Review and Ranking
What is Realty Shares?
IMPORTANT 2021 COVID-19 UPDATE: The investment repercussions of the global pandemic continue to change and evolve with unusual speed. As such, this review might be dated, no longer accurate, irrelevant and/or missing crucial information necessary to making an effective investment. For the latest and greatest information on analyzing investments in this new era, see the latest article in the series: "How will Covid-19 / Coronavirus Affect my Alternative Investment Portfolio?"
Update Nov 7, 2018: Realty Shares has run out of cash for funding operations and has shut down to new investors.
Update Feb 13, 2019: Realty Shares is being sued by investors in a class action lawsuit.
Realty Shares is an unusual combination of some of the most impressive features in the industry, one of the most inconvenient and is also one of the more complained about sites by investors.
It had bragging rights previously as one of the largest volume of new investments in the industry (19 versus the average of 1). This alone made it one of the "must visit" sites for many investors (although volume has since waned).
They also offer the most diverse mixture of asset classes and investment types of any site (every combination of commercial, debt/equity, direct investment/fund). This is really handy for diversifying your portfolio quickly.
Additionally, they offer low minimums, and superior bankruptcy protection. And they have the distinction of breaking the 2016-2017 VC funding drought and raising an impressive $28 million.
On the negative side, unlike It's closest competitors (Crowd Street and Real crowd), Realty Shares inserts itself as a middleman between the sponsor and the investor. This means that the investor cannot go directly to the sponsor for questions (which in my opinion is not ideal, because it can lead to a game of "telephone" where the original information is not passed along accurately). It also means that the investor cannot go directly to the sponsor for updates if things go wrong. And finally, it also means that the investor is paying an extra fee to Realty Shares for the structure, that isn't paid on other sites.
Also, investor feedback on Realty Shares, was generally not positive, with several claiming that they would not use the company again after their experiences.
Investors alleged dissatisfaction with inadequate management oversight when investments went wrong. For example one claimed:
"One investment seemed to be going great until the final (largest) payment was expected where it turned out to be a 45% loss of capital. The sponsor performed extraordinarily poorly: only 4 of 13 properties in that investment turned a profit. If this is true, I would think that if RealtyShares was performing competent oversight, they would have noticed a severe problem like this much earlier, and would've had time to intervene and at least reduce the damage to investors. They do charge a fee for management, so it's not clear to me what that fee is buying."
A couple of specific allegations of problems are listed below in the "problem investments" section.
In September 2017, Realty Shares announced it had exited the residential loan origination business and has sold that portion of the company to Lima Capital. It also said it will focus on commercial real estate going forward. As of the writing of this review, I was still waiting for a response on the company as to whether Lima capital will be taking over any of the alleged distressed investments or if Realty Shares would be continuing to administer them.
Investors have also claimed they experienced irregularities with the Realty Shares tax reporting for 2016. They said that tax documents were initially provided with incorrect or erroneous information and that customer service was generally unhelpful in resolving the issue (for example putting up corrections online and only some who complained rather than all investors, etc.).Other
Advantages: Highest investment volume, most diverse asset classes and investment types, low minimums ($1k - $5k versus $10k average), superior bankruptcy protection, $60 million in venture capital.
Disadvantages: Fees are a bit on the high side (from 1 to 2% versus a 1% average).
Accolades: #2 for lowest minimums.
Problem investments: (as reported by investors)
327 N Grenola Street: sponsor suspended preferred return in November 2016. October 2017:preferred return resumed, but allegedly with no communication from Realty Shares as to why, what had changed, whether it looks like things are back on track or not,etc.
84 South Union St: fix and flip that failed to return investor money when promised and still trying to sell after more than 2 years.
2018-06-02 an investor alleges that $525k of investor money for an investment on RealtyShares was received from the sponsor but not distributed by RealtyShares for over 17 days and counting. They claim that RealtyShares says "our engineering team is currently updating our servicing system, and we are working diligently to make sure everything is working properly before sending out the remaining principal". If this is true, it's not clear why it would take so long to do something that should be so routine, unless the platform is having significant issues. I've asked the investor to let me know if and when he claims he has finally received his payment.
*Starred sites are tied and are shown in alphabetical order.
For more raw data on the site (including investor and sponsor fees, legal structure etc.), or to easily compare it with the data of competitors, see the feature by feature comparison matrix.
Where can I discuss other Realty Shares deals?
You can do this with thousands of other investors in the private investor club. While the club is free, membership is restricted to investors who have no business connections to sponsors or platforms. Also, all members must agree to keep all club info confidential by signing a nondisclosure agreement. Click here to join or get more info.
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About Ian Ippolito
Ian Ippolito is an investor and serial entrepreneur. He has been interviewed by the Wall Street Journal, Business Week, Forbes, TIME, Fast Company, TechCrunch, CBS News, FOX News, USA Today, Bloomberg News, Realtor.com, CoStar News, Curbed and more.
Ian was impressed by the potential of real estate crowdfunding, but frustrated by the lack of quality site reviews and investment analysis. He created The Real Estate Crowdfunding Review to fill that gap.
Code of Ethics: To maintain objectivity, I do not accept any money from any sponsor or platform for publicity nor for referral of investors (including but not limited to affiliate ads, advertising etc.). See code of ethics for more.
Personal opinion only: All info is my personal opinion only as an investor. I am not an attorney or accountant or your financial advisor. Always do your own due diligence and consult with your own licensed professionals before making any investment decision. Information is believed to be correct but may have errors, so use at your own risk. If you find an error, please let me know.
Rankings/rating are general: In my opinion, every investor comes from a different risk tolerance and financial situation, so there's no such thing as a single investment or platform that's great for everyone. There are many deals that aggressive investors love, which I won't touch, and vice versa. And every investor has their own way of doing due diligence. I believe there's no one right way to do it.
So, the site ratings are based on criteria which I feel are important to the broadest range of investors (transparency, volume, bankruptcy protection, etc). And even though I have my own personal, conservative, due diligence method (and talk about how the site's deals measure up in the "deep dive section"), I don't use my personal criteria as a factor in the ratings. So for example, a high ranking/rating doesn't mean that I would personally invest in a site (and vice versa). Click here to see what's in my own portfolio.
Have you used the above site before? What was your experience?
This site has been ranked and reviewed as part of our in-depth, 100+ site industry review. All data is believed to be correct, but may have mistakes. Please contact us if you notice one. All non-data (including rankings, investor comment summaries, etc.) are my opinion only. I'm just an investor and not an attorney, accountant, or certified financial advisor. To maintain neutrality: I do not own a portion of any of the companies reviewed.