. You can invest directly in specific projects or opt for funds that offer a diversified portfolio across various real estate investments.
Types of Investments EquityMultiple Offers
EquityMultiple offers various commercial real estate projects, primarily in the middle market, including office, industrial, hospitality and retail properties.
EquityMultiple divides available investment types into Keep, Earn, and Grow.
- Keep. These accounts, which the platform refers to as savings account alternatives, are diversified short-term debt notes. The target return on these notes is to exceed current rates on certificates of deposit (CD). For example, the six-month Alpine Note has a minimum investment of $5,000 and an expected yield of 6.9%.
- Earn. This bucket of investments offers current yield, payment priority, and a relatively short term. The types of investments under this category include senior debt with target returns of 8-12%, preferred equity with target preferred returns of 10-14%, and yield-focused funds. For example, a current offering, the Cottage Gardens in Greensboro, NC, has a minimum investment of $10,000, a target annual return of 15%, and a term length of 36 months.
- Grow. The types of investments under this category include value-add and opportunistic equity with target net internal rates of return (IRRs) of 18%+, upside-focused funds, and growth-focused portfolios.
As an investor, your participation in these investments can take one of three forms:
- EquityMultiple Managed LLC. You purchase an interest in an LLC managed by EquityMultiple, which then invests in the underlying property-owning entity or an affiliate.
- Project Payment Dependent Note. You purchase a note, the proceeds of which are invested in the project.
- Sponsor-Controlled Special Purpose Vehicle. You invest directly into a special-purpose vehicle controlled by the sponsor.
Debt investments are typically secured by a first lien on the underlying property, but in some cases, they may be in a second or later lien position, or not have any lien.
EquityMultiple’s fee structure varies depending on the type of investment you choose.
- Common Equity Investments. An annual monitoring and reporting fee is charged for these investments, typically between 0.5% and 1.5% of the invested capital. Additionally, EquityMultiple holds profit participation, but this is only applicable after you’ve received a full return of your invested principal and the internal rate of return (IRR) hurdle is achieved.
- Debt and Preferred Equity Investments. These investments typically incur a servicing fee, which is usually around 1%.
- Fund Offerings. Fund offerings usually involve an origination fee, which is typically paid upfront.
- Administrative Expense. Across all offerings, EquityMultiple deducts an administrative expense to cover tax document creation, annual filings and entity formation. This fee is split among all investors and typically ranges from $30 to $70 per investor annually.
For sponsors, EquityMultiple charges a 3% fee of the total raise to the sponsor upon the successful close of funding. While you don’t see this fee as an investor, it helps you understand the revenue drivers for EquityMultiple, as they do not necessarily have skin in the game with the investments on the platform.
What Kind of Returns EquityMultiple Offers
Since its inception in 2015, the platform has yielded a net return of 15% on realized investments. More recently, from 2019 through the end of 2022, the platform has achieved a 17% rate of return after fees and expenses on realized investments.
EquityMultiple sets different return targets for various types of deals.
- Debt deals. Net annual percentage rate (APR) of 7-12%.
- Preferred equity deals. Net current preferred return of 7-12%.
- Equity deal. Net cash-on-cash return of 6-12%, and net internal rate of return (IRR) in the mid-teens.
EquityMultiple’s asset management team actively tracks the performance of each investment. You will get updates on the status of your investments at least quarterly.
Your portfolio page provides up-to-date return information, including the cumulative annualized returns for each investment.
Returns are typically distributed to investors on a monthly or quarterly basis. At the end of the tax year, you will receive tax documents related to your investments.
EquityMultiple, CrowdStreet and Cadre are popular accredited investor real estate platforms. Here’s a look at the three platforms.
EquityMultiple vs. CrowdStreet
CrowdStreet is open to accredited investors and has a minimum investment requirement of $25,000. The platform primarily offers individual commercial property deals, while EquityMultiple provides various investment types, including notes, direct investments and pooled investments.
Without shorter-term investment options (like Alpine Notes), CrowdStreet’s required holding periods will typically be longer than EquityMultiple’s.
CrowdStreet has a strong track record, delivering an 18% IRR net of fees since inception.
If you’re planning long-term investments and have more capital available, CrowdStreet is worth checking out and we recommend comparing the projects available on each platform. However, if you prefer a mix of short-term and long-term investments and want a lower minimum investment requirement, EquityMultiple could be the more suitable option.
EquityMultiple vs. Cadre
Cadre, like EquityMultiple, is a real estate investment platform that focuses on commercial properties and is open to accredited investors. The minimum investment requirement for Cadre is $25,000.
However, the two companies utilize different investment approaches. Unlike EquityMultiple, Cadre commits all funds to a deal first, then allowing investor access. This means Cadre has a high stake in every deal.
Cadre’s investment offerings include both individual deals and a Direct Access Fund. The fund has a target balance of 50% multifamily and 50% office buildings and hotels.
Cadre has a strong track record, with a historical IRR of 18.2% and over $168 million in distributions since its launch in 2015.
One unique feature of Cadre is its secondary market, which allows investors to sell their shares after six months. This provides more liquidity compared to EquityMultiple. However, a 1.5% transaction fee is charged at the time of sale, and there’s no guarantee there will be buyers for your shares.
Read our full Cadre review.
Yes, as long as they have a U.S. tax identification number and meet the SEC’s definition of an “accredited investor.” This includes U.S. citizens, legal residents and foreign nationals who own a U.S.-incorporated entity.
EquityMultiple structures most investments through a special purpose vehicle (SPV) for bankruptcy protection. If EquityMultiple were to cease operations, a third-party manager would be appointed to manage the investments on behalf of investors.
It depends. EquityMultiple has no requirement to invest alongside you. However, EquityMultiple states that in many deals, certain employees may invest. Unfortunately, there’s no way to know which deals have employee investment when choosing projects.
Summary and Final Thoughts
If you’re an accredited investor looking to diversify your portfolio with high-quality commercial real estate projects, EquityMultiple has a lot to offer.
You can sign up for free and browse their current deals here.
However, if you prefer more liquid and passive investments in real estate, consider alternatives such as real estate Investment trusts (REITs) or Fundrise, which offers limited liquidity in many of their offerings.