Real Estate Crowdfunding is Only Rising with iFunding’s Best Month in August 2015

iFunding, a leading real estate crowdfunding platform, had its best month in its 3 year history, offering investors over $14 M in real estate investment properties.

August is typically one of the quietest months of the year, with investors distracted by summer activities. However, due to the quality of iFunding’s real estate opportunities, the company quickly funded six of its eight projects listed within a week of introducing the project to its 7,000 accredited investors.

“iFunding takes pride in providing quality deals for our investors, “ William Skelley, Founder and CEO, states, “We have been focusing on developing sound relationships with our sponsors, and this month, it’s clear this effort has paid off.”

“We thoroughly enjoy working with the iFunding team and using its platform for our funding source.” Myles Bruckal, Founder of The Bruckal Group says, “Raising capital with iFunding exceeded our expectations, and therefore listing with them again was an easy decision. We are honored to be apart of its most successful month, and we’re in discussions regarding our next project for the iFunding platform. ”

iFunding expects continued growth by offering larger and higher quality opportunities and acquiring additional accredited investors.

About iFunding 
iFunding is a leading real estate crowdfunding platform, facilitating debt and preferred equity fundraising for properties ranging from multi-family residences to apartment towers, hotels and resorts, ,retail locations, malls, offices, mixed-use buildings, and more. iFunding provides opportunities for its 7,000 accredited investors to invest in institutional-quality real estate deals, with a minimum investment of $5,000. The company oversees deals throughout their lifespan, providing extensive information and transparency to give investors insight and oversight into their investments. It also generates financing for multi-project funds, and partners with family offices to co-fund opportunities with its individual investors. iFunding offers flexible financing terms to real estate developer and operators. Visit http://www.ifunding.co for more information, or connect with us on LinkedIn athttp://www.linkedin.com/company/innovational-funding, on Facebook at http://www.facebook.com/iFunding , or via @inno_funding on Twitter. The phone number for investor and operator inquiries is 844-367-4386.

iFunding Contact:
Paula DeLaurentis
Marketing
844-367-4386 ext.3
press(at)innovationalfunding(dot)com

A New Indicator of the Health of Real Estate Investing

US government data indicates that commercial real estate lending is healthier than it has been for many years.

With Q2 ’15 data analysis now available, the Federal Reserve notes that commercial real estate loan delinquency rates have been in steady decline, implying a healthier economy and real estate market.  The percent of CRE loans from banks with delinquent payments dropped to 1.2%, the lowest rate since 2006. In between these years, the delinquency rate climbed as high as 8.77%, during the major recession. There’s a great chart here, with a screen capture below.

iFunding sees this as another sign that commercial real estate investing may be in a ‘goldilocks’ environment now, where market demand and property prices are growing slowly but steadily and investment performance overall should bias positively.  Although there are no guarantees about the future, many industry pundits agree the U.S. domestic economy is relatively robust (see the video here), the existence of an investment bubble is very unlikely, and the possibility of a recession is low for the next several years.
What does the Fed’s loan data mean for your real estate investing? You may want to consider that:
  • Investment opportunities with a 1- to 3-year target for return of capital are attractive yet prudent, as they are predicted to avoid major macro-economic surprises.  Longer duration investments also can be favorable, but understand that your capital may be locked in for an unexpected amount of time until the market is right for a property sale.
  • Both first-lien debt and well-underwritten mezzanine (“second tier”) debt, with its higher average return rate of several percentage points, can be reasonable investments for an income-generating portfolio at this time. First-position debt is secured by a first-in-line lien against the property, meaning that even if there are payment delays or defaults, a company like iFunding is in position to take control the property and protect investors’ principal.
  • The average loan default rate will vary by the type of commercial property held, the structure of the loans, as well as local and demographic economic trends, and each property carries its own risks. Therefore, spread your investments across multiple holdings to diversify away much of the default risk.

 

Five of the Best Books for Part-Time Real Estate Investors

There are countless books about real estate for an active property investor who is negotiating for acquisitions, overseeing refurbishments or managing an apartment building.  However, there’s much less education available for investors participating financially but not becoming closely involved with the properties.

Investors in this “limited partner” role need education about:

  • how to evaluate the risks and rewards of different property types;
  • which real estate markets are strong;
  • how to select an real estate business partner;
  • and what milestones to look for while monitoring project progress.

In this blog, we recommend five books that are especially relevant to limited partners, whether they are about to invest with a partner in a local project, or online through an investing marketplace/crowdfunding site. The books are listed in order of easiest to most advanced reading.

Real Estate Investing For Dummies

People admit to liking the “Dummies” series about as much as they admit to liking the musical group ABBA, but let’s face it, the books get the job done. “REI4D,” as you’ll allow me to call this book, covers whether real estate investing is right for your situation; how to evaluate properties; what kind of supportive professionals you’ll want to work with; and much more.

Trump Strategies for Real Estate: Billionaire Lessons for the Small Investor

For those who like to learn about an industry by reading about the ‘players’ in that industry, it’s hard to beat Donald Trump for big picture insights. This overview is written by his lawyer of 25 years. It’s actually the best Trump book to encapsulate principles for achieving a premium on a property and negotiating an arrangement to your advantage. The author also recounts some of their biggest property ‘scores’ from which they profited. A memorable and easy read.

Investing in REITs: Real Estate Investment Trusts

Real Estate Investments Trusts generally are publicly traded securities that can be purchased through your broker, just like stocks. Each REIT holds large numbers of properties of a particular kind, which together generate profits for investors. Their unique characteristic is that at least 90% of their taxable income must be distributed to investors each year, making them high income-yielding assets. While they don’t provide the same hands-on approach of investing in a specific property, they can be useful to diversify one’s real estate portfolio. Ralph Block’s book covers the economic dynamics of each key RE sector – apartments, office, industrial, storage, mortgage and more. Understanding the sectors also can help you select investments through crowdfunding.

Mastering Real Estate Investing: Examples, Metrics and Case Studies

This book excels at combining case studies about different types of properties and how they perform, with key financial ratios needed to understand to find identify the strongest opportunities, and predict and monitor the properties’ investment returns. The same author penned another great financial book, “What Every Real Estate Investor Needs to Know About Cash Flow”.

The Due Diligence Process Handbook for Commercial Real Estate Investments

Due diligence about the state of a property and the local real estate market is the foundation for successful investing. This book starts with basics then gets into a thorough listing of checkpoints.  While a passive investor in real estate won’t need to perform all these steps themselves, they should feel comfortable asking the right questions and understanding for the answers about a property before investing.

Selecting a Self-Directed IRA Custodian to Increase After-Tax Returns with Real Estate Investing

Self-directed IRAs (SDIRAs) can be very effective with online investing to defer taxes on your earnings. This is a second interview by iFunding in our SDIRA series, focusing on selection of an IRA custodian. SDIRAs require that an IRA account holder use a custodian company to administer investments and generate tax reporting. We spoke with Michael McNair – Trust Officer at IRA Services Trust Company about how well this can work with real estate investing online.

Remind us how self-directed IRAs improve the after-tax returns on any investment, including real estate.

In some respects, self-directed IRAs are like any IRA. They defer or eliminate taxes on investment income. SDIRAs can be traditional, taxed-deferred IRAs – including SEP and Simple IRAs – or a Roth IRA. With a traditional IRA, a certain dollar amount each year can be contributed without paying taxes on that income, but eventually, after the participant reaches the age of 70 ½ , they are required to take a distribution each year. The participant will pay taxes on the amount distributed to them. With Roth IRAs, you pay taxes upfront on the contributions, but never pay on the income or growth on the investment, even when withdrawing the money.

The restriction with IRAs that are not self-directed is that you are limited to stocks, bonds and mutual funds. You cannot, for example, invest directly in real estate properties, limited liability companies, promissory notes, crowdfunding opportunities or precious metals. That’s where self-directed IRAs come in. They are especially suited for real estate debt investments, that is, loans to property operators or developers.

Consider that some real estate investment types can average returns that are in the double digits (e.g., over 10%) per year. You can perform quick calculations about your potential savings if you defer taxes on income and growth, or eliminate taxes on asset growth entirely with Roth IRAs.

How did IRA Services Trust Co., and you personally, get involved with SDIRAs?

IRA Services Trust Company originally administered limited partnerships for Wells Fargo. In 2008, we were granted a Trust Charter, which enabled us to act as a custodian of self-directed IRA accounts. Since 2008 we have grown the business from less than 15,000 to over 40,000 accounts. I’ve been with the company since 1995.

Note that some providers in the SDIRA market only are “administrators.” Administrators can perform administrative duties and reporting but need to work with a custodian that is allowed to hold title to investments.

How do fees work with SDIRAs? They must be designed to accommodate the smaller transactions typical of an investment in a crowdfunded property, correct?

You should look for a SDIRA custodian that offers a fee structure compatible with online real estate investing, or crowdfunding. In a traditional, direct property investment, the investor is likely to make one big investment upfront then have a variety of outbound payments or inbound income each month. With crowdfunding, many investors will only put up $5,000 to $20,000 upfront per asset, and receive monthly interest or a lump-sum payment at the end. Our fees at IRA Services Trust are crowdfunding friendly – $35 to set up an account online; $125 one-time to purchase an asset/property; then $100 per year to maintain the account and $80 per real property asset per year. There is a small charge for a wire, while ACH transfers don’t generate a fee [note that iFunding will accept investment contributions, and pay returns, via ACH].

So, the benefits of the SDIRA outweigh the costs?

Very often that’s the case, though it depends upon your situation. SDIRAs tend to shield taxes best on income-generating properties paid for in cash (without debt). The use of SDIRAs has grown exponentially over the past decade.

iFunding suggests considering this simple case: $15,000 invested in each of two real estate crowdfunded properties at the same time. They each have a target return of 12% after one year, or $3,600 total (2 x $15K x 0.12). The one-time fees to open and fund the investments would be $285 and the ongoing maintenance fees would be $260/yr. In this situation, the annual maintenance fees come to .5% of the assets and 7% of the income.

Next, you would make a calculation with respect to your marginal tax rate on the profit of $3,600. This represents the tax savings benefit of using an SDIRA. Many US investors’ marginal tax rate is 25% to 39%. If you calculate the taxes you would not have to pay with a Roth SDIRA, and net out the fees, you arrive at the economic benefit in this example. At the 39% marginal tax rate, the SDIRA would let you keep over roughly $1,000 more of your $3,600 gross profit versus investing with a taxable account (you would keep slightly less than $1,000 in year 1 with the IRA account, and somewhat more thereafter). This is equivalent to a 50% increase in your net profit per year by using the SDIRA.

What else are customers looking for in a SDIRA custodian?

The question about fees usually comes up first. A very close second however, is the helpfulness and promptness of the client service staff. You want to be confident that your custodian can process transactions quickly so that, for example, your real estate deal can close promptly with your available funds. You also want experienced staff that are readily accessible and care about the account holders’ questions and challenges.

At IRA Services Trust, we have 55 employees, many of whom have been with us for 10 to 15 years. We also offer a special Concierge Service, for investment advisors and investment providers who want a single point of contact and often want transactions to be expedited.

How long does it take to set up an SDIRA?

The primary determining factor is where the funds are coming from. One can make a new IRA contribution, roll over funds from a qualified plan (401k, profit sharing plan, etc), or transfer funds from an existing IRA. Making a contribution to fund an IRA is very quick, but it is limited to $5,500 (under 50) or $6,500 (over 50) per year. If you are moving funds from an existing IRA to an SDIRA, the timing depends on how quickly the custodian will process the request. It is our experience that it will take from one to two weeks. In either case, it’s fair to say, a typical set-up time may be a week, but leave a buffer if you have an important investment to fund with a firm deadline.

If you are investing in what’s known as a Reg.D/506(b) investment (ask your real estate investing platform about specific property offerings), then there can be a “cooling off” period after you sign up and before you can invest. The period is intended to protect the investor by reinforcing the need to learn about the offerings and build a relationship with the issuer. This can be perfect timing to establish your SDIRA.

One more note is, that with 401K plans, some employers do not allow plan participants to transfer funds while they remain active employees.

What related services does IRA Services Trust offer?

Our systems are set up so that we can work with a crowdfunding platform to capture and securely share basic SDIRA account set up information from the platform’s website. Alternatively, a visitor to the crowdfunding site can be easily directed to a custom landing page on our site to start the account set-up and account funding processes.

Real Estate Investing Due Diligence: How to pick your market (a bird’s-eye view)

In today’s vast and sophisticated real estate market, investors have opportunities to directly or indirectly access real estate assets worldwide. As real estate starts to recover as an investment class, it can become a daunting task to decide where to place your chips.

Before diving into to the juice of the actual deal, (asset returns; asset condition; asset location) it’s imperative to research the “market” in which that asset lies. Seasoned investors know different risks involved with each region; my goal is to get the average investor to think about the not so average due diligence questions.

For the purpose of this blog, we will focus on the continental United States, although the scope of this research approach can and could be applied elsewhere. Regionally speaking, we can divide this topic into four regions; the East; the Midwest; the South and the West. Each with its own nuances, you can imagine there are far too many to cover in this blog, so we will cover broad areas for investigation.

 

Culture

Are state laws friendly towards investors? Is this rumored to change and if so, how will it affect your strategy? Touted as America’s most disliked tax, (and known as a lagging indicator) property taxes vary state by state and tend to follow the direction of political environments.

Are the political heads competent enough to get things done? Double-checking on the leaders of your potential investment region is key before finding yourself in business with them. There is nothing more stifling to projected long term profit than city leaders who cannot respond to growth needs. A good place to start is the cities 5-10 year plan. Make sure your goals will fit into their projected plan.

Changes in demographics

Population changes are huge game changers as investors in natural gas states like Wyoming and North Dakota have found. Projections from independent and reliable resources such as The Brookings Institute are worth checking, on a regular basis. Places with stagnant or declining populations should have compensating factors and accompanied with well thought-out long term strategies

Diversity

Diversity in population has proven to bring increasingly stable returns. We are finding dense populations and higher returns around urban more so than suburban areas for numerous reasons; diversity in food, shopping and entertainment experiences are a few of them. Americans love choice and convenience, these two amenities are luring them to the surrounding urban areas.

Seasons & Natural Elements

Weather will affect your bottom line. Consider the South where for all intensive purposes it rains a lot or consider the Midwest where the winters are most fierce, what type of additional expenses should an investor include in their calculations? For these examples biweekly grass trimming, winterizing and snow removal expenses are cash flow attackers. Investors in NV should think twice about buying assets with aluminum siding as hailstorms frequent the region and can damage the curb appeal once held.

Geography

Is the area predominantly developed? Does it have its infrastructure needs met? Is there a finite amount of livable and build able land? It is safe to assume property values will be higher in more developed areas. It can also be reasonably deducted that the more sophisticated the infrastructure, the more money needed to run that economy.

As you can see, this due diligence aspect can become as expansive or detailed as you want. It’s important to keep in mind that Investing whether in your backyard or out-of-state will require knowledge of your market. Once you’re financially involved with a real estate market it’s all about managing the experience. Putting a lot of the work in on the front-end can make that process more profitable and palatable.

 

Jasmine Willois is the co-founder of WBRE Mgmt, LLC. Learn more about her real estate investment clubs and follow Jasmine Willois on LinkedIn!

Real Estate Investing: What is a Tranche, and What Does it Mean for You?

Tranche, a French word meaning “slice,” is a financial term used to describe a unique piece of a larger, single transaction. Typically this division is based on how much risk the transactions, typically in the form of securities (tradable assets), carry. It’s a technique employed in the financial world to better package and sell assets like loans — often backed by mortgages — to investors which are looking for a particular form of cash flow and is particularly intertwined with the real estate world.

Three Things That Make A Great Real Estate Investment

If you’re looking into real estate investments, you likely want to earn wealth on real estate based on risk you are taking, while minimizing the amount of time you need to spend attending to the property. In order to accomplish this, you need to make some smart choices upfront when buying investment property. Your goal should be to strive to get as close as possible on as many of these optimal scenarios as possible:

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NNN Leases

What is a Triple Net Lease?

A triple net lease, a type of commercial leasing agreement, is a lease where the tenant pays the insurance, maintenance, taxes and rent. There are pros and cons associated with a triple net lease for both the tenant and the landlord.

Prior to making a decision, individuals should carry out extensive research about the triple net lease. Often times, a triple net lease is referred to as a true net lease as usually the landlord has no responsibilities related to the upkeep of the building. This is the reason why a majority of commercial landlords prefer triple net leases over any other type of lease. The terms of a triple net lease agreement are individualized to the lessor and the tenant. These may include stipulations and restrictions to protect both the parties involved in the agreement.