- Special area of expertise
- Browsing of present and past investment information with no registration
- No direct investor charges
- Site suggests that Reg A+ deals will be available to investors who are not approved
- High min. of over 15k USD
- Small range (1 available bid as of this date)
- Restricted track record (only two ventures listed as financed)
- Wide set of contract documents for analysis
They were founded in 2014, have two funded projects and one open offering.
Forms of Investment
EquityRoots provides debt and equity investing in hotel real estate, although no debt investment is offered for now (and the lone equity investment is projected to have a pretty long holding time of a decade). Although the details vary by project, a typical unfolding of events seems to be that an established hotel operator wants to offer money for constructing via a combo of lending obtained from banks and funding with the help of more people through EquityRoots.
EquityRoots' hotel real estate listings are more nuanced than the majority of other CRE's, partially due to the revenue sources being more diverse (room charges, food, drinks. and so on) and more volatile relative to annual apartment rentals or longer commercial leases. Investors with info of the hospitality sector and/or the future movements of the economy are in the better position of assessing the firm's offerings.
What does an investment with this company bring you?
When investing via the company, just like with other crowdfunding investment sites, what you get is a stake in an investment-specific LLC which actually has the debt interest in the real estate. With every investment you make via EquityRoots, you will get another K1 at tax to disclose your stake of the profits (if any) earned by the LLC.
How the company makes money?
The company doesn't require money from investors directly. They charge specific charges (usually $100,000-$255,000) to issuers. It would be smart for the prospective investors to go through the proposal documentation in depth and ensure that they comprehend how the issuer gets money – for instance, in once case the investment LLC gets the money to the issuer in a form of a development charge of one percent of the overall development prices, a 3.5 percent of property maintenance charges (paid each month), a "loan acquisition" and a "loan guarantee" fee. Obligatory financials tend to provide positive gains on all of these payments.
Possible Returns and Cash Flow
The only present and past listings that appear on the site are investments for equities with pretty long holding times (five to ten years). Most have a forecasted IRR of 20-26 percent, counting in a combination of annual dividends and a share of the proceedings on selling or refinancing of the land. Investors have to check the tender documents in depth to ensure that they comprehend how much it will take before the venture is finished if it is new, because any payments are contingent on the hospitality structure earning profits.
It would be smart of the investors to check the investment LLC membership agreement to ensure that they comprehend how the LLC can purchase investors prior to any refinancing event or real estate selling.
Scope of the Offerings
There's one available investment on their website for now and another coming soon. The first 2 were hotels in Schaumburg, Illinois (where the firm is located), and the new and future ventures are in San Antonio, Texas, and Lexington, Kentucky.
Regulatory Structure and Standards for Due Diligence
The firm doesn't mention any connection to a broker-dealer. To date, projects have been provided via SEC Reg D and are therefore restricted to approved investors, although their website says that they also want to provide some Reg A+ projects that will be available to all.
When underwriting and due diligence are concerned, it's beneficial to get better clarity beyond fairly generic description that say (or don't say) that pre-screening of each of their issuers is done to ensure that all products on the platform are valid. They ask that all offers contain a significant amount of detail in order to help make informed investment decisions. Moreover, they ask each issuer to identify all investment uncertainties and chances.
EquityRoots main features and highlights
- Niche platform offering equity and debt investments