Interested in investing in real estate online?
Look no further!
There’s a new website in the industry that allows you to invest in private commercial real estate from the comfort of your home. All you need is an internet connection.
Streitwise takes advantage of new federal regulations to make commercial real estate investing accessible to everyone. You can use the website to discover properties around the country that will produce healthy cashflows and returns.
In this article, I want to go through some of the major pros and cons of the Streitwise real estate crowdfunding website. We’ll explore how you can use them as part of your investment strategy.
By the end of this article, you’ll have a crystal clear understanding how Streitwise works and how the site differs from other investment options, like publicly traded REITs and bonds.
How Streitwise Works
The Streitwise real estate crowdfunding website gives retail investors access to institutional quality commercial properties.
They handle the end-to-end management of the properties, including finding the properties, sourcing quality tenants, collecting rents, and handling the paperwork.
All you gotta do is participate in one of their offerings ($1,000 minimum) and they’ll do the rest. Of course, it’s important to look extensively through the Offering Circular, which completely outlines the deal.
You will then experience pass-through dividends from commercial property rents on a quarterly basis. Your initial investment may appreciate over time, which can be realized if or when the property is sold.
Unlike REITs, these investments are not publicly traded, meaning that you’re getting access to a public non-traded REIT. After one year, you have the ability to participate in their Stock Holder Redemption plan.
Pros of Streitwise
There are many benefits that come along with investing with Streitwise. First of all, the team has a wealth of management experience when it comes to commercial real estate properties.
The company is led by its three founders who possess a combined 40 years of experience in real estate. Not to mention, they’ve accumulated over $5.4 billion of real estate investing know-how.
Simply put, the team follows a proven value-oriented investment strategy that focuses on acquiring commercial properties that produce REAL cash flow.
Unlike with other investing platforms, the team actually manages the properties they acquire. They effectively act as “sponsors” in a deal. All of the profits are passed on along to you.
This unique structure is what contributes to fees that are lower than typical REITs you might find online. Typically, fees include:
- Offering Fees: Streitwise charges a one-time 3% fee.
- Management Fees: Streitwise charges a flat 2% management fee.
- Transaction Fees: Streitwise charges no transaction fees.
This fee structure is notably lower than the industry average and when browsing through the Streitwise, you can rest assured that all fees are taken into account before dividend distributions.
This means that any dividend that is referenced on the website is net of fees.
Lastly, a major pro to investing in private REITs is the special tax advantages that you’ll get as an investor. Here are two major advantages:
- You won’t experience corporate taxes. Instead, all dividends that are disbursed will simply pass through to investors.
- You get to deduct 20% from the dispersed income. This will lower your taxable income, and is a newer rule.
These tax advantages will only be unlocked if the private REIT adheres to the 90/10 rule, meaning they distribute the majority of their profits. Streitwise has made a commitment of abiding by this rule.
Cons of Streitwise
There are also drawbacks to investing in a private REIT like Streitwise. I want to outline some of those here so that you can make a more informed decision.
First of all, since a private REIT is private, it is not publicly traded, which impacts the liquidity of the investment. You won’t be able to easily go on an open exchange and receive cash for your investment.
That being said, there are opportunities to trade in your investment after a set period of time.
“There is a 1 year lockout, then you will have a quarterly option to participate in our Stockholder Redemption Plan, subject to certain restrictions that are fully explained in the Stockholder Redemption Plan section of the circular.”
This means that you will have the opportunity to redeem your shares after a period of one year. During that year, you will experience cash flow distributions.
Another major con of Streitwise is that the investments are limited to commercial real estate. If you want to participate in the single family housing market, raw land, or other forms of real estate investing, this is not for you.
Typically, you can expect to find multifamily, hotels, and retail assets in their portfolio.
A final major drawback to using Streitwise is that you won’t have the same control over a property as if you were the landlord. You will give up the day-to-day management of the property in exchange for a more hands-off approach.
Depending on your goals as an investor, this could be a pro or a con. If you want greater control over your properties, to manage tenants, and pick out locations, then Streitwise isn’t for you.
Should You Invest in Streitwise?
Personally, I think that if you haven’t yet considered alternative investments as a part of your portfolio, then Streitwise is a great option.
With their current offering, the property has made 10% annualized dividends since its inception. Of course, past results are no indication of future results.
“Using its proven investment strategy, our Sponsor has generated an average annual return of 33.1% on its realized investments, dramatically outperforming other public and private real estate investment managers.”
These are pretty good returns by any standard, but nothing is guaranteed. Unlike other investments, private REITs are great because they produce cash flow, which is a form of passive income.
If income investing is your goal, I would recommend looking more into options like Streitwise. While I wouldn’t make them your entire portfolio, I do think they could make up a portion of it.
I hope that you enjoyed this overview and that you take some time to learn more about private REITs, real estate crowdfunding, and also online real estate investing.
