REITs and fractional real estate offerings are two paths to invest in real estate. Learn the differences in regard to ownership structures, available information, and portfolio management.
REITs have been available to individual investors for decades, with publicly traded REITs offering access through brokerage accounts and stock exchanges. Over approximately the last 10 years, online fractional real estate platforms, like Realbricks, have expanded the ways investors can access property-specific offerings, often at lower investment amounts than purchasing real estate outright. REITs and fractional real estate offerings provide different ways to gain exposure to real estate without purchasing and managing an entire property.
Public REITs must make disclosures through SEC filings, including information about materially important physical properties under Item 102 of Regulation S-K. Reporting practices vary by issuer, portfolio, and the materiality of individual assets. Large REITs often emphasize consolidated financial results of the portfolio as a whole over property-specific information, although some provide extensive information about property types, geographic allocation, occupancy, debt, and major assets. Review Regulation S-K.
When investors participate in fractional real estate investing through the Realbricks platform, property-level information is provided for each offering. Under the fractional real estate investment structure, each property is held in its own legal entity. Investors purchase ownership interests, or shares, in the entity that owns a specific property rather than investing in a portfolio of real estate assets. The Realbricks Offering Circular and other offering documents identify the underlying property and provide information relevant to that offering. Depending on the offering, this may include:
Realbricks also provides construction and property updates to investors when material milestones such as completed construction or executed leases occur so investors can monitor each property's progress. This information allows investors to evaluate an identified property rather than relying primarily on consolidated portfolio results.
Access to more detailed information does not make an investment predictable. Investors should review the applicable offering information before investing. SEC qualification does not represent an SEC endorsement of the securities, offering terms, or issuer.
The market price of a publicly traded REIT is determined through securities-market trading. It may be influenced by the estimated value of the REIT’s assets, as well as interest rates, investor expectations, market sentiment, management, leverage, and conditions affecting the broader stock market. As a result, a REIT’s market capitalization may differ from estimates of the net value of its underlying assets and liabilities.
A property-specific offering gives investors access to acquisition and valuation information for the identified property. This can make it easier to understand the relationship between the offering, the property, and the entity’s capitalization.
That relationship should not be interpreted as a guarantee that the acquisition price represents the property’s current or future market value. Appraisals, comparable sales, and other valuation methods rely on assumptions, and future sale prices are uncertain.
Debt can materially affect a real estate investment. Mortgage financing may allow an owner to acquire an asset using less equity, but it also creates interest expense, repayment obligations, refinancing risk, and the possibility of foreclosure after a default. The effects depend on factors such as the amount, interest rate, term, and conditions of the debt.
Depending on the type of REIT and the applicable portfolio, REIT investments may utilize mortgage financing, commonly referred to as leveraging. Sensitivity to changing interest rates can impact the performance of REITs. Investors should understand the risks of investing in a portfolio of assets that use mortgage financing and leverage debt.
Alternatively, the Realbricks fractional real estate model structures investment offerings to acquire properties without property-level mortgage financing. When Realbricks acquires a home, the entity that owns the property holds the title free of mortgage debt at the time of the offering. This structure means there is no mortgage lender with a lien against the property.
If a property closes without mortgage debt, it begins with a 0% property-level loan-to-value ratio. This removes scheduled mortgage principal and interest payments at acquisition and reduces exposure to changes in mortgage interest rates.
Investors can purchase ownership interests in available Realbricks offerings knowing that the property was acquired without leverage. While the absence of property-level debt may reduce certain financing-related risks, investors remain subject to a variety of other risks, including property-specific, operational, market, regulatory, and liquidity risks.
One of the central differences between the two models is who selects the underlying properties.
With a REIT, management chooses and manages portfolio assets according to the REIT’s stated strategy. Investors evaluate the company, management team, portfolio composition, financial condition, fees, leverage, and public disclosures. They generally cannot exclude an individual property while continuing to own the same REIT.
With Realbricks offerings, investors can decide how to build their real estate portfolio, selecting the offerings and underlying properties that align with their personal investment goals and preferences. This allows investors to construct a portfolio based on selected characteristics, such as:
This control also places greater responsibility on the investor. Selecting individual offerings requires research and does not ensure that the resulting portfolio will be adequately diversified or aligned with the investor’s objectives.
Realbricks does not provide individualized investment advice or determine whether an offering is suitable for a particular investor.
Shares are currently offered at $10 per share, with a $100 minimum investment. A young investor hoping to gain exposure to real estate investing may be using the Realbricks platform alongside an experienced investor who is hoping to diversify their portfolio. Providing accessible, transparent investment opportunities is our mission.
When you invest with Realbricks, we manage the day-to-day operations of the real estate offerings for investors. Realbricks handles tenant placement, property management and maintenance, as well as financial reporting and other administrative functions. Investors hold their shares and receive property status updates from the Realbricks team.
Before a property is offered on the platform, Realbricks evaluates it using multiple factors, including: economic and demographic information, rental market considerations, characteristics of the property, long-term market performance, and applicable regulations.
The Realbricks evaluation process is intended to provide a consistent framework for reviewing potential investment opportunities before they are offered on the platform. Evaluating each investment opportunity takes time, promoting the concept of disciplined real estate investment.
The Secondary Market on the Realbricks marketplace is a peer-to-peer marketplace where investors can buy and sell shares of individual offerings. Learn more about eligibility and requirements for participating in the secondary market: An Introduction to the Realbricks Secondary Marketplace (coming soon).
The principal distinction is not that one structure is universally more transparent, secure, or effective. It is the level at which investors make their decisions.
A REIT allows investors to evaluate and invest in a professionally managed company or portfolio. A property-specific offering allows investors to evaluate an identified asset and purchase interests in the entity that owns it.
Investors comparing these structures should consider:
Investors should consider their own financial circumstances, investment objectives, and risk tolerance before investing.
You can explore the available offerings on the Realbricks marketplace or review the offering circular for the terms, risks, and disclosures associated with each offering.
Disclaimer: Investing in real estate involves risks, including the potential loss of capital. This content is for informational purposes only and is not intended as investment advice. Investors should perform their own research and consult with financial professionals before making investment decisions.
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Terra Mint Group, Corp ("Terra Mint"), as the Managing Member of Neptune REM, LLC ("Neptune") operates the RealBricks.com website (the "Site") and is not a broker-dealer or investment advisor. All securities related activity is conducted through Dalmore Group LLC, a registered broker-dealer and member of FINRA/SIPC, located at 525 Green Pl. Woodmere, NY 11598. You can review the brokercheck for Dalmore. An up-to-date Dalmore Form CRS is available.
You should speak with your financial advisor, accountant and/or attorney when evaluating any offering. Neither Terra Mint, Neptune, nor Dalmore makes any recommendations or provides advice about investments, and no communication, through this website or in any other medium, should be construed as a recommendation for any security offered on or off this investment platform. The Site may make forward-looking statements. You should not rely on these statements but should carefully evaluate the offering materials in assessing any investment opportunity, including the complete set of risk factors that are provided as part of the offering circular for your consideration.
Neptune is conducting public offerings pursuant to Regulation A, as amended, through the Site. The most current offering circular for Neptune is available here. Past performance is no guarantee of future results. Investments such as those on the Realbricks platform are speculative and involve substantial risks to consider before investing. These risks are outlined in the respective offering materials and including, but not limited to, illiquidity and a complete loss of capital. Key risks include, but are not limited to, limited operating history, reliance on key personnel, inherent risks in investing in real estate, distributions may not be received on predictable schedule and or at all by Investors, and lack of voting rights. Also, the adverse economic effects of the COVID-19 pandemic remain unknown and could materially impact this investment. An investment in an offering constitutes only an investment in a particular series and not in the underlying asset(s). Investors should carefully review the risks located in the respective offering materials for a more comprehensive discussion of risk.
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Property information shown has been provided from various sources, which can include the seller and/or public records. It is believed reliable but not guaranteed and should not be relied upon without independent verification.
Disclaimer: Images, Information and Floor Plan and Measurements are approximate and are for illustrative purposes only. We make no guarantee, warranty or representation as to the accuracy and completeness of the floor plans, measurements and or any information provided. You or your advisers should conduct a careful, independent investigation of the property to determine to your satisfaction as to the suitability of the property for your space requirements. All pricing and availability is subject to change. The information is to be used as a point of reference and not a binding agreement.
