If your goal is to build long-term wealth, your asset allocation should include real estate investments. Real estate investing can be a solid passive income source with a variety of monetary benefits. If you don’t have tens of hundreds of dollars, though, it may feel like you’re already priced out of these assets.
One alternative for individual investors who want to get involved with real estates investments is private REITs. Which just happens to be one such solution offered by real estate crowdfunding platform, Streitwise.
Streitwise offers real estate investment trusts (REITs) for investors with as low as a minimum investment of $5,000. The primary real estate investment that Streitwise makes is into cash-flow real estate, also known as rental properties.
So, if you don’t want the hassle of renting property or can’t fund real estate projects individually, Streitwise claims it can help. But before you jump the gun into Streitwise investments, let’s dive deeper into this real estate crowdfunding platform. In this Streitwise review, we’ll go through everything you need to know before making your final decision.
Let’s get started!
What is Streitwise?
Streitwise was founded in 2016 and sponsored by Tryperion Partners. The company is based out of Los Angeles, California.
They are thought of as a real estate crowdfunding platform, but Streitwise is actually a non-traded REIT. REITs are companies that own and manage cash-flow real estate. Shareholders of these REITs receive dividends as a share of the company’s profits. This REIT is also considered an equity REIT, meaning that you have a share of the capital appreciation and also get paid dividends that are produced by the cash flow generated by the properties.
Over $76 million assets under management are within this REIT. Tryperion Partners has done more than $5.4 billion in transactions.
How does a Private Real Estate Investment Trust work?
It should be noted that any investment account will have some sort of risk associated with it. Private REITs, like what Streitwise offers, have some great potential benefits, including:
- Generating passtve icome
- Greater and more diversified returns
- Can assist in heading against inflation
- Tax benefits
What does Streitwise Offer?
To invest in Streitwise’s REIT, you must be able to meet a minimum initial investment of $5,000. You don’t need to be an accredited investor unless your investments are more than 10% of your net worth or income in the past two years.
Individuals, corporations, limited liability companies, trusts, and self-directed IRAS or 401(k) plans can hold these investments.
Until you reach your first full year of ownership, you won’t be able to redeem your REIT shares. 90% can be redeemed after your first year. This gradually increases to 100% over the course of five years of ownership.
Below is the redemption schedule:
- Less than one year – Redemption is not allowed
- 1 to 2 years – 90% of the Net Asset Value (NAV)
- 2 to 3 years – 92.5% of NAV
- 3 to 4 years – 95% of NAV
- 4 to 5 years – 97.5% of NAV
- 5 or more years – 100% of NAV
A shareholder who passes away or becomes completely disabled will be eligible for 100% redemption as well. Since Streitwise is a non-publically traded REIT, you can’t sell your investment on the exchanges.
An optional feature that Streitwise offers is its Streitwise Dividend Re-Investment Plan (DRIP). This program allows you to have your dividends go towards purchasing more shares in the REIT.
How Does Streitwise Work?
Non-accredited investors can use Streitwise’s real estate crowdfunding platform. This is different from most other real estate investing platforms that only allow accredited investors.
That opens the door to anyone when it comes to these investments, regardless of net worth or annual income. The one requirement that the company does have is that your REIT investments must not exceed 10% of your net worth or your annual income in the last two years. (Can be either individual or joint net worth or income).
From 2017 to 2019, Streightwise has paid out dividends that average 10% per year. These dividend payments come on a quarterly basis, net of investment fees.
One of the unique benefits of Streitwise is that the three founders who manage the REIT have over $5 million of their personal money invested into the trust. Therefore, the founders have a vested interest in ensuring the fund is successfully managed.
The primary real estate investments that Streitwise makes go into commercial properties. These commercial real estate projects are generally expected to be held for 10 years or until the property value reaches a level that it would be desired to be sold.
Proceeds on the sale of a real estate investment would be distributed among investors. The funds may also be used to invest in a new property.
Currently, 1st Streit Office Inc. holds two commercial properties. The first is the 290,000 square feet headquarters for Panera Bread in Saint Louis, Missouri. The other is the 142,000 square feet Allied Solutions Building which is a mixed-use building located in Carmel, Indiana.
1st Streit office is actively uprising additional properties. The website states that “We do intend on acquiring, over time, a diversified portfolio of quality office properties.”
There are four investment strategies that Streitwise utilizes when looking at potential commercial investments:
- Creditworthy tenants – It looks for established commercial tenants
- Non-gateway markets – By avoiding high-priced coastal markets, Streitwise looks for moderately priced markets that offer the potential for higher dividends
- Value-oriented investments – This looks at the strategic location of a property such as established employment, sustainable occupancy, nearby amenities, and quality construction.
- Modest leverage – Streitwise limts its debt levels to a maximum of 60% of the value of the property held
These strategies are in place to reduce the company’s risk while increasing long-term capital appreciation and dividend income.
You don’t have to have a ton of money stashed away to purchase Streitwise’s REITs. The minimum investment is $5,000. The investment platform offers pricing at about $10 per share. That means you’ll get around 500 shares with $5,000.
What does Streitwise Cost?
Streitwise has lower fees when compared to other investment platforms. Specifically, the company charges two charges in its fee structure:
- 3% upfront fee – This is the fee you pay when you make your initial investment
- 2% asset management fees – This is an annual fee that will be deducted from your dividend income
For example, if your dividend percentage for the year is 13%, your net return will be 11% after paying the annual management fee. There are no hidden fees.
Who should use Streitwise?
Both accredited and non-accredited investors can invest with Streitwise. Most private REITs don’t allow non-accredited investors, making Streitwise stand out.
An accredited investor can invest as much as they want and in anything that they want. To meet the criteria, you must make at least $200,000 individually or $300,000 if you file as married.
The alternative way to meet this status is that your net worth is at least $1 million. This amount can’t include your primary home.
There are some limitations to be aware of if you aren’t an accredited investor, though. Specifically, you can only invest as much as the greater of either:
- 10% (or less) of your total annual income
- 10% (or less) of your total net worth which excludes your primary residence
That means if you make $100,000 a year and your net worth is $50,000, the most you can invest is $10,000. Your income is the greater of the two, which allows you 10% of your annual income.
How to Sign Up with Streitwise
You must have a U.S.-based bank account or be able to complete a wire payment to open a Streitwise account. U.S. citizens and foreign nationals are both eligible for this platform.
You must be able to provide the following information when signing up:
- Full name
- Email address
- Investor status
- Individual or joint investment
- Amount you wish to invest
- Physical address
- Telephone number
- Social Security number
- Date of birth
If you live outside the United States, you must be able to complete a wire payment to visit. An ACH authorization form must be filled out so that your bank account can be connected with Streitwise’s platform.
Computershare Investor Center is where you’ll actually purchase Streitwise shares. You can also track your portfolio and view account statements here. If you wish to enroll in the Streitwise DRIP program, you can do so here.
Streitwise Pros and Cons
Pro: Low investment minimum
You can start investing in commercial office properties with as little as $5,000. That’s enough to get you around 500 shares.
Pro: Open to non accredited investors
You don’t have accredited investor status to use the investment platform. This is typically required with these types of investments.
Pro: Earn both capital appreciation and annual dividends
You get paid out a quarterly dividend, and investors earn money when the properties are sold.
Pro: Above-average Dividend history
The Streitwise REIT performs better than most fixed-income investments (i.e., Certificates of Deposits) and stocks.
Pro: Can Redeem after One Year
You can start redeeming your shares after your first year of ownership. This is another factor that differentiates Streitwise from other platforms.
Pro: Tax Benefits
Your tax liability with real estate investing with Streitwise is minimized.
Taxable income is reduced by depreciation which is a paper expense. It’s a 20% pass-through reduction, so your dividend income gets the benefit of that.
Capital appreciation will be taxed at the lower long-term capital gains rates.
Pro: 401(k) and IRA options
You can hold your investments in a self-directed IRA or self-directed 401(k) account.
Pro: Deposit Dividends in your bank account or Reinvest it
Dividends from the commercial real estate can be transferred to your bank account if you wish to have immediate access to the funds. You may also take advantage of Streitwise’s dividend reinvestment program and use the income to grow your investments.
Pro: Founders are deeply vested into the company’s success
All three founders who manage the private REIT have invested a significant stake in the company. They utilize a strategy that uses deep property research to increase the chance of making a good investment.
Pro: Can Invest using Cryptocurrencies
If you own crypto and you’re looking for a less volatile investment like commercial real estate, Streitwise might be right for you. Your investments can be funded with Bitcoin or Ethereum.
This allows you to move funds to a less risky asset type. You can also avoid pulling money from your checking or savings.
Con: Can’t Sell your Investments on Popular Exchanges
Since Streitwise is a private REIT, you can’t sell on the exchanges like publicly-traded REITs. This makes these investments less liquid.
Con: Must Open a Special Account
Commercial property investments must be held in special self-directed accounts set up for the sole purpose of these real estate deals. These are different from regular self-directed retirement accounts, which allow you to choose and manage your own investments.
Con: REIT only holds 2 properties
There are only two properties owned by Streitwise. Therefore it’s not the most diversified portfolio out there.
Con: Full liquidity takes 5 Years
After your first year, you have 90% liquidity. However, you must wait a total of 5 years to get 100% liquidity.
Con: Focused on Commerical Real Estate
While real estate investing can hold many benefits, economic conditions can make commercial real estate more susceptible to risks. The COVID-19 pandemic is a good example of this. Remote work has accelerated significantly in the post-pandemic world.
FAQ: Streitwise Review
Is Streitwise a good deal?
You don’t have to worry about disposition fees or other costs with Streitwise. There is an initial 3% upfront fee when you start to invest in commercial real estate with them.
After that, you’ll pay 2% annually as a management fee. This percentage is taken out of your dividends.
Does Streitwise offer solid customer service?
You can find a helpful FAQ page on Streitwise’s website that will help answer common questions like how to get started, how often you will receive dividends, and more.
There is also a live chat feature available to contact if you have a question that can’t be answered on the FAQ page. Chat is available from 9 am to 5 pm, Pacific Standard Time.
Investors can email them at email@example.com. If you’re not an investor, you can email them at firstname.lastname@example.org.
On their website, you can also schedule a call with one of their reps, which is a pretty handy feature when you don’t want to get stuck on hold. Streitwise’s phone number is 310-907-5525.
How is the diversification and risk management on Streitwise?
Unlike traditional investments such as a mutual fund, Streitwise has no way of diversifying its portfolio. There are only two commercial properties in its mix.
Its long-term growth could be limited if the company doesn’t purchase additional properties.
Is Streitwise easy to use?
Starting a Streitwise account is easy. You can just click on the “Start Investing” tab on their homepage to get started. You’ll enter some basic information about your investment and yourself.
You’ll also have to complete a brief questionnaire that asks if you’re an accredited investor or not.
It does take a while to fund your account, though. The funds will typically sit in an escrow account for 10 years before they are cleared for share issuance. The entire process can take as long as four weeks.
You can also access your account using an iPhone or iPad through the Streitwise mobile app for iOS. It allows you to keep track of your investments while on the go. Unfortunately, there is not an Android version of this app available yet.
You can receive compensation from Streitwise’s REIT in two ways: Dividends and capital appreciation. This allows you to earn regular, passive income on your investments.
But if you’re not willing to have your money tied up for a year or more, Streitwise might not be right for you. You also have to be willing to take on some risk, as the REIT only has two properties in its portfolio.
Those who are looking to get into commercial real estate, non-accredited investors, in particular, should consider Streitwise. These investments require that you have some knowledge of the real estate market and are comfortable with locking up your money for a while.