CMBS, eREITs And Crowdfunding: The Future Of Real Estate Investments
With new innovations hitting the scene, it's become easier—and more popular—than ever to get into prime commercial real estate. Last month, Fundrise's "eREITs" sold out in just four hours, less than a year after offering crowdfunding stakes in the World Trade Center.
CMBS might no longer be a rich man's game, either—Morgan Stanley is already discovering crowdfunding in CMBS portfolios. Just this month analytics company CrediFi launched a new platform, branded as the "Zillow of CMBS," to provide more info and transparency to the market.
Meanwhile, Vlad Tenev's Robinhood app (pictured) lets anyone invest in public REITs, without commission fees, from the palm of their hand. So what does the future of commercial investment look like? Let's take a peek.
In one of the biggest rulings of the year, the SEC passed Title III of the 2012 JOBS Act, allowing non-accredited investors to get in on billion-dollar equity crowdfunding game with just $1k. The move was a critical step towards allowing more people access to prime investment assets.
Real estate crowdfunding firm Fundrise (founders Ben and Dan Miller pictured) took advantage by launching the first-ever eREIT, and plans to take advantage of an addition to the JOBS Act that will allow retail-class investors to invest in private companies.
In December, Realty Mogul, another leading crowdfunding platform, announced that its investors had made over $20M in principal and interest from its platform.
Now that the average Joe can invest with as little as $1k, what next? Well, data analytics company CrediFi is working on that with a CMBS platform "CMBS Suite" (pictured), for discovering, underwriting and monitoring loans. CMBS Suite will link lenders with CMBS and non-securitized loan opportunities.
Users will have access to property details and built-in mapping technology to compare properties and make informed decisions about their investments. This brings transparency to the CMBS market at a time when rising interest rates and the CMBS maturity wall continues to complicate things.
So how will real estate investing be different on the security markets? Let's look at Fundrise's eREIT. Instead of trading on the stock exchange in a matter of seconds (like a traditional REIT), shares will trade on Fundrise's platform. However, they can only be redeemed at the end of each quarter.
Like any other REIT, investors still get 90% of the income, they just won't have access to it as quickly. This is still perfect for investors looking for a long-term prospects or an additional stream of income.
eREIT investors need to keep in mind that they can't get around high REIT income-tax rates by holding distributions in a retirement account like a Roth IRA, as Fundrise's model doesn't allow it.
There's also no way of knowing how it will play out if things go wrong on the eREIT's relatively untested platform.
These software platforms help individual investors learn about—and get access to—securities markets, just as the CMBS market heats up and hits the "maturity wall" in the wake of the Fed rate hike.