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BuildingBits

BuildingBits

BUILDINGBITS REVIEW:

Investing in Commercial Real Estate

Interested in getting started investing in commercial real estate, but lacking the capital? BuildingBits makes commercial real estate available to everyone.

Just like it sounds, you invest with other investors on the platform in a property "bit". It helps you to start spending less than conventional commercial real-estate investments. Nonetheless, you still get a share of profits, losses, rent, and more fractions.

What is Building Bits?

Building Bits, also called BuildingBits, is a crowdfunding platform. They concentrate on commercial properties, such as office and multi-family buildings. BuildingBits is located in Portland, OR.

Like other crowdfunding sites, Building Bits uses Section 401 of the Jumpstart Our Business Startups Act (JOBS Act), which extends Regulation A. The Act enables non-accredited investors to invest in private companies. They also invite non-accredited investors.

What are they offering?

Bulding Bits helps retail investors and approved investors to spend as little as $500 in commercial real estate. When you buy a Building Bits investment, the money goes into an escrow account. If the property you invest in achieves the investment goal, the property title is transferred to a holding company named Building Bits Properties I, LLC).

To be specific, you're not actually buying property, but investing in BITs that are tied to a real estate asset. This is how Building Bits conveys fractional shares or land ownership. Building Bits' SEC filing was for BIT offerings.

After investing in a Building Bits asset, there are a few ways to make money from it. The first is by quarterly dividends and the second, after the property is sold, is land appreciation. Know that dividends are not guaranteed.

To help you assess properties, Building Bits has built a proprietary BB Rating system. Six metrics show information:

  • Cap-rate
  • Local market and local dynamics
  • Performance of occupant
  • Terms of contract
  • Building class and efficiency
  • Useful life

The website currently has just four listings. Both have a way to go until fully funded. Their BB ratings are 3.3, 4.0, 4.2, 4.3.

Looking at a property listing, you'll see how much is funded, the target of funding, venue, and the expected cap rate. Cap rate is the estimated return of the property based on the profit it generates (net operating income, or NOI), divided by the purchase price.

Clicking a property listing shows much more detail about the house, including:

  • List of investments
  • Building details
  • A tenant's description
  • Core characteristics
  • A map

If you've built an account, you'll also see the financials, gallery, records, and investor reviews of a company.

Every listing has an earnings calculator. Using AT&T Retail Building listing as an example, the calculator shows the annual IRR based on the amount invested. When this property invests $500, the IRR looks like this:

  • 1st Year: $542
  • 2nd Year: $588
  • 3rd Year: $638
  • 4th Year: $693
  • 5th Year: $751

As for timelines for financing and closing on a house, building funding is expected to take one to three months and closing two to three more weeks.

Building Bits is offered in all states except Texas and Washington. They meet for approval with regulators in those jurisdictions.

How is BuildingBits Different from a REIT?

A REIT is public security listed on open-market exchanges. REITs invest in various property sectors. You, as a REIT investor, have no influence of what the REIT can invest in. REIT benefits are that they pay dividends, are very liquid and can be sold quickly.

Building Bits helps you to invest in a particular single property. BITs also pay dividends. No secondary market for selling BITs is available, however. You'll have to keep your BITs until Building Bits sells the property or find a buyer for your BITs. Therefore, BITs are highly illiquid.

What are the fees?

There is a 1% purchase fee and 1% exit fee. There is also an annual review fee of 0.75% and Building Bits pays 1% on any gains at exit time.

How can I open an account?

You'll need $500 for initial investment.

My money, is it safe?

Building Bits uses HTTPS encryption on its website and cites fair security measures to protect your data. When you pick a property to invest in, funds go to an escrow account. If the property doesn't meet its fundraising target, you'll get your money back.

It's worth it, right?

For those wishing to start with commercial real estate investment, Building Bits offers an easy-to-use website with lots of informative content on commercial real estate investment. Why the platform works and how investments are completed is simple.

Creating Bits can be a fair solution for both beginners and seasoned investors.

BuildingBits main features and highlights

Bottom line
Invest in large commercial real estate market.
Fees: 1.75%
Min Deposit: $500
Target returns: -
Sectors:
  • Commercial Real Estate

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