Detailed Streitwise Review 2020: crowdfunding real estate investment with Streitwise
Our Streitwise Review - Updated 30th June 2020
Have you ever considered investing in commercial real estate but wanted to stay away from the typically high costs involved? If you want to get into this potentially lucrative investment and have $1,000 to invest, you'll want to check out Streitwise. It's a new investment service allowing consumers to invest for less in commercial real estate.
We will take a close look at this real estate platform in our Streitwise analysis and all that it has to offer investors. Ready? Let's dive in.
What Is Streitwise?
Streitwise is one of the newest commercial real estate investment companies for crowdfunding that used the combination of digital technology and the relaxed investment rules offered by the 2012 JOBS Act to grow their businesses. Most crowdfunding sites in the real estate sector developed out of this legislation. Many of them have a platform where investors can check out real estate deals.
Streitwise is not a crowdfunding real estate business or a platform. Streitwise provides a nontraded, proprietary real estate investment trust (REIT), which already owns a number of commercial real estate assets already leased. Investors are buying shares of 1st Street Office, Inc., a qualified portfolio of managed commercial office properties.
What are REITs?
REITs are not a novelty. Publicly traded REITs were established in 1960 as part of President Eisenhower's signature Cigar Excise Tax Extension. Congress understood the value of encouraging all investors to invest in large-scale, diversified portfolios of income-generating immovables.
REITs have traditionally yielded attractive total returns consisting of high, steady dividend income and long-term capital appreciation. Managed portfolios of investments today usually have an immovable component to them. Owning shares in a publicly traded REIT offers many investors a stock-like opportunity to add commercial real estate to their portfolios.
On the other hand, private REITs existed long before the '60s, and don't trade on the national stock exchanges. Traditionally, these were sold to institutional investors and rich family offices. In fact, it was difficult for individual investors to buy shares in REITs until the passage of the JOBS Act. To be able to afford the high minimum investment you needed contacts to learn about the offers, accreditation to apply and deep pockets.
How Is Streitwise's REIT Different?
In contrast to publicly traded REITs which allow you to buy and sell market exchange shares, Streitwise's REIT is a private fund. And unlike most private REITs, both accredited and non-accredited investors have access to Streitwise's REIT. Streitwise is one of several companies that gives the masses the opportunity to invest in private, nontraded REITs.
You usually get as a private-REIT investor:
- Incentives to taxes, like depreciation;
- Quarterly earnings by dividends, and
- The advantage of lower tax rates on long-term capital gains when the property is sold.
Many private REITs, including Streitwise's 1st Streit Office, Inc., also qualify for the new pass-through income deduction of 20 percent thanks to the 2017 tax bill.
How Does Streitwise Work?
The REIT of Streitwise is operated by Tryperion Partners, a well-established real estate firm owned by managers with over 40 years of combined investment experience in real estate. The firm has made corporate transactions in excess of $5.4 billion, covering many market cycles of real estate.
The focus of Streitwise is on buying and maintaining commercial immovable property for the long term. The business is looking for deals with stable economics in secondary markets, where secure tenants can be found and relied on to provide a steady cash flow from long-term leases.
Investors have 2 ways of making money:
- Dividends for the month
- Participation in the capital appreciation when/if selling a holding while you are an active investor
When you invest in Streitwise, you become a co-owner of a REIT consisting of several office assets already bought, leased, and generating a positive cash flow from commercial tenants with leases in place.
The business is looking for commercial buildings ideally located near highways, nearby facilities and an industry base with existing employee bases.
A main differentiating feature of Streitwise is that it provides direct investment in a REIT that is entirely in-house controlled. The organization does not invest or operate investment assets operated by third parties that are not affiliated with it. And to reduce risk and ensure stability, Streitwise holds debt leverage low (at the time of this writing) with direct ownership equity of 55 percent.
Although many REITs are rife with extra investor fees, the charging structure of Streitwise is straightforward and fixed. New investments include a front-end load of 3 percent and an annual management fee of 2 percent.
The company is still young, so there is not much history of dividends, but since 2017 paid-out dividends have consistently been higher than many other available REITs, coming in at an annualized 10 percent in 2017 through 2019.
How to Get Started With Streitwise
Setting up an investment account on the platform at Streitwise is easy. Before making an investment, both accredited and non-accredited investors would need to provide and validate revenue and net worth information. That's because there's a cap to how much you can spend — your overall investment needs to be less than 10% of your net worth (excluding home) and less than 10% of your annual income.
After you have set up your account, you'll need to complete an ACH authorization form to connect your bank account so you can invest. You can also directly invest and set up automatic dividend reinvestment via the website's portal link to the Computershare Investor Center. The minimum investment is $1,000, which is one of the lowest minimums available for private real estate deals open to investors who are not approved.
If you have any questions, it is easy to get a representative on the phone or to talk to one through online chat. All investment documents are processed electronically on the web of Streitwise, using Computershare and FundAmerica's SEC-compliant stock transfer agent services.
Streitwise Pros & Cons
Autonomous Accounts - Streitwise is set up to accept contributions from self-directed IRA's and 401(k)'s.
Prefunded - The properties are all owned and pre-financed by Streitwise.
Due Diligence - With substantial financial skin in the game, the management of Streitwise has a vested interest in conducting due diligence. The emphasis is on the acquisition for long-term ownership of stable properties.
Leverage - Streitwise controls 55 percent of the REIT's commercial properties, holding debt leverage low.
Liquidity - Most private, nontraded REITs allow you to remain completely invested until you liquidate the underlying asset. If you need to access your assets for an emergency, you have a Stock Redemption Plan that allows you the ability to redeem your shares for 90 percent or more of their value in only one year.
Performance - Since its formation, Streitwise has a stable annualized dividend of 10 percent, paid quarterly. According to Streitwise, most current investors reinvest their dividends on a regular basis, which boosts stability and long-term growth.
Passive Investment - Your presence as a REIT investor is passive at 100 percent. Management makes all the decisions and manages all the paperwork and you get a quarterly earnings-based dividend.
Fee structure - Investment fees are straightforward and non-variable. The costs are fair, and many similar non-traded REITs usually charge higher for the total fee burden investors.
No Investor Choices - Investors can not pick and choose the commercial properties in which they want to invest.
Small Diversification - Streitwise provides one REIT composed of a few commercial properties situated in two geographic areas. This gives very little diversification by form of asset and position of assets.
Streitwise is neither a technology platform nor a marketplace where the crowd will invest in offers provided by external partners or real estate companies. This is a real estate investment company that uses an online platform primarily as a way to collect capital within their REIT for internally operated assets.
Unlike other REITs that concentrate on purchasing, upgrading and reselling assets, Streitwise focuses on acquiring properties located in prime market areas and keeping them on a long-term basis for the rental income created by the leasing businesses.
Underwriting is performed in-house by tenant vetting to ensure their ability to pay and efficient property management to preserve value to attract tenants and to rapidly backfill when there is a vacancy.
Streitwise's three founding partners have considerable "skin in the game," with over 500,000 shares in total invested themselves. This means they have an immense personal interest in finding, controlling and profiting the properties held in the REIT.
Streitwise has delivered 10 percent of annualized dividends since its inception. The goal is 8-10 percent per quarter in the future.
Streitwise might be a perfect way for the individual investor to invest in commercial real estate without having accreditation or several thousands of dollars to get started.
Streitwise main features and highlights
- Real Estate
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