In this article I’ll take a look and review a rather new and small player in the real estate crowdfunding space: Holdfolio.
We’ll go over what exactly Holdfolio is, how it works and the types of deals they offer. Further we’ll explore what the difference between Holfolio and a REIT is and what might be the better option for you.
I will collect any questions that are relevant to this Holdfolio review and list them at the bottom of this post.
Holdfolio is a crowdfunding real estate investment company located in Indianapolis, IN. The company is fairly new to the crowdfunding game and currently only has a team of two people: Jacob Blackett, CEO and Vanessa Turner, COO.
Holdfolio’s mission is to “create profitable & innovative partnerships through real estate with the purpose of enhancing the lives of our partners & colleagues while strengthening local communities.”
They do this by investing in a lot of local real estate deals (in the mid-west area) and providing investors with a very fair deal structure, often giving more than 80% of all distributions and proceeds back to investors.
How Holdfolio Works
The process in which Holdfolio works is simple: they acquire a multi-family property with all the associate due diligence and financing and subsequently open up the acquisition to investors on their site. Investors then can choose to contribute capital to an LLC holding one investment property and so become a partner in that company.
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Types of Deals You Can Invest In with Holdfolio
Before last year (2019) it was possible to invest in a portfolio of single family homes, thus the name: Holdfolio.
Since then, however, the company has changed course and now solely offers investment opportunities in multi-family properties. As of today only those kind of opportunities are available to investors.
Every now and then Holdfolio will also partner with a third-party to bring deals outside their local areas to investors, such as in Texas or Florida. These offering often differ a bit from the local ones in terms of their investment objectives.
Criteria for investment deals – Holdfolio Review
All investment opportunities require a minimum investment amount. This varies and used to be around 10,000 USD for single home portfolios and has since increased to either 20,000 USD or 25,000 USD for multi-family real estate.
As Holdfolio is a smaller player in this field managing resources becomes more important and thus a minimum investment amount as specified above significantly reduces the administrative burden associated with each offering. On the other, for the average investor this usually means less opportunity to diversify your funds and more risk as a result.
On the plus side, you do not need to be an accredited investor or a U.S. citizen to invest.
NOTE: The easiest way to add diversification to your portfolio is to invest in real estate through Fundrise. You can become private real estate investor without the burden of property management! Check it out here (link to Fundrise).
Holdfolio Sign Up & Dashboard
The sign up process with Holdfolio is fairly simple. All that is required is your basic contact info and a welcome call with Jacob. This is supposedly due to their mission of forming lasting partnerships as well as a preemptive screening of serious investors vs. casual bystanders.
Once signed up…
Once signed up you will have access to Holdfolio’s current investment opportunities. You will also be able to view past opportunities as examples and place reservations on upcoming projects.
The reservation feature allows to place a non-binding reservation and will give you front-line access once the investment becomes available. This means: you’ll be notified first once the investment is available and then you will have 7 days to submit an investment. After that you spot is no longer reserved and can be taken by another investor on a first come first server basis.
Once you’ve actually invested in a property with Holdfolio you will find all your investments on your personal dashboard. The information provided here is quite basic but will give you a decent overview of past and upcoming distributions.
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!
Customer Support & Contact
One of the benefits of investing with a smaller company such as Holdfolio is the closer personal contact you will have with the management. Holdfolio is known to answer questions or investor concerns personally usually within one business day.
No hassle dealing with chat bots or unqualified call center operators.
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Holfolio vs REITs
Although this Holdfolio review does not specifically focus on a comparison to REITs I would be amiss if I did not mention them.
Another investment option you have probably come across when researching real estate investment opportunities are REITs (Real Estate Investment Trusts). With REITs you can invest in a fund of hundreds or thousands of properties and receive monthly or quarterly dividend payments. The advantage here is obvious: even with a fairly small investment you can be very diversified in terms of location and property type.
Holdfolio is not a REIT. By investing with Holdfolio you will become a direct partner in a LLC owning a single multi-family property. Even though this brings with it a higher risk it also has many advantages over a REIT: your overall returns will usually be much higher since you earn a direct profit split as a partner. Furthermore you will receive a K-1 tax form which will allow you to claim paper losses on most properties and thus reduce your tax burden to almost zero in many cases. Of course this last advantage will only really come into play once you have invested a significant amount but it’s never to early to start planning ahead!
Holdfolio Pros & Cons
As discussed above there are plenty of pros and cons when it comes to investing with Holdfolio. Here a quick summary:
- Direct partnership in LLCs
- Profit share of 80%+
- Responsive and professional customer service
- IRR north of 15%
- Tax shield of up to 90% due to paper loss
- No diversification of locations
- Small team (can be a pro as well)
- High minimum investment amount
Conclusion: Should You Invest with Holdfolio?
The decision to invest with Holdfolio will depend mostly on your risk tolerance. Personally for me, the advantages far outweigh the risks. The returns can be double those of a REIT and the tax savings will build up over time.
Yes, diversification is an issue in the short term but over a couple years, investing in different offerings that risk will go down enormously. When investing in real estate a long-term perspective of at least 5 years should be your focus anyhow in my opinion. Anything below that and you will not reap the full benefits of value-adding, increased rents and property appreciation.
Holdfolio Review: FAQs
Do I need to be an accredited investor to invest with Holdfolio?
No. You do not need to be an accredited investor to invest with Holdfolio. This is one of the rare opportunities for unaccredited investors to become partners in a property owning LLC.
Do I need to have experience investing in residential real estate?
Of course, it will be advantageous if you have experience and can use this to perform your own due diligence on every offering. However, this is not must. Nonetheless I would highly recommend getting familiar with the most important concepts of real estate investing such as IRR and other financial metrics.
I get that I’ll be receiving income from the investments. But what happens to my principal?
Your principal will be returned either once the property is sold or refinanced. The time period for this from property to property. Usually this will be between 5-7 years.
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