The CEO of a $ 400 million real estate crowdfunding company explains how retail investors can acquire shares of commercial properties with as little as $ 1,000 – and why this method could …

Aaron Halfacre is the CEO of $ 400 million real estate crowdfunding firm Modiv.
  • Aaron Halfacre is the Managing Director of $ 400 million real estate crowdfunding firm Modiv.
  • He told Insider how retail investors can access commercial real estate with as little as $ 1,000.
  • It also explains why crowdfunding makes more sense than real estate hacking and REITs for some investors.

Despite all the credentials and experience needed to be successful on Wall Street, Aaron Halfacre couldn’t resist the allure of real estate investing.

“It’s a little different from stocks and bonds because it’s ultimately a tangible asset,” he told Insider in an interview. “We live there, we work there, we do our shopping, we have an opinion on real estate even if we do not own it.”

The Chartered Financial Analyst and Chartered Alternative Investment Analyst had spent more than a decade working on different asset classes at fund management giant BlackRock, but eventually began to focus solely on investing. real estate in various real estate companies.

This is why when an offer arrived to lead the real estate crowdfunding investment platform Modiv, formerly known as Rich Uncles, he was immediately intrigued by the combination of technology and real estate in the capital markets.

“When you think of asset classes, in stocks and bonds, we’ve been using technology all along, but real estate was really still left in the dark ages in terms of technology,” he said. .

Modiv, which was rebranded to reflect the idea of ​​more monthly dividends and greater investment diversification, offers commercial real estate investments through public and unlisted REITs or REITs.

The company has grown to manage over $ 400 million in assets for more than 7,300 investors. She has built a portfolio of 38 commercial properties spanning retail, office and industry. Modiv has paid $ 38.7 million in dividends since its inception, according to the company.

Start investing in commercial properties with $ 1,000

As an asset aggregator, Modiv buys real estate titles and is responsible for collecting monthly rent from tenants. Because it is structured as an unlisted REIT, investors can purchase a portion of the trust with a minimum of $ 1,000 and receive monthly cash distributions on rental income paid by its tenants.

There are similar real estate crowdfunding platforms out there, but Halfacre said what sets Modiv apart is not only that it doesn’t charge any fees or commissions, but REIT investors can also own a portion of the company. . This is because the crowdfunding company is owned by the REIT itself.

“When you buy a stock, you get half a billion dollars in real estate and crowdfunding platform,” he said. “It’s income generating, it’s low leverage, it’s commercial real estate. You also own this crowdfunding company and the management team is working for you.”

According to him, the Federal Reserve has flooded the market with “cheap money and low interest rates“, causing investors to buy assets as they demand appreciation and yield. This heated up the residential real estate market and turned “sparkling”.

The commercial real estate market has also compressed over time, but Halfacre said his team is always looking for opportunities. For example, they added a fast food restaurant chain Cane Chicken Fingers two months ago and are under contract to potentially shut down a cold storage facility.

“Interestingly enough, a lot of us don’t think we can own it,” he said. “We drive down the freeway, fly over a city and see tons and tons of commercial real estate, but we never really think about owning it. I think those paradigms are changing.”

Why crowdfunding makes more sense for some investors

Last year, it was estimated that $ 15 billion in volume was raised by crowdfunding companies, according to Halfacre, who finds the growth “phenomenal.”

“This is because the crowdfunding industry didn’t exist eight years ago,” he said, “$ 15 billion looks really low compared to the asset class, so there’s still has a lot of growth to happen in space. “

True, Halfacre said he would never discourage investors from buying income-generating rental properties themselves or owning publicly traded REITs.

But for some investors, he thinks the crowdfunding model makes a lot of sense. For example, there are investors who want to be in real estate but don’t want to deal with property management or a tenant who calls them at midnight saying their toilets are blocked.

“Real estate crowdfunding offers the same kind of ethics associated with stocks and bonds or other financial products,” he said. “You can decide when you want to come in and out, how you want to allocate your wallet, but you are not responsible for the actual management of a property, paying your property taxes or renewing your insurance or whatever happens. it if you need to replace the roof. “

Halfacre also believes that investors should have exposure to both listed and unlisted REITs. The reason for this is that listed products offer immediate liquidity on any given day, but they are essentially correlated with stocks and can move in tandem when the market becomes volatile. Meanwhile, private real estate does not have price volatility, but it can sometimes be illiquid. For example, some shares purchased may not be immediately redeemable on demand.

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