This Streitwise review will give you insights on how as little as $1,000 you can already start investing in commercial real estate. Needless to say, we are also going to look into how this company becomes the perfect investment platform for small investors aspiring to participate in the sophisticated world of commercial real estate.
Have you been eyeing to invest in commercial real estate but does not have a huge amount of money to begin with? Well, guess what, with just $1,000 you can already take advantage of a high-yield investment in the commercial real estate industry!
Surprised? Well, don’t be, because Streitwise REIT made it possible for you. In fact, the trust expects to pay a yearly dividend of around 8% to 9% this year. In addition, the opportunity to take part in capital appreciation of the underlying properties.
What’s nice about commercial real estate investing through Streitwise is that it is more liquid as compared to other real estate crowdfunding platforms. Even better is the fact that anyone — regardless if you are an accredited or non-accredited investor — can take advantage of this.
Probably the best reason why you should be encouraged to get into commercial real estate investing with Streitwise is that it is a thoroughly passive investment. This basically means, you invest your money, you get dividends, and then, you can also participate in capital appreciation. All these are possible without the need to get your hands dirty or even without having to worry about managing underlying properties.
If you are not convinced yet, here’s the thing.
In a data presented by Statista, wherein it shows the share of commercial real estate investments in the United States as of 3rd quarter 2019, it shows that 24% or almost a quarter of the total shares was with real estate investment trusts (REITs), which is where Streitwise belongs.
You see, REIT is so promising. The earlier you jump into this, the better. That would mean better and bigger earnings in the days to come.
Anyway, to help you decide further about getting into commercial real estate investing through Streitwise, we are going to do a — as mentioned earlier — Streitwise review. We are going to tackle, in particular, the following aspects:
- What is REIT?
- What is Streitwise?
- Who can invest with Streitwise?
- How does Streitwise works?
- What are Streitwise’s investments?
- What are the Streitwise’s features and benefits?
- What are Streitwise fees and costs?
- What are the pros and cons of Streitwise?
We’ve mentioned REIT a couple of times already, but what is it all about, really?
Real estate investment trusts (REITs) refers to a tax-advantaged company that owns, or in most cases operates, income-producing properties. The company basically issues cash flows to investors as dividends.
REITs usually owns different types of commercial real estate such as offices, apartment buildings, warehouses, as well as shopping centers, hospitals, timberlands, and hotels. There are also some REIT companies that engage into financing real estate.
In a definition by Investopedia, it says that an REIT is “a company owning and typically operating real estate which generates income. Most REITs specialize in a specific real estate sector, focusing their time, energy, and funding on that particular segment of the entire real estate horizon.”
Furthermore, the website says that one of the advantages of REITs for everyday investors is that these companies provide opportunity to own a part of real estate that generates dividend-based income – as earlier mentioned.
If you want to know more about real estate investment trust, here’s a very informative video created by Let’s Talk Money! with Joseph Hogue, CFA. Click the play button to watch the whole thing:
Now that you already know what REIT is all about, and that you have fully understood how REIT companies work, this time, let’s talk about Streitwise. After all, this is a Streitwise review, right?
Streitwise is an online real estate investing platform that started back in September 2017. Yes, it is safe to say that the company is relatively new. However, regardless of how new it is in the industry, it has earned trust and respect from a lot of investors already.
Anyway, the company was co-founded by Eliot Bencuya, Jeffrey Karsh, and Joseph Kessel. The company is based in Los Angeles, California. Since it started its operation, the company has delivered yearly 20% historical return (this refers to net of fees) to their investors. To be honest, this is quite impressive.
This 2020, the company is looking into nearly as favorable with a dividend distribution targeted at 8% to 9%.
Streitwise has been successful early on. All thanks to the current SEC regulations under Regulation A+ of the JOBS Act. This allows companies to raise up to $50 million from both accredited and non-accredited investors alike.
Since Streitwise is an REIT, and not a real estate crowdfunding platform, this offers a number of advantages over its competitors.
WHO CAN INVEST
What’s nice about Streitwise is that it is open for both accredited and non-accredited investors. However, the company follows a couple of guidelines in accepting non-accredited investors or in layman’s term, ordinary investors like you and me.
For non-accredited investors, you can invest your:
- Individual or joint net-worth (for married individuals)
- Individual or joint net-worth the past two years or your expected revenue for the existing year
In addition, you may also invest an additional 10% of your net worth’s value if you want to.
HOW STREITWISE WORKS
Streitwise is a non-publicly traded REIT that invests in commercial properties. Every single investment held in the REIT is directly owned by the REIT. Through your REIT shares, you are considered as an owner of the properties that the company owns as well.
In June 2019, the net asset value per share of common stock was $10.11. The amount varies, of course. It changes depending on season. Remember, it’s an investment — there are days when it’s high, there are days when it’s low.
Anyway, Streitwise looks for real estate following below qualifications:
- The property has to be located in “non-gateway markets”.
- The property has to be located near transportation means, as well as nearby amenities, and a base of established employers and industries.
- It has to be of high-quality construction.
- It has to have a record of constant occupancy well-positioned to outdo the bigger market.
Furthermore, Streitwise pays only meek leverage to be able to minimize the risk of every individual investment. Moreover, the targeted leverage is just restricted between 40% and 60% of the greater of cost or the fair market value of the property. Just to say, what we find good about Streitwise is that they focus on real estate that has creditworthy tenants.
As a Streitwise investor, you can earn income from the distribution of dividends, as well as potential appreciation of the underlying properties. The company pays out dividends on a quarterly basis. Furthermore, Streitwise advertises that they are able to deliver 10% yearly dividend since they started operation. Dividends are reported on IRS Form 1099-DIV every 31st of January every year.
Just like any other investments, there is always a potential risk — all the more since this one’s an equity investment. Some of the probable risks include reduction in cash flow, inability to find suitable investments, as well as big picture events such as deteriorating economic conditions, and many more.
So, if you are afraid of the risks that come with it, this may not be the perfect or the right investment for you.
STREITWISE INVESTMENT OPTIONS
As part of our Streitwise review, we are also going to look into the different investment options that the company offers.
The thing about Streitwise is that all investments held with them are held until they meet the optimum value during the expected life of the company. Once it’s reached, they will consider letting go of the investment.
Once the property is disposed, proceeds will either be distributed among shareholders, or invested into another property with higher overall return in the future. Generally, it is expected that the whole process will take approximately 10 years forever investment.
At this time, REIT is holding two commercial properties, which are:
- A 290,000 square feet Class A office park in Suburburan St. Lois. It is currently occupied by the Panera Bread headquarters, Nationwide insurance, as well as New Balance regional headquarters, and Wells Fargo, Edward Jones among other tenants.
- A 142,000 ft.² building and parking garage that is located in Carmel, Indianapolis, which is also a Class A space with 108,000 ft.² leased to Allied Solutions, LLC until 2030. Meanwhile, 15,750 ft.² leased to F.C. Tucker until 2029.
But the trust does not end there. It continues to actively pursue additional properties within REIT. However, as expected, it does not disclose any potential additional purchases at the moment.
FEATURES AND BENEFITS OF STREITWISE
Just like any other Streitwise reviews, ours will not be complete without sharing with you the features and benefits you will find in the company. These will help you determine whether or not Streitwise is the right one for you.
|Minimum Initial Investment||You can invest for as low as $1,000. If you wish to increase your investment, you may do so in increments of $500.|
|Accounts Available||Streitwise offers the following account types: Individual Accounts Trusts Self-Directed IRAs Note that either type of retirement account must be self-directed.|
|Investment Liquidity||Just like real estate crowdfunding platforms, investment liquidity is also limited. There is a one-year lockout, and during this time, you will not be able to liquidate your investment. |
Once done with the one-year lockout, you can opt to participate in the Stockholder Redemption Plan, which happens on a quarterly basis. Details of the plan will vary depending on the investment you hold.
For your reference, here’s how the Stock Redemption Plan works:
Investment held less than one year, redemption not allowed
One to two years, 90% of net asset value (NAV)
Two to three years, 92.5% of NAV
Three to four years, 95.0% of NAV
Four to five years, 97.5% of NAV
Five years or more, 100% of NAV
If in case, unprecedented things happen like the stockholder’s death or complete disability, 100% NAV can be redeemed under the plan.
However, stock redemption is not guaranteed. Streitwise limits total redemptions to not more than 5% of the outstanding shares in any year, or 1.25% every quarter.
Meanwhile, if redemptions in a particular quarter or year exceed those thresholds, redemption in unlikely.
|Tax Benefits||Since this is an investment in an REIT, 20% of your dividends is deductible from your taxable income. |
Furthermore, REIT’s taxable income may be reduced by depreciation expense. This is a non-cash expense that is typical with real estate investments.
|Dividend Reinvestment||As an investor, you have the opportunity take advantage of enrolling in the dividend reinvestment plan or DRIP, and then use your dividend income to grow your investment.|
STREITWISE FEES AND COSTS
Our Streitwise review will not be complete if we are not going to look into the fee structure as well as other costs.
Once you decide to invest with Streitwise, you will automatically be charged an upfront fee of 3%, and then, you will have to pay a yearly management fee, which is 2%.
These fees are deducted already before you receive your dividends. So, basically, when the company says their current dividend distribution is as 10%, that basically refers to when the fees are already taken out.
Now, other than those two fees, Streiwise does not charge you for anything else, which is one of the company’s selling points.
To give you an idea, here’s what those fees pay for:
- The 3% fee is used for the organization as well as offering expenses.
- Meanwhile, the 2% fee is used for managing the fund.
It is worth sharing that investor ownership in the fund is defined by his or her Net Asset Value (NAV) multiplied by the shares owned by the investor. This means investors, get to own 100% of the proceeds!
PROS AND CONS OF STREITWISE
Before we end our Streitwise review, it is just right that we share with you some of the pros and cons we found with Streitwise.
For your reference, here are some of the advantages and disadvantages
- The company has low leverage. – Streitwise targets 50% to 60% debt to fund acquisitions. At the moment. 55% loan-loan cost. Compared to what other commercial property developers usually use, this one’s on the lower end.
- The company owns high-quality commercial real estate. – At the moment, Streitwise owns institutional-quality office buildings with corporate tenants.
- The company’s fee structure is aligned with investors. – Apart from the 3% upfront fee, and the 2% yearly fee, Streitwise does not charge you for anything else.
- Investing is open to both accredited and non-accredited investors with very low minimum initial investment. – With just $1,000, you can already start investing in a commercial real estate.
- The company is composed of an experienced management team. – Streitwise’s founders, as well as management, are backed with a strong track record investing in real estate industry.
- The company has a small asset base. – At the moment, 1st Streit Office, the REIT available to investors on Streitwise only owns two properties unlike others who own more. Although the properties are high-quality, the concentration makes it a little more risky than owning a collection of assets.
- The company focuses on office buildings. – Unlike other commercial properties, office buildings are more exposed to changes based on economic conditions.
- The company has a 3% upfront fee upon making your initial investment. – Unfortunately, this may be a little off for some investors.
- The company is relatively new. – Compared to its competitors, Streitwise is just new in the industry, which means, it still needs a lot of work in terms of building up the company’s reputation.
FINAL THOUGHTS ON STREITWISE REVIEW
Now, the question is, should you invest with Streitwise?
Our answer would be, that it depends on you. As you’ve seen, we have provided you with essential information that will help you decide whether or not Streitwise is the right investment company for you.
We have shared both the good and the not-so-good about the company. We included the risks involved when it comes to investing in commercial properties as well. But the reality is, any investments, particularly those involving equity participation, comes with specific risks.
However, with Streitwise, payoffs are consistent. In addition, dividend returns are double-digit, and it also includes the potential to participate in capital appreciation.
All of these, you can take advantage of with a very little amount of investment — $1,000 (yes, this one’s little considering the kind of investment you are making).
Furthermore, Streitwise is also made available for self-directed IRAs, which is highly significant because commercial real estate is one of the best long-term investments. In fact, it is a perfect choice for retirement investing.
Having said all that – if we were to decide, we got to say that Streitwise investing is a good choice. But then again, it all boils down to you.
If you are also torn, you may consider asking yourself questions like: What are your financial goals? What are your current and future needs? Do you want a solid or liquid investment? Etc. These questions and more will hopefully help you decide whether or not investing with Streitwise is the right one for you.