Real Estate Crowdfunding for Accredited Investors
Product Name: Upright
Product Description: Upright offers investing in short-term real estate notes with fixed interest rates and short loan terms.
Summary
Upright is a real estate crowdfunding platform offering investors an opportunity to earn passive income. That means you don’t need to invest directly in individual properties, nor do you need to participate in the management of those properties.
Pros
Cons
Upright is a bit different from other real estate crowdfunding platforms in that it focuses almost entirely on the lending side. They provide loans to real estate developers and rehabbers for short-term financing. Investors participating on the platform buy individual slices of those loans. This means as an investor, you can earn a fixed interest rate on short-term notes, with durations ranging from three months to 24 months.
Because the notes are secured by the underlying real estate and represent an obligation of the real estate developers and rehabbers, default rates on these loans range from extremely low to nonexistent. This means you can earn an average return of 10% or more, with very little risk of principal loss that may occur if you were to participate in similar projects as an equity investor.
First, you must be an accredited investor to invest with Upright. The platform is best for those who want to diversify their investments with real estate development but don’t want to flip houses themselves.
Also, you cannot take distributions of your principal from the investment until the loan is repaid. This means that you should not invest money that you may need in the short term. Investors looking for liquidity should look elsewhere. However, if you are comfortable committing your funds to this investment, then Upright is certainly worth considering.
Upright is a real estate crowdfunding platform where you can invest in notes that represent slices of loans made to real estate developers and property rehabbers. It’s a completely passive form of real estate investing since you will be receiving interest on your investment, with a predetermined maturity and a full return of your original investment principal.
You can invest in either individual notes on specific properties or choose to invest in one of three different funds. Each fund holds loans against multiple properties, providing you with a portfolio of notes to invest in.
The company was founded in 2014 as Fund That Flip and still functions as Fund That Flip, Inc. DBA (doing business as) Upright. The company is based in Cleveland, Ohio, and has managed more than $2 billion in real estate investments.
Upright can accommodate individual or joint taxable accounts or a type of retirement plan known as a self-directed IRA (SDIRA). This is a special type of IRA that allows you to invest in non-traditional assets, the kind not typically offered by banks or investment brokers. These assets include direct ownership of real estate, real estate loans, private equity, and even artwork.
It is also possible to open an account with Upright for a company or a trust.
Whatever type of account you would like to open, a minimum of $1,000 is required.
Upright is a real estate crowdfunding platform that enables you to invest primarily in short to medium-term notes secured by residential real estate. However, they do offer equity positions through one of the three funds they provide.
As an investor on the platform, you’ll have the ability to invest in either individual notes or to choose among one of three funds, each of which holds a portfolio of real estate notes. The emphasis on real estate notes means that Upright offers largely passive investments with an extremely high likelihood of full repayment at the end of each note term.
The company has originated more than $2.6 billion in loans, paying investors an average gross yield of 10.8%. They claim that 99.7% of the principal invested has been returned to investors. The company accepts only between 6% and 8% of all projects submitted for funding, indicating a strict vetting process.
Upright operates as both a hard money lender and a private lender, focusing exclusively on residential properties. Loans offered include portfolio loans, new construction loans, and rehab loans.
Borrower Dependent Notes provide an opportunity to invest in short-term, high-yield project notes with fixed interest and maturity dates. Loans are made primarily to developers with returns projected as high as 13%.
Upright underwrites and originates loans that investors can purchase to earn a stable income. Loan terms run longer with individual notes than with other investments on the platform, extending to as long as 24 months.
Referred to as simply “Pre-Fund,” this fund enables you to invest in a line of credit that funds every loan underwritten and originated by Upright. Even though the term “line of credit” is used, the principal raised is used to fund first-position mortgage loans secured by the underlying properties.
Returns average 10% annually, and the company claims the fund’s track record is “100% interest paid, 100% principal repaid, 100% on time.”
One of the big advantages of this fund is that you can participate with as little as $1,000, which will provide you with access to a portfolio of notes. In addition, the fund provides monthly distributions, making it a good choice if you are looking for a regular income.
Also called the Horizon Fund, this is Upright’s flagship investment fund. It utilizes the tax advantages of a real estate investment trust (REIT) and invests in short-term residential mortgages, with an emphasis on providing current income.
Since the fund uses the REIT structure, it offers similar tax advantages. Because the fund invests in loans secured by multiple properties, investors can take advantage of a ready-made, fully managed loan portfolio.
The Blueprint Fund is invested in a diversified portfolio of residential mortgage loans for new construction. However, the Blueprint Fund introduces an equity offering through the fund’s Equity Membership, with an expected return of between 11% and 14% on a net income basis.
The Fixed Maturity Debt portion of the fund provides monthly distributions, while Equity Membership pays on a quarterly basis.
The fund invests in first-lien positions in residential new construction with short-term mortgage loans. The Fixed Maturity Debt allocation is designed to provide current income, as well as portfolio diversification. To improve performance and stability, loans are made only for residential housing located in growing market areas.
Upright does not charge fees to investors on the platform. Instead, fees are paid by property developers and borrowers when loans are originated. The annual returns provided by Upright are net of those fees paid by property developers and borrowers.
Customer service can be reached by phone at (646)895-6090 (Option 2 for investors), though no hours of contact are specified. You can also direct email the company at [email protected].
The company can also be accessed from popular social media sites, including Instagram, LinkedIn, YouTube, X (Twitter), and Facebook.
Upright uses Plaid to provide secure transfers of financial data, though investors can choose to opt out of this service. The company does not share your information except with affiliates, though you do have the right to opt out of that activity as well.
It’s important to understand that as an alternative investment platform, Upright investments are not covered by FDIC or SIPC insurance.
Arrived is another popular real estate crowdfunding platform. It has some major advantages over Upright in that accredited investor status is not required, and you can begin investing with as little as $100. That makes it an excellent choice for new and small investors who want to begin investing in real estate through crowdfunding platforms.
Similar to Upright, Arrived claims average annual returns on investment of at least 10% and offers a truly passive investment.
With Arrived, you will invest in individual, single-family properties. The minimum investment is $100, but it can be as high as $20,000. Income is distributed quarterly, and investments can be held in an SDIRA or a taxable account.
Read our full Arrived Review.
EquityMultiple differs from Upright in that it focuses on commercial real estate rather than residential. It is similar in that it does require accredited investor status. The minimum investment is $5,000, which is considerably higher than the $1,000 minimum for Upright’s Pre-Funding Notes Fund.
This crowdfunding platform offers investments in high-yield, professionally managed commercial real estate. Like Upright, only a small percentage of projects reviewed are accepted for investment purposes.
EquityMultiple offers investments in three different categories, Keep, Earn, and Grow. Keep is considered something of a savings account alternative, with competitive interest rates higher than those offered by certificates of deposit. These investments run for no longer than nine months and have an average annualized return of 7.4%.
Earn works similar to Keep investments, but with higher returns. It invests in a combination of senior debt, with target returns of 12%, and preferred equity, with returns of 14%. The minimum investment is $20,000.
Finally, Grow offers equity investments with a targeted net return of at least 18%. As the name implies, this offering focuses on principle growth and requires a minimum investment of $25,000.
Read our full EquityMultiple Review.
Much like Arrived, Groundfloor does not require accredited investor status. Investors can participate in this real estate crowdfunding platform for as little as $10, and there are no fees charged to them.
Similar to Upright, Groundfloor investments focus on short-term, high-yield real estate loans. These loans have terms of between 12 and 18 months, with an average annual return in the 10% range. Also like Upright, loan investments are first-lien positions, making them more secure than other financing arrangements.
Groundfloor loans are secured by non-owner occupied residential real estate, limited to 1 to 4 units. The company does not invest in apartment buildings or commercial projects, as some crowdfunding platforms do.
Groundfloor does provide equity investments (through Groundfloor Labs) for higher returns, but those investments do require accredited investor status.
Read our full Groundfloor Review.
The company has been in business since 2014, making it one of the more established real estate crowdfunding platforms. In addition, the company claims a repayment success rate of nearly 100%, which is extremely high in the space.
Upright is a real estate crowdfunding platform that enables investors to invest in short-term notes secured by underlying real estate. The platform provides average annual returns above 10% and a return of principal rate of nearly 100%.
You can, but as is the case with virtually all real estate crowdfunding platforms, you must keep your funds invested until the end of each respective investment term. There is no capability to withdraw your funds before the term expires.
Upright can be an excellent way for accredited investors to gain access to real estate investing without buying and managing individual properties.
The platform mostly offers investing in short-term notes. These don’t provide returns as big as equity investments on other platforms, but they are more secure and offer steady, double-digit returns.
This type of investing should not be viewed as a replacement for fixed-income investments, such as bonds or certificates of deposit, but rather a diversification into a hard asset, like real estate.
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