One way that many experts suggest investing is through real estate. In some cases, it can produce bigger returns than investing in the stock market. And even if you still invest in the stock market, real estate investments can diversify your holdings, reducing your risk.
However, real estate investing can be tough work. And it can require a lot of capital. Not everyone has the financial ability or the knowledge to purchase and manage rental properties.
Investing through crowdfunding real estate sites is becoming a popular choice for investors who don’t want to own real estate investment properties outright. It allows more people to have a chance to profit from real estate investments — even without a lot of cash.
One such crowdfunding real estate investment firm is called Rich Uncles. In this review, we’ll share what Rich Uncles is all about so you can decide if it’s a smart investment move for you.
Rich Uncles seems to be a solid choice as a real estate crowdfunding option. Find out how it works in our Rich Uncles review.
Table of Contents
- What is Crowdfunded Real Estate Investing?
- What is Rich Uncles?
- How Does Rich Uncles Work?
- What Fees Does Rich Uncles Charge?
- What About Liquidity? What if I Need to Cash My Account in?
- Rich Uncles Pros and Cons
- Rich Uncles Better Business Bureau Rating
- My Experience with Rich Uncles
What is Crowdfunded Real Estate Investing?
Let’s start with a brief summary of what crowdfunding real estate investing is. Traditional real estate investing involves purchasing rental properties outright.
As an investor, you’re responsible for buying the properties, paying the mortgage, etc. You either manage the properties yourself or hire a management company to find and manage tenants.
This type of real estate investing can be a lot of work — and cost a lot of money. With crowdfunding, a real estate investment firm collects money from thousands of people wanting to invest in real estate.
The firm uses the money to invest in properties. After that, it splits any profits with all of the people who contributed to (invested in) the purchase of the properties.
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There are many crowdfunding real estate investing companies. Many allow you to invest in real estate for as little as $500 or $1000. However, there’s one crowdfunding real estate investing site that lets you get started for less.
What is Rich Uncles?
Rich Uncles is a crowdfunding real estate company that started in 2012. Chairman “Uncle” Ray Wirta wanted to create a way for nearly anyone to invest in real estate.
Wirta is a board member and former chairman of CBRE, the world’s largest commercial real estate services and investment firm. This means he has a lot of experience in commercial real estate. Rich Uncles co-founder Harold Hofer also has over 30 years of experience in real estate.
They’ve created Rich Uncles for the purpose of selling shares in REITs (Real Estate Investment Trusts). By selling shares in REITs, the Rich Uncles founders can help many more people invest in commercial real estate or in residential student housing.
How Does Rich Uncles Work?
Rich Uncles uses funds invested in REITs to purchase various properties. As properties produce rent and increase in value, REIT investors get dividends from any profits.
Rich Uncles REITs are publicly non-traded REITs. This means that as public REITs, they are registered with the Securities and Exchange Commission and open for public viewing.
However, they are non-traded, which means you can’t buy and sell shares of the REITs on the open market. This is different from the publicly traded REITs you can get from an investment broker.
Instead, Rich Uncles relies on crowdfunding to buy real estate. If you want to sell, you’ll have to sell your shares back to Rich Uncles.
The Rich Uncles website says that share prices of traded REITs sometimes are lower than the net asset value of the shares. Rich Uncles REITs don’t have that problem.
Another benefit the company claims is that by cutting out the middlemen (investment brokers), it can invest 10% more of your funds directly into real estate instead of into fees.
Rich Uncles has two REITs you can invest in at this time.
The NNN REIT
The Rich Uncles NNN REIT has a minimum investment requirement of $500. You’re not required to invest any additional money into the NNN REIT after this initial $500.
However, if you do invest additional money into the NNN REIT, you need to invest a minimum amount of $50 at a time. This additional investment can be done on an automatic monthly basis or occasionally as you choose.
The NNN REIT focuses on single-tenant commercial properties. Some of the features of this REIT include:
- Tenants have strong financial statements.
- Tenants sign long-term leases.
- Tenants are responsible for paying taxes, insurance and maintenance on properties.
- Properties are located in primary, secondary and some tertiary markets where construction is substantially complete.
The reason Rich Uncles chooses properties in areas where construction is substantially complete is to avoid the risk that can come with new construction. The company seeks out properties that come with reduced risk in order to help maximize profits.
Note that the NNN REIT is currently available only in certain U.S. states. Rich Uncles is in the process of getting approval to offer the NNN REIT in the remaining U.S. states. Contact Rich Uncles directly for more information.
The BRIX REIT
Rich Uncles BRIX REIT has a minimum investment requirement of $5. This can be an attractive concept for people like me with little money to spare at the moment.
It’s also a nice option for those wanting to simply dip their toes in the water and not invest too much in real estate crowdfunding. The BRIX REIT invests in real estate projects such as:
- Student and multi-family housing
- Quick service restaurants and casual dining restaurants
- Convenience stores
- Fitness centers
The student housing portion of this REIT focuses on buying and owning properties within a one-mile walking distance of NCAA Division 1 schools that have more than 15,000 students enrolled.
These student housing properties typically have a minimum 150-bed capacity and a 90% occupancy rate. Again, the goal here is to reduce risk and potentially maximize profits for investors.
As an investor, you set up an automatic withdrawal from your bank account to your Rich Uncles investment account. As I mentioned earlier, the minimum investment for this REIT is $5.
You don’t have to invest any more money in the BRIX REIT after your initial $5. However, you can do automated monthly investments or occasional investments into the account going forward. Minimum additional deposits to the BRIX REIT are $5 as well.
Every month, Rich Uncles will deposit any dividend profits into your Rich Uncles account to be reinvested. Or you can take your dividends as a cash deposit into your bank account.
Investment dividends can be a great way to make passive income. Bonus: shares in both the National REIT and the BRIX REIT are available to accredited and non-accredited investors. More about this in a minute.
What Fees Does Rich Uncles Charge?
One thing that stands out about Rich Uncles is that it doesn’t charge any annual transaction or commission fees. In addition, it won’t charge you any fees to manage your account.
Rich Uncles doesn’t use brokers to find investors. Instead, it focuses on the crowdfunding platform to find investors. This means it has lower overhead costs and can pass those savings onto investors.
The flip side of this is that there are no third-party underwriters performing due diligence checks on investments.
Also keep in mind that just because there are no fees, doesn’t mean you aren’t paying for the service. The Rich Uncles website says that 97% of the money you invest goes toward the investment. The remaining 3% goes toward “organization and offering costs.”
What About Liquidity? What if I Need to Cash My Account in?
The REITs Rich Uncles offers are long-term (over three years) investments. The company does have a share repurchase program in which it will buy back your shares if you need to cash out early.
However, it charges fees for repurchasing your shares, as follows:
- 3% administrative fee if you’ve owned your shares for less than one year
- 2% administrative fee if you’ve owned your shares for one to two years
- 1% administrative fee if you’ve owned your shares for two to three years
There are no fees for the share repurchase program if you’ve owned your shares for over three years.
Note that the website says the company will only repurchase shares if its advisors say they have enough liquid cash to do so safely. However, the site also says it’s never denied a share repurchase request.
Rich Uncles Pros and Cons
Now let’s go over a summarized list of Rich Uncles pros and cons.
Rich Uncles Pros
Rich Uncles has a lot of great features to talk about. Here’s a summary.
$5 Minimum Investment Requirement
Possibly one of the best pros about Rich Uncles is the super low minimum investment requirement. Just about anybody can come up with $5 to invest.
Nobody else in the business of crowdfunded real estate has a minimum investment anywhere near that.
No Annual Fees
Another attractive feature is the fact that there are zero annual management fees and broker commission fees. Typical REITs have annual management fees and broker commission fees.
You Get Paid First
Another great benefit of Rich Uncles REITs is that you get paid before Rich Uncles does. They work on a performance-based model. The first 6.5% of profit gets paid out to shareholders.
After that payout, they take 40% of the remaining profit. This model gives them fuel to help ensure they’re making smart property purchase and management decisions.
Rich Uncles REITs are Available to Non-Accredited Investors
Many real estate investments are only available to accredited investors. You become an accredited investor if you meet one of two criteria. First, you qualify if you have a net worth of $1 million.
Conversely, you can qualify if you have a sole annual income of $200,000 or a joint-with-spouse annual income of $300,000 (for the past two years and expected to continue).
Rich Uncles allows non-accredited investors to participate. It asks only (on your honor) that you have either an annual family income of at least $75,000 or a net worth of $250,000.
It Pays Monthly Dividends
As I mentioned earlier, Rich Uncles pays monthly dividends on its REIT profits. You can choose to take the dividend payments as cash or have them reinvested.
It’s a True Passive Income Source
Rich Uncles REITs are a true source of passive income. You can literally set it and forget it. Just set up the monthly amount you want withdrawn from your bank account and deposited into your Rich Uncles REIT.
Then let the property purchase and management team do the rest.
Rich Uncles Works to Minimize Risk
Rich Uncles focuses on purchasing properties intended to minimize risk for investors. It buys properties in well-established areas with high occupancy rates.
This is a great feature if you are an investor with a low risk tolerance.
It’s a Hands-Off Way to Invest in Real Estate
Possibly one of the biggest pros of Rich Uncles and crowdfunded real estate investing in general is that it’s largely hands off.
When you invest in real estate yourself, you’re looking at some cumbersome investment factors. You’ll need to:
- Come up with a large down payment to buy a property.
- Make monthly mortgage payments.
- Find and screen tenants — or you’ll need to pay a management company to do this.
- Maintain the property and make repairs as needed. Again, you can instead pay a management company to handle this.
I’ve always loved the idea of investing in real estate. However, financial and fear factors have kept me from buying a rental property on my own.
Rich Uncles allows me to reap the benefits of real estate investing in a hands-off manner. I am an investor and will share my experiences with Rich Uncles later in this article.
Rich Uncles Cons
First, though, let’s talk about potential cons of investing with Rich Uncles
There’s No Guarantee of a Profit
As with any investment, Rich Uncles can’t guarantee it’ll have dividend payments for you each month. There is a risk you’ll lose your investment monies as well.
The company does work to minimize risk by investing in properties with a down payment of 50% or more. In addition, it works to choose properties in established areas. However, this process doesn’t eliminate your investment risk entirely.
This is a Long-Term Investment
As I mentioned earlier, the Rich Uncles REITs are a long-term investment. Plan on five to seven years or more for a term. If you’re interested in sticking with short-term investments, this probably isn’t the best investment choice for you.
There are Early Liquidation Fees
Also as mentioned earlier, you can sell your shares through the Rich Uncles share repurchase program. However, you will pay administrative fees of up to 3% for doing so.
Keep this in mind as you decide whether Rich Uncles is for you. Next, let’s talk about what the Better Business Bureau has to say about Rich Uncles.
Rich Uncles Better Business Bureau Rating
Whenever we do review posts on Well Kept Wallet, we try to find independent sources of review. One source we use — if available — is the Better Business Bureau (BBB).
Rich Uncles has been a BBB accredited business since 2014. The BBB website says Rich Uncles has officially been in business 12 years.
However, the Rich Uncles site says its official start date for crowdfunded real estate investing is 2012. It has an A+ rating on the BBB site.
There are only four reviews listed on the Better Business Bureau site. However, all four reviewers gave Rich Uncles five stars. This is the highest rating you can give a business. So overall, the BBB rating for Rich Uncles is sparkling.
My Experience with Rich Uncles
Another thing we try and do for all Well Kept Wallet review posts is get first-hand experience of the product or service we’re reviewing. In this case, I have personally been a member of Rich Uncles since August 2018.
Here’s a summary of what I’ve experienced with the company since that time. When I first joined, I set up an automatic deposit amount of $25 per month to invest in the BRIX REIT. This is the amount I felt comfortable losing if Rich Uncles went belly up.
I think it’s important to consider how much you’re comfortable losing before deciding on an investment amount with any company. What was my experience after I signed up?
The first thing I noticed about investing with Rich Uncles is their great customer service. Even though I was only investing a small amount, I was assigned an account specialist.
The account specialist sent me an email soon after I signed up. He thanked me for joining and asked if I had any questions.
I did, and I sent the list on to him. He answered each one clearly and articulately. I appreciated this attention to detail. They seemed to value my membership, even though I am far from the biggest investor they have.
I found the website easy to understand and navigate. Even if you’re a beginner investor, you should have little issue finding your way around the website and getting help if you need it.
Possibly my favorite part of owning shares in the Rich Uncles REITs is that I’m getting paid dividends every month! My average dividend payout stands at 6.45% as of this writing.
I’m content with my monthly dividend profit to-date and I’m comfortable with the business model. Because of that, I’ve increased my monthly automatic deposit to my Rich Uncles account.
I’ll likely continue to do so if the BRIX REIT keeps performing as it has so far. I like that Rich Uncles allows me to participate in real estate investing even though I’m not loaded with cash.
If you’re considering investing in real estate, consider a crowdfunding platform. It’s a way for you to potentially profit from real estate without all of the hassles of owning rental properties outright.
You won’t have to deal with saving for a large down payment and working to find the right property to buy. In addition, you won’t have to deal with tenant issues, repair and maintenance, and a large mortgage payment.
Crowdfunded real estate investing means that experienced real estate investors do the heavy lifting for you. They do the work of finding and managing the property, and of making the mortgage payment.
As an investor, you simply back their work with your money and collect any profits. Rich Uncles seems to be a solid choice as a real estate crowdfunding option.
It works to minimize risk to investors by purchasing lower risk properties. And it doesn’t charge any annual management fees or broker fees.
In addition, you just can’t beat the $5 minimum investment requirement. If you’re thinking about dabbling in real estate investing, Rich Uncles can be a great way to start with minimal risk.
Have you ever tried crowdfunded real estate investing? If so, which company or companies did you invest with. And what was your experience? Feel free to share by leaving a comment on our Facebook page.