Sharestates Review – Real Estate Crowdfunding
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For accredited investors, choosing Sharestates as a place to get started with real estate crowdfunding is a solid option.
8/10
Cost
8/10
Features
8.5/10
Ease of use
9/10
Services
8.5/10
Although real estate investing dates back to the early 1800s, it’s not always enjoyed the current level of popularity. Nor has it been as accessible as it is today. The perks of real estate investing are everywhere, from your computer’s homepage and your Instagram feed to magazines and books in your local bookshop (or Amazon, if you’re fully embracing the perks of 21st-century life).
Previous generations had to save for years for a down payment, only to take out a mortgage with an interest rate in the double digits. Today many fintech startups exist to bring investing to as many people as possible. It’s a great way to add diversification to your regular investment accounts or build your retirement fund. Or a little of both!
And there’s no need to stay in it for the long haul if you don’t like a particular real estate investment. Like the loans funded with Sharestates, many are short-term loans, and you can expect to get your principal back (with a balloon interest payment) within 12 to 18 months. All while getting monthly interest payments, you can spend or reinvest in more real estate.
In this article
What is Sharestates?
Sharestates is an investment platform for real estate crowdfunding. This means that you can get into real estate investing without a substantial down payment, without doing the rehab work that a flip entails, or dealing with tenants, toilets, and termites (and any of the dozens of issues that could arise) if you buy a long-term rental.
In 2013, brothers Radni Davoodi and Raymond Y. Davoodi started Sharestates and soon partnered with co-founder Allen Shayanfekr. The Davoodi brothers had previously grown a company to include a suite of real estate solutions for their clients and were eager to start something new that drew on their backgrounds. They realized a big gap in the market: the average person didn’t have access to quality commercial real estate deals.
Sharestates was one of the first to enter this niche market, launching in February 2015 and allowing ordinary investors to cash in on large real estate deals that are generally inaccessible.
Unlike being a hard money lender for developers, using a real estate crowdfunding platform allows you to outsource much due diligence. (Note the emphasis on much; you still need to research to ensure an investment is good for you.)
Once you have bought membership units (shares) in a real estate asset, you get to enjoy what the real estate long-time real estate investors call “mailbox money,” monthly interest payments sent to you month in and month out without doing any extra work.
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How does Sharestates work?
Getting started investing with Sharestates is easy.
First, you’ll choose which kind of account you want: investor or sponsor (borrower).
Next, you're prompted to fill in basic details, including address, email, and phone number. To verify you, you’ll receive a text message. Then enter the code to move on to the next step.
After that, you will be prompted to give details that support your accreditation status. I’m not yet at that point in my financial journey, but I was able to check out that page to see that they require you to upload certain financial documents proving your income and net worth.
Then there are questions about your investing experience, risk tolerance, and the main reason you’re investing.
Finally, you get to your dashboard and can see what’s available.
You can click on each listing to view more details about the project to see if it’s one you want to invest in. A button prompts you to invest in it, and that’s when you can put in your funding information.
From there, the navigation seems intuitive as you fund your account and invest in shares of large real estate deals.
You can also get an overview of properties that are fully funded.
You will need to prove that you’re accredited. Submitting documentation appears to be straightforward. Just upload your documents and submit them for review.
How much does Sharestates cost?
There is no annual fee for investors, but you may incur an account setup fee of up to 2% of your initial investment.
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- 30-Day Membership-Fee-Back Guarantee
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Sharestates features
With so many crowdfunding platforms out there, what makes Sharestates appealing? The background of its founders and team members is key to its excellent track record.
Borrower debt payment dependent notes
This is one of the two investments you can make at Sharestates. These are debt securities that are linked to projects. Your money is lent to the project developer, you get monthly interest payments, and at the end of the project, you receive your initial investment back. Loan sizes and interest rates vary depending on the project's underwriting.
Equity funding
Unlike a building rented out and bringing in income monthly, like the aforementioned debt payment notes, equity funding gives you a share of the property when you purchase Membership Units. When the project is sold for a profit, you get a portion of the proceeds based on how many units you have. The converse is also possible; if the developer sells it for a loss, you might not get your entire investment back.
Knowledgeable team
This isn’t just a company created by people in the tech industry, it’s created by people from real estate-related backgrounds. They wanted to make large Wall Street deals available to everyday people, not just those with deep pockets.
Referral program
You can invite friends to join you in investing with Sharestates. When they start investing, you are eligible for a 1% increase in yield on your next investment.
Who is Sharestates best for?
- Someone who wants to diversify their portfolio. At some point in life, you’ve been told not to put all of your eggs in one basket. But financial gurus also preach that you shouldn't invest in something you don’t understand. Sharestates is a way to dip your toe into real estate without the learning curve of buying a property to flip or rent.
- Someone who wants to get into real estate without breaking a sweat. Those who find real estate a fascinating area to invest in but don’t want to pull up carpets and install new toilets, investing in Sharestates gives you access to real estate without all the manual labor.
- Someone who doesn’t have a lot of cash to put toward real estate. Even though Shrarestaes is only open to accredited investors, it doesn't mean you have piles of cash just waiting to invest. Maybe you have six-figure income, but you’re putting your three kids through college and are limited. Perhaps your other assets produce a steady but small cash flow that you want to invest into something slightly more liquid than an apartment complex. Investing in crowdfunded real estate is something to look into.
Who shouldn’t use Sharestates?
- Those who are already doing their own real estate deals. If you’re deep in the real estate trenches, calling sellers, writing offers, and closing deals, then the investment side of Sharestates might not be what you’re looking for. That said, if you’re looking for more funding, you can apply to be a borrower and receive financing from Sharestates investors.
- Those who prefer a more hands-off approach. It’s far easier to invest in Sharestates than to buy a rental property, but for the best results, it’s not as easy as putting your account on auto-draft and taking a set-it-and-forget-it approach. Transparency is a core value with Sharestates, and you’re encouraged to look at the data on the deals available. You’ll also be sent updates throughout the loan.
Pros & cons
Pros
- It is run by people who know real estate. The founders, and many of the management, have a considerable amount of real estate investing experience, which has led them to structure the platform in ways that have gained investors’ trust and limiting their liability.
- Comprehensive due diligence is performed. While the underwriting process may be daunting to a sponsor (borrower), it ensures the delinquency rate stays very low.
- Low minimum investment. The minimum investment of $5,000 is reasonable, considering the platform only works with accredited investors, and maybe even low depending on comparable investment options.
- Option to liquidate. It’s not ideal, but if at any time you do need out of a deal, you can apply to have your position liquidated for a discount.
Cons
- You have to be an accredited investor. Possibly the biggest downside is that you have to be a high-income earner ($200,000 a year or $300,000 for couples) or have a large net worth ($1 million in assets not including your residence). Due to SEC regulations, there’s no way around this.
- A limited selection of investments. Unlike investing in stocks or mutual funds, which you can always buy more shares of, there may be times when there are a limited number of projects to invest in on the platform.
- No secondary market. Since this is restricted security, you should expect to hold them until the loan comes due unless you sell your shares at a discount. Fortunately, most loans are for 12 months, meaning that your money won't be tied up for long.
Sharestates vs. competitors
Crowdfunding platform | Investment minimum | Fees | Open to non-accredited investors |
Sharestates | $5,000 | Up to 2% setup fee | No |
Realty Mogul | $25,000 or $35,000 | Varies | Yes |
Fundrise | $10 | 0.15% annual advisory fee, 0.85% annual management fees | Yes |
RealtyMogul
With investment opportunities for both accredited and non-accredited investors, RealtyMogul makes it easy to add diversity to your financial portfolio. But their minimum investment is a high bar to clear for non-accredited investors. You will start earning passive income monthly, which can be reinvested. If you decide crowdfunding isn’t right for you or need your money, you can sell your shares after one year.
Fundrise
For beginning investors who want to get started in real estate investing but aren’t sure they want to put a lot of money into it, Fundrise makes it easy to invest in several properties with a minimum investment of just $10. You can select your account type, including individual, joint, or self-directed IRA. Their proprietary model allocates your money to various projects based on your investment objectives. Fundrise’s investment options are open to non-accredited investors.
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- Over 100 Stock Picks with 100%+ Returns
- Averaged Stock Pick Return over 593% (vs. 165% for the S&P)
- 2 New Stock Picks Every Month
- Investment Community With 700,000+ Loyal Members
- 30-Day Membership-Fee-Back Guarantee
- Joy Wallet Reader Deal: The Motley Fool is offering 50% off its top stock-picking service for new members (Limited Time)
FAQs
How do I become an accredited investor?
Being an accredited investor means that you meet one of two criteria. Your annual earnings are $200,000 per year ($300,000 with a spouse) for each of the past two years and are expected to stay at that level or increase. Or you have $1 million in assets, excluding your personal home. Becoming accredited isn’t something that most people can do in a matter of weeks or months, but it is worth working toward to gain access to more investment opportunities.
What are the fees associated with investing with Sharestates?
An account set up fee between 0% and 2% may be charged, otherwise, there are no ongoing fees for investors. Borrowers are charged an origination fee that helps keep investor costs low.
What kind of properties can I invest in through Sharestates?
According to Sharestates stats, the current portfolio is invested in roughly one-third of each residential and multifamily. The remaining one-third includes mixed-use, land, commercial, and portfolio.
The bottom line
For accredited investors, choosing Sharestates as a place to get started with real estate crowdfunding is a solid option. They take a lot of the work out of vetting deals so that when it comes time to decide between your investment opportunities, you know it will be hard to go wrong with whichever one you choose.
Even if you’re just curious or will soon be able to claim accredited investor status, the site is worth spending some time perusing. The resource page contains videos, blog posts, and news articles about investing in crowdfunded real estate.
You can even create an account, as I did, so you can get a peek inside the platform to see what deals are available and see the details of previously funded properties and get a feel for the investment opportunities that get funded through Sharestates.
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Writer
Charlotte Edwards is an educator-turned-freelance writer based in Beijing, China. She writes personal finance and parenting content for both digital and print publications around the world.
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