Where Should You Invest $25,000 in 2016?
The last financial quarter of 2015 was excellent for iintoo, the real estate social investment network. iintoo raised $10 million for several projects with a total asset value of $45 million. The company also secured some significant international projects and grew its investor base on a daily basis.
“Being able to invest small amounts in real estate starting at $25,000 is an important thing for a private investor,” explains iintoo CEO Eran Roth, one of Israel’s promising under 40 business people, according to Forbes Israel. “iintoo’s social investment network brings news to the world of real estate investments by making large-scale investments accessible to private investors, as well as diversifying one’s investment portfolio with an alternative to today’s zero-interest-rate environment. Moreover, it is also becoming a viable alternative to today’s challenging financial market. We bring a different model, one that connects quality real estate investments with a social investment network based on the funding of many. This way we allow a variety of investors to become aware of and invest in larger projects that, usually, are not available to the small and private investor – both financially and because of the needed due-diligence process required prior to investing in a large deal. With iintoo both barriers are removed,” says Roth.
Real Estate Funding of Many – How Does it Work?
All this came about in 2012, with the introduction of the new JOBS Act (Jumpstart Our Business Startups Act) in the United States, a law intended to encourage funding of American small businesses by easing various securities regulations. The new rules allow accredited investors to invest in various forms of investments (and in 2015, a new regulation was introduced allowing non-accredited investors to invest, opening up the market to an even wider variety of investors). The JOBS Act impact on the real estate market occurred immediately. In 2012, investments injected $2.7 billion, rising to $5.1 billion by the end of 2013 and ending up in 2014 with $10 billion (worldwide), an increase of 350%.
How does it work? Property developers and entrepreneurs come to iintoo with projects they seek to fund. All projects go through a thorough investigation and due diligence by our investment committee, which comprises the best legal, finance and real estate experts. We physically visit the property and its location and surrounding area as well as perform a thorough investigation of its current and potential financial trajectory. Only after the approval of the project by our investment committee, we approach our pool of investors to invest in the project.
Investors can join iintoo and set up their profile at no cost and with no commitment. All registered investors can view investment projects that have passed our investment committee. The decision to invest in a project is up to the investors. They can select a project based on their preferences and match their appetite for risk and return. Once they decide to invest, and based on the portion of their investment, they become members of a Limited Liability Company (LLC) that, in turn, invests in a joint-venture entity that holds title to the real property.
This is great news! iintoo’s international digital platform lets its registered investors invest in real estate projects around the world. Throughout the investment period, investors get periodic updates about the state of their investments, all of which appear in their account. They can communicate with each other and discuss investments via the platform. What’s more, they can follow other investors and learn from their investment decisions while making their way in the world of property investment at their own pace.
“Investing together in real estate, as offered by iintoo, removes entry barriers normally associated with property investment,” explains Dov Kotler, iintoo’s Chairman. Dov has years of financial experience, including managing Israel’s top credit card companies and one of Israel’s prominent banks. He continues: “We open the market to investors with funds as low as $25,000, where they can invest in exclusive projects with potential high yield returns where the associated risks are managed. Moreover, as the project exit period impacts on its yield directly; our contract with the developers requires them to meet the project’s set schedule. Not meeting the set deadlines influences directly the projects' profit distribution in favor of iintoo’s investors,”adds Dov.
Double-Digit Yield, Risk Management and Transparency
This may come across as “too good to be true,” yet, real estate investments, especially in the US, demonstrates that transparency, lowering the barriers to entry, high-yield projections and risk management is a great formula that brings about proven results:
- Projected annual return of 15%. At iintoo, we approve projects only when the project’s business plan includes projected annual returns of at least 15%.
- Risk management. iintoo’s track record and hands-on experience comes in handy when it comes to avoiding pitfalls. iintoo minimizes risks associated with real estate investment while negotiating the deal terms with the developer. For instance, the developer cannot exceed the expenses associated with the project, and the developer may undergo a profit distribution penalty if the project term extends beyond what is defined in the business plan. In addition, iintoo’s unique investment model permits investing in several projects simultaneously, making sure risks are diversified over several projects.
- Transparency and removing entrance barriers. With as little as $25,000, anyone can invest in real estate. You no longer need to be wealthy or an institutional investor. Moreover, one of iintoo’s foundations is the harnessing of investors with tools and knowledge for them to make better-informed decisions about their investments. This is why iintoo developed a state-of-the-art social investment network that keeps investors updated and informed. It lets them connect with and follow other investors with more experience and know-how.
iintoo Gains Only When Its Investors Gain
A common headache for investors is the ongoing investment-management fees. iintoo has set out to change the game here, too. Roth explains: “We don’t manage capital. We call upon capital when there is a deal. This is why we do not charge any ongoing management fees. We collect a success fee – a certain percentage of the profits when there are profits. The relative portion is based on the amount of funds committed – the more funds that are committed, the smaller is our success-fee percentage, 20% being the maximum we charge of any project’s profits.”
Less than a year in the market, iintoo has already raised funds for four impressive projects in the US, with average projected annual returns of 18%. For the first project, iintoo raised $1.6 million from its investors (out of a total of $15 million in project costs) for a purchase and upgrade of a residential apartment building in Manhattan (50 leased apartments, all to be upgraded before its resale within three years).
With a projected annual return of 17%, the second project is the purchase of a 174-unit multi-family asset in St. Louis, Missouri. Here, iintoo raised $1.6 million from its social network investors (out of a total of $5.5 million in project costs). Until its resale, the property is expected to produce average cash-on-cash revenue of 13.5%, to be distributed to investors on a quarterly basis. Upon its sale, it is projected to produce a total 16% annual yield.
For the third project, iintoo raised $4.5 million from its investors for a unique project in Flatbush, Brooklyn, New York. The projected yield is 20% annually.
Recently, iintoo raised $2.3 million (out of a total of $10 million in project costs) for another income producing property in Tulsa, Oklahoma. Here too, the property is expected to produce a yearly yield of 14% to be distributed to investors on a quarterly basis. Upon its sale within three years, it is projected to produce a 19% annual yield.
If there is one thing you should take from this article, it is the understanding that there is a way to remove many of the barriers associated with property investments, all without giving up on quality investments, projected high yields and risk management. This results in a different form of thinking, one that changes the world of real estate investments and makes it more accessible and transparent.
The second thing you should take from this article is that iintoo is an investment social network for property investments, which enables you to enter the world of real estate easily and led by the best experts in the field.
Would you like to hear more about iintoo and invest together? Join us today!