Holdfolio is not one of the lesser-known real estate crowdfunding platforms out there. They have gained a lot of traction in the past few years, acquiring more and more multi-family properties in the south-eastern market. But why might Holdfolio be a bad choice?
Overall, Holdfolio’s team is less experienced than that of similar real estate syndicators. Although Holdfolio frequently works with more experienced sponsors, they have little to no control over the sponsors’ actions which can potentially lead to delays and mismanagement.
In this article, we’ll first and foremost look at why Holdfolio is a bad choice to invest your money. However, I can’t mention the bad without also giving credit to Holdfolio’s good sides. Finally, I’ll give a quick comparison of two other real estate crowdfunding services.
What makes Holdfolio bad?
Before getting into the downsides of investing with Holdfolio, let me just say I have personally invested with Holdfolio and that my experience has been overall positive. If you’d like to read more about my investment experience, check out my complete Holdfolio review.
Why Holdfolio is bad:
- Changing Team: While Jacob Blackett – one of two managing partners – has been in the real estate game for quite a while the rest of the team has been changing. One of the previous managing partners – Sterling White – left the company a few years back without notice. There has been little to no communication with investors regarding these staff changes.
- No Control over Sponsors: More and more deals are not managed directly by the Holdfolio team. While early on Holdfolio was hands-on acquiring and managing deals they have transitioned to partnering with third-party sponsors. While these sponsors typically have a good track record in real estate, Holdfolio has very little control over how the property is managed and when it is sold.
- Delays and Mismanagement: Due to mismanagement by sponsors there have been several delays – as in the case of the Cobble Hill project – in getting properties up to market standard, increasing rents, and selling the asset. To be fair, with the properties that are managed exclusively by Holdfolio every is going very smoothly.
Some of the above points are based on objective views but most stem from my personal investment experience with Holdfolio over the past 4 years. My main concern remains that Holdfolio outsources property acquisition and management too much to third parties in order to increase their deal flow.
This outsourcing may lead to more investor deals but the quality of management and investor communication also suffers in the process. Nonetheless, there is also a lot of upside to be had when investing with Holdfolio which I will go over next!
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Why Holdfolio is good
I like to give credit where credit’s due and my investment with Holdfolio have overall progressed very nicely. While some things may have slightly changed for the worse within the company here are some of the reasons I decided to invest with Holdfolio in the first place:
- Excellent Returns: First and foremost, Holdfolio offers some of the best returns out there. Cash-on-cash returns are typically upwards of 6-7% with an internal rate of return (IRR) of 15%+. In fact, the average IRR achieved by Holdfolio over the past 5 years was 19%+.
- Fair Profit Split: One of the reasons for the excellent returns is the advantageous profit split between management and investors. While typical real estate syndicators offer splits of 65/35 or 70/30, Holdfolio operates frequently with an 80/20 or even 85/15 profit split. This means that over 80% of profits go directly to investors.
- Knowledge of Real Estate Market: Even though the team at Holdfolio has changed, their approach and commitment to multi-family real estate have never wavered. Holdfolio mostly targets the south and the south-eastern United States to find deals for instance in Texas, Florida, or South Carolina. Locations where job and population growth remain strong.
- Transparent Communication: A big plus for Holdfolio is their open and transparent communication style with investors. While this can sometimes be a problem with third-party sponsors, Holdfolio themselves have always communicated the positive as well as the negative developments of each property.
- Less Marketing & Hype: Believe it or not, I originally also decided to invest with Holdfolio simply because they seemed to spend less time marketing their product than actually executing (looking at you Grant Cardone). I appreciated their down-to-earth approach to real estate investing which ties in with the honest communication mentioned above.
As you’ve probably guessed by now there are more things I like about Holdfolio than things I don’t. However, with every investment, it is important to be aware both of the pros and the cons which is why I tried to cover both sides appropriately.
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Holdfolio vs. other real estate syndicators
Overall, I believe that Holdfolio still offers incredible upside when it comes to multi-family real estate investments. One of the points which is not really a negative per se but which might prevent some investors from accessing these deals is their relatively high investment minimum. Most of their deals start with a minimum investment of $20,000 or $25,000.
In addition to the high minimum investment, the money will be definitely locked away for the duration of the deal, i.e. until the property is sold. While the timeline for most properties tends to be 3-5 years it may end up being longer depending on market conditions.
If you are looking for something slightly less long-term and with a lower minimum commitment I’d recommend that you take a look at something like Fundrise (link below).
FYI: Another great way to get exposure to the real estate sector is by investing in real estate debt. Groundfloor offers fantastic short-term, high-yield bonds that can add diversification to your portfolio!
Holdfolio’s team has been changing and there have been some problems and delays in bringing properties to market due to mismanagement by third-party sponsors. The high minimum investment and the illiquidity of the investment may be a turn-off for some investors.
However, once you get past that barrier the pros far outweigh the cons in my opinion. Holdfolio has an excellent track record of providing high returns and communicating clearly and openly with investors. Overall, I’ve been very happy with my investments with Holdfolio and plan to partner with them again in the future.
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