investing in real estate through crowdfunding

© 2016 DailyDAC, LLC d/b/a/ Financial Poise™ 1

REAL ESTATE INVESTINGInvesting In Real Estate Through Crowdfunding

Premier date: December 14, 2016

Premier Date: December 14, 2016

REAL ESTATE INVESTING

INVESTING IN REAL ESTATE THROUGH CROWDFUNDING


WE WOULD LIKE TO TAKE THIS OPPORTUNITY TO THANK OUR SPONSORS



meet the facultyPANELISTS

Elizabeth Braman RealtyMogul.comJessica Healy Syndicated EquitiesJordan Fishfeld CFX Markets

MODERATOR Bill McGuinn

Sugar Felsenthal Grais & Hammer


Practical and entertaining education for business owners and executives, accredited

investors, and their legal and financial advisors. For more information, visit

www.financialpoise.comDISCLAIMER: THE MATERIAL IN THIS PRESENTATION IS FOR INFORMATIONAL PURPOSES ONLY. IT SHOULD

NOT BE CONSIDERED LEGAL ADVICE. YOU SHOULD CONSULT WITH AN ATTORNEY TO DETERMINE WHAT MAY BE BEST FOR YOUR INDIVIDUAL NEEDS.

http://www.financialpoise.com/


about this webinarReal estate is one of the most traditional investment vehicles in existence. Crowdfunding on the Internet, in contrast, is a new technology that didn’t exist a few years ago but which is already facilitating billions of dollars of investment activity a year. And with at least 85 real estate crowdfunding platforms already in existence, the activity is poised to keep growing. Should you invest in real estate through one or more crowdfunding platform? If so, which one? And if you do, how do you decide which specific deals to invest in? This Financial Poise webinar walks you through objective answers to these questions in plain English.


about this seriesReal estate has always been a popular asset class for investment. After all, as the adage says, “they’re not making more of it.” Investors considering making an investment in real estate have a variety of choices: retail, office buildings, industrial, raw land, and, of course residential. More and more investors are turning to the real estate market to invest their funds. This Financial Poise webinar series will cover several types of real estate classes that one may choose to invest in, explaining where to look for opportunities; how to diligence them; and best practice for execution.

As with all Financial Poise webinars, each episode in the series is designed to be viewed independently of the other episodes, and listeners will enhance their knowledge of this area whether they attend one, some, or all of the programs.


episodes in this series

EPISODE #1 Investing in Residential Real Estate 9/21/16

EPISODE #2 Investing in Multi-Family Real Estate 10/26/16

EPISODE #3 Investing in Commercial Real Estate 11/30/16

EPISODE #4 Investing in Real Estate through Crowdfunding 12/14/16

Dates above are premier dates; all webinars also available on demand


New Industry

Real estate crowd funding is an industry that started on 2013 and now there are over 100 Real Estate Crowd Funding Sites


JOBS ACT - 2013

With the passage of the Jobs (Jumpstart Our Business Startups) act in 2013, crowd investors can now pool their money into a single investment, dramatically reducing the barriers to entry into real estate investing


Rapidly growing market

Investors used crowdfunding to pour $2.5 billion into real estate in 2015. More than triple the amount from 2014


2 options

With real estate crowdfunding, there are essentially two options for investing:

• debt investments

• equity investments.


DebtWhen you invest in debt, you’re investing in a mortgage note that’s secured by a commercial property. As the loan is paid back, you receive a share of the interest.

• Usually lower risk

• Usually lower return

• Upside – no obligation to manage the underlying real estate


EquityInvesting in equity means you receive an ownership stake in the property. In this scenario, returns are realized as a percentage of the rental income the property generates.

• Cash flow from property

• Potential gain on sale

• Usually higher risk than debt


Benefits of investing through crowdfinding

• No need to actively manage the property

• Low investment amount - $5,000-$10,000

• Tax benefits of real estate apply (depreciation, capital gains)


Who can invest

• Accredited investors – no limits

• Non-accredited investors – limitations apply


Requirements to be accreditedIncome exceeding $200,000 in each of the two most recent years, or joint income with a spouse exceeding $300,000 for those years, and a reasonable expectation of the same income level in the current year;

or

Individual net worth, or joint net worth with a spouse, exceeding $1 million at the time of the purchase, excluding the value of the primary residence of such person (official SEC statement).


Limits on non-accreditedTitle III of the JOBS Act of 2012 sets yearly investment limits based on investors’ income and net worth. In October 2015 the SEC issued Regulation CF which clarified those limits:

• If an individual’s annual income or net worth is less than $100,000, he or she may invest the greater of (a) $2,000 or (b) 5 percent of the lesser of his or her annual income or net worth, over the course of the year.

• If the annual income and net worth of the individual are both greater than $100,000, he or she may invest up to 10 percent of the lesser of his or her annual income or net worth, but not more than $100,000, per year.

• Spouses may combine their incomes for the purpose of the income test.• In calculating net worth, investors may not include the value of their primary

residence.

SEC Investor Bulletin dated 2/16/16 gives guidance on calculating net worth: http://www.sec.gov/oiea/investor-alerts-bulletins/ib_crowdfunding-.html

http://www.sec.gov/oiea/investor-alerts-bulletins/ib_crowdfunding-.html


Due Diligence

With Crowd funding, the investor must perform due diligence on the investment company as well as the underlying real estate


Factors in picking company• Transparency• Historical results• Co-investment• High volume• Bankruptcy protection• Low/limited fees• Pre-funding• Venture Capital backing


Factors in Selecting property• Location

• Size of property

• Type of property

Commercial

Retail

Residential


Differences from direct investment• Lower investment amount required• Allows for easier diversification• Does not require the work of owning and operating

properties• Lack of control• Lack of transparency• More limited opportunity to complete due diligence

TitleSurveyCondition of propertyQuality of leases, tenantsQuality of location


Financial terms

• If you collect $1,000,000 in rents and other income (i.e. vending machines, satellite tower) and pay $600,000 in expenses (excluding major capital expenditures), your “Net Operating Income”is $400,000

• Once you have the NOI, divide the price or value of the property into it. For example, if you have $400,000 in NOI, and you paid $4.8 million for the property, the Cap Rate is = 8.33%.


Additional financial terms• If you have a mortgage, your return isn't the money you

collect in your NOI. It's what you have left after making your mortgage payments

• To calculate your after-debt return, called a cash-on-cash return, you divide that net cash flow by your down payment. If you put $700,000 down on that $2.4 million property, you would owe $1.7 million

• If your annual debt service was $130,000, and you took it out of the $200,000 NOI, you would end up with a $70,000 annual cash-on-cash return

• When you relate the $70,000 to your $700,000 down payment, you would end up with a 10 percent cash on cash return

More About The Faculty

D

Bill’s real estate practice extends to the acquisition, development, sale, leasing and financing of commercial, office, residential and retail properties.

In his affordable housing practice, Bill has represented owners and developers of thousands of housing units in numerous states with multi-layered financing including taxable and tax exempt bonds, low income housing tax credits, HOPE VI, Community Development Block Grants, Neighborhood Stabilization Program funds, Tax Credit Assistance Program and Tax Credit Exchange Program.

Bill has also represented developers of conventionally financed projects, both residential and commercial. He also guides buyers and sellers, landlords and tenants through all aspects of their respective transactions.

Aside from real estate matters, Bill has worked with numerous closely held businesses on a variety of matters including representing business in obtaining credit facilities, structuring start-up organizations and the purchase and sale of a number of business entities.

Bill is an avid sailor and participates annually in the Chicago Yacht Club Race to Mackinac. Bill has also competed in the Transpac, racing from Long Beach, California to Honolulu, Hawaii.

BILL [email protected]




D

ELIZABETH [email protected]

Elizabeth is the Chief Production Officer at RealtyMogul.com. An award-winning finance executive and CCIM with 15 years of experience in commercial real estate, Elizabeth is responsible for leading all equity and debt real estate investment opportunities. Previously she was with ReadyCap Commercial, where she headed originations for a national small balance commercial real estate platform. Elizabeth earned her JD and MBA from George Washington University.



D

JESSICA [email protected]

Jessica Healy joined Syndicated Equities in October 2013. Prior to joining Syndicated, Jessica worked for United Airlines in the Corporate Sales Department. Jessica is involved with evaluating acquisitions and providing research support for the company’s investment platforms. She assists in creating presentations and materials for investment offerings. Additionally, Jessica is involved in sourcing new investors seeking to complete a 1031 exchange and has spearheaded our FEA membership. Jessica holds a bachelor’s degree from the University of Wisconsin-Madison and a graduate certificate in Change Management from Northwestern. Jessica is a licensed Series 22 and Series 63 representative through FINRA and is a licensed real estate broker in the state of Illinois. She is actively involved in Chicago Council on Global Affairs, Urban Land Institute, and International Council of Shopping Centers. Jessica lives in Chicago's West Town neighborhood.


D

JORDAN FISHFELD


[email protected] Fishfeld is the co-founder and CEO of CFX Markets, a venture-backed trading platform that is changing the way people access alternative asset with offices in Chicago, New York and California.

An early innovator in the crowdfunding space, Jordan assisted on the rule creation and implementation of the JOBS Act regulations as well as the intra-state crowdfunding rules in a number of different states. Jordan is the elected Treasurer of the Crowdfunding Professional Association (CfPA), and continues to advocate and educate on behalf of the crowdfunding industry. Jordan was also named one of Chicago’s Jewish Community 36 under 36. He is also a board member of the young professional real estate division of the Jewish United Fund and a Board Member of UpStart, a San Francisco based accelerator focused on Jewish engagement and innovation.Prior to that, Jordan worked as a finance attorney for Katten Muchin Rosenman, LLP, where he assisted on more than $1 billion worth of syndicated loan transactions.

Jordan received his Bachelor of Arts in Political Science and his Bachelor of Science in Business Administration from the University of Florida and his Masters of Business Administration and his Juris Doctor from the University of Miami, where he graduated Magna Cum Laude.

Visit www.eisneramper.comEisnerAmper. Let's Get Down to Business®

EisnerAmper LLP is a leading full-service advisory and accounting firm, and is among the largest in the United States. We provide audit, accounting, and tax services, as well as corporate finance, internal audit and risk management, litigation services, consulting, private business services, employee

benefit plan audits, forensic accounting, and other professional advisory services to a broad range of clients across many industries. We work with high net worth individuals, family offices, closely held businesses, start-ups, middle market and Fortune 500 companies. EisnerAmper is PCAOB-registered and provides services to more than 200 public companies and to thousands of entities spanning the hedge, private equity, brokerage and insurance

space in the financial services marketplace. As companies grow we help them reach their goals every step of the way. With offices in New York (NY), New Jersey (NJ), Pennsylvania (PA), California (CA), and the Cayman Islands, and as an independent member of Allinial

Global, EisnerAmper serves clients worldwide.

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Important Notes

• THE MATERIAL IN THIS PRESENTATION IS FOR GENERAL EDUCATIONAL PURPOSES ONLY.

• IT SHOULD NOT BE CONSIDERED LEGAL, INVESTMENT, FINANCIAL, OR ANY OTHER TYPE OF ADVICE ON WHICH YOU SHOULD RELY.

• YOU SHOULD CONSULT WITH AN APPROPRIATE PROFESSIONAL ADVISOR TO DETERMINE WHAT MAY BE BEST FOR YOUR INDIVIDUAL NEEDS.