If you’re wondering whether Streitwise is a good investment, you’re not alone. Being able to invest in commercial real estate with as little as $5,000 may sound too good to be true. However, it is possible to do this with the Streitwise REIT (Real Estate Investment Trust) and it can offer you high annualized dividends as well as the chance to earn capital appreciation of the underlying properties you’re investing in.
It’s a more passive investment than other real estate ventures and you can do it as a non-accredited investor (though you may be limited with the types of investments you can make). That means you can invest money and get paid without the need to manage the actual properties themselves.
Check out our Streitwise review to see if this investment platform is the right fit for you.
In This Article:
What is Streitwise?
Based in Los Angeles, California, Streitwise started in 2017 and sponsors REITs for investment by individual investors. The company only has non-publicly traded REITs, so it’s different from other companies who operate as a real estate crowdfunding platform–there are a few advantages such as spreading your investment dollars over more properties.
Streitwise’s REIT is technically an equity REIT, so that means you earn dividends from the net cash flow from rental income and you’ll also be privy to a share of the capital appreciation from the underlying properties.
How Does Streitwise Work?
Each of Streitwise’s investments are within the REIT and directly owned by it. In other words, you have ownership of the properties the REIT owns once you own a share of it. You’ll earn dividends that are paid on a quarterly basis. Plus, don’t forget you earn potential appreciation of the properties.
Streitwise vets their properties using their high standards to make sure they’re viable investments. To minimize the risk of individual investments, Streitwise chooses properties with the most creditworthy tenants and limits each target leverage from 40% to 60% of the fair market value or the greater of cost of the property.
Other characteristics Streitwise looks for include:
- Buildings with high-quality construction
- Properties that are in proximity to established industries and/or employers, transportation options and other amenities
- A history of occupancy that is sustainable and has the ability to outperform the market
- Properties that are in moderately-priced markets offering higher dividend yields, such as ones that aren’t in high priced areas
Remember, even with all this research and risk management, there is the potential to lose part or all of your investment. That means Streitwise REITs could see downsides, such as current events, disruptions in the economy, inability to get sound investments and cash flow reductions. However, this is typical with any type of investment.
Streitwise charges a 3% upfront fee of your investment, plus a 2% annual management fee of your investment afterward. Aside from that, there are no commission fees or hidden fees.
Is Streitwise Only For Accredited Investors?
Many real estate crowdfunding platforms only allow accredited investors to open an account. That means you need to have at least a million dollars net worth (aside from the equity in your primary residence) and earn at least $200,000 as an individual each year, or at least $300,000 if you’re married–this needs to be in the past two current years.
The good news is that Streitwise offers REITs for nonaccredited investors (though accredited ones can absolutely invest as well) but there are some restrictions. You can’t invest more than 10% of your income (individual or joint) from the two most current years. That, or it can’t be more than 10% of your net worth (again, individual or net worth), not including your primary residence.
That means if you don’t want those limits, you’ll probably need to be an accredited investor.
Types of Investments
Streitwise REITs hold investments until the management believes it’s reached the optimum value of the company’s expected life–essentially, when it doesn’t feel like it’ll offer a consistent amount of ROI. In this case, Streitwise will consider selling the property and distribute profits to shareholders or use the proceeds to invest in another property that has the potential to generate a higher return overall.
Typically, this process takes about 10 years per investment.
Features and Benefits
Here are some things you’ll want to know before deciding to open an account with Streitwise:
- Minimum initial investment – Starts at $5,000, then you can increase it in $500 increments.
- Types of accounts – Individual accounts, self-directed IRAs and trusts. These cannot be institutional accounts.
- Taxes – You can deduct up to 20% of your dividends from your taxable income since you’re investing in a REIT. Plus, you may be able to reduce the REIT’s taxable income by its depreciation expense.
- Reinvestment – You can reinvest your dividends if you enroll in DRIP, or the dividend reinvestment plan.
- Liquidity – Your investment liquidity is limited. For the first year, you won’t be able to liquidate your investment and only on a quarterly basis afterward. This is done through the Stockholder Redemption Plan and the specifics will depend on the type of investment you have. There is no guarantee of stock redemption.
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Is It a Good Idea to Invest With Streitwise?
As with all investments, there are risks with investing with Streitwise. However, if you are an informed investor and understand the risks and are willing to take them on, then by all means it’s worth considering. If you think about it, the company has advertised consistent high-yield returns, plus you have the opportunity to participate in capital appreciation.
For nonaccredited investors who don’t have a lot to spare, the $5,000 minimum is a substantial amount to get started in investing in commercial real estate. Plus, the way Streitwise vets its properties offers investors fairly low risk while paying out higher potential returns. That is, if you’re ok with not having an investment vehicle that doesn’t offer as much liquidity.