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Crowdfunding Real Estate: A Q&A with Realty Mogul’s Jilliene Helman

Editor’s Note: We recently got in touch with Jilliene Helman of Realty Mogul, a real estate crowdfunding portal for accredited investors, who told us about her platform, how it works, and its success thus far. For the latest news, follow Realty Mogul on Twitter at @Realty_Mogul.

Anton Root, Crowdsourcing.org: Can you start off by telling me a bit about the site and how the idea for it first came about?

Jilliene Helman, Realty Mogul CEO: Realty Mogul is a marketplace for accredited investors to pool money online and buy shares of pre-vetted real estate investments. The idea came about from an economic opportunity and legal opportunity. From an economic perspective, we’re coming out of a recession and it’s very challenging for people to find investments with current cash flow. Banks are paying less than one percent – my family had this challenge. So I started investing in real estate notes. I invested some family money, and we were generating some pretty decent returns – eight to ten percent net on our investments. We were getting current cash flow, and when you compare that with one percent at the bank, it made a lot more sense.

About the same time, which was early last year, the JOBS Act passed. I said, “I think that we have this great opportunity to ride this political wave and change around crowdfunding and the JOBS Act, while simultaneously providing an answer to what’s going on in the economy.”

Were you a real estate broker before this, or anything related to that? What’s your own background?

My background is in commercial banking. I spent a number of years at Union Bank, the majority of my time there was spent in wealth management. I come from a wealth management background, working with high net worth individuals to structure unique portfolios, based on their situation.

What exactly is your site’s role in connecting potential investors with real estate opportunities? What are the services you guys offer?

We’ve built technology to allow investors to invest in real estate, from start to finish, online. We bring pre-vetted, curated real estate investments to our investor base. We’re pretty stringent on our investor base – we’re only open to accredited investors today because of the legislation, so we have some requirements around that. We allow them to do the entire transaction process online, so they can find their legal documents online, fund online, and have 24/7 access to an investor dashboard to watch how their funds are working for them.

Who is it that screens the real estate opportunities? Is it your own in-house team, or do you outsource that to another company?

We do it all in-house. First, we do an analysis on the real estate company and the principals who are involved in the transaction, including background and criminal checks. Then, we do an analysis on the property, using proprietary methods we use for due diligence. We are looking at things like the vacancy rates, projected income and expense growth, and sale assumptions for the property. That being said, there’s always risk for any investment. We don’t say that there’s no risk, we’re very, very clear with our investors that there’s real risk, and we don’t know how [an investment] will perform. Past performance is not an indicator of future performance, and we’re very careful about making sure our investors understand that and understand the risk.

I know there’s a $5,000 minimum for how much an investor can invest, but is there a cap?

There’s no cap, an investor can take the entire investment opportunity if they choose to do so.

What’s the activity been thus far? I know you guys started out only recently, but can you give me a sense of how many properties you’ve listed and funded, how many investors you have registered, things like that?

Yes, we have a few thousand accredited investors, and a few thousand unaccredited investors – we’re only actively working with accredited investors. We funded our first eight properties, we’ve got others in the works, but I’m not at liberty to speak about them. We’ve been in business a little over three months, funded our first $2 million in transactions, and are looking to continue to do so as we move forward.

Have you sold any of the properties? Have any of the investors exited?

Yeah, we’ve had two exits so far, two of our loans have been repaid in full. One paid ten percent annualized to investors, and the other paid eight percent annualized to investors. So, we are seeing transactions turn over. We also pay monthly distributions on all of our loans, so we’ve made tens of thousands of dollars of distributions already, and will continue to do so in the foreseeable future.

Are you guys most active in any particular region? You mentioned you funded eight properties – are these mostly in California?

We’re based out of Beverly Hills in California, so we’ve done a number of transactions in [the state]. We also have part of our team in the Seattle, Washington market, so we’ve also done transactions in Washington. We’re doing a more national rollout with more properties now.

I saw that you guys are connected with Microsoft, is that the reason why you have a Seattle team?

Yeah, we did Microsoft Accelerator powered by TechStars, so we have a lot of connections up in that Seattle market, which made it a good place for us to be.

Crowdfunding that’s more catered to particular neighborhood or region has been touted as a way to help prevent fraud, since it’s harder to fake a brick and mortar business (or property) than an online business. Does this also apply to your site? Do you encourage investors to invest in their own backyards?

You know, we see a little bit of both. We see investors who invest all over, whereas others are located in Los Angeles, and want to invest in Los …read more