GI149: Investing in Commercial Real Estate Through Crowdfunding with Jilliene Helman

Jilliene Helman is the Founder and CEO of RealtyMogul, an online marketplace for investors to invest in institutional quality real estate. To date, investors have invested over $750 million, in over $4.1 billion of real estate on the RealtyMogul platform.

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Announcer:
Welcome to the Global Investors Podcast, a show that focuses on helping foreign investors enter the lucrative US real estate market. Host, Charles Carillo, combined decades of real estate investing experience with a professional background in international banking to interview experts in all areas of US real estate investing. Now here’s your host, Charles Carillo.

Charles:
Welcome to another episode of the Global Investors Podcast; I’m your host Charles Carillo. Today we have Jilliene Helman. She is the Founder and CEO of RealtyMogul, an online marketplace for investors to invest in institutional quality real estate. To date, investors have invested over $750 million, in over $4.1 billion of real estate on the RealtyMogul platform. So thank you so much for being on the show, Jilliene.

Jilliene:
Yeah, absolutely. Thanks for having me.

Charles:
So you it’s you have a little different of a background and of a business of most of our guests, but please give us a little bit about your background both personally and professionally prior to founding. T-Mobile

Jilliene:
Sure. I, I grew up in a really entrepreneurial family on the personal side. So we talked about, you know, business at the dinner table. I, I joked that I was in business conversations from, you know, two or three years old when I, when I started being able to, you know, talk. And I ended up going to business school at Georgetown, out in DC, and then coming out of there, I went to work for a bank, actually, a Japanese bank bank of Tokyo Mitsubishi, which was headquartered in Tokyo and then had operations here in the us. There were a couple of banks that they’d acquired. And one of the areas that I worked at the bank was in wealth management. And one of the themes that we saw being in wealth management was that our wealthiest clients were real estate investors. So in addition to growing up in an entrepreneurial family, I also grew up in family that had a lot of experience and interest in real estate.

Jilliene:
So if my grandfather had built a, an apartment building in Los Angeles, my mother was in the like luxury residential markets and my father owned commercial and office really industrial. They had warehouses where he was importing goods from China and, and other countries. And so kind of grew up in a real estate family, grew up in a very entrepreneurial family coming outta wealth management. I saw that our real wealthiest investors and our wealthiest clients were real estate investors. So really wanted to pair sort of this love of real estate with this love of helping people to meet their dreams and sort of accomplish their goals in life. And, and that’s really the inception story behind Realty mogul and, and sort of how I got here from kind of the intersection of my, my life and, and the intersection of my professional life. You know, I was the, the dorky geeky kid who loved rich dad, poor dad, you know, and that’s what you’d find me, you know, reading at bed in bed at 9, 10, 11 years old. So I’ve always been interested in, in how you invest and what the best investments are and, and how to go about sort of crafting a portfolio to help secure one’s financial future.

Charles:
Interesting. So can you explain a little bit about crowdfunding just over, just in kind of an over basis of what, of what it is and how it involved since the jobs act? I believe it was that really opened the door for it.

Jilliene:
Sure. So crowdfunding is just a fancy word for syndication, right? Pooling capital together. This happens to be on the internet. You know, the old syndication was typically at the country club or sort of past the hat, right? Mm-Hmm, <affirmative> where you would investors who are putting in $25,000, $50,000, a hundred thousand dollars a pop to be able to pool that capital together and, and invest in a real estate deal. That’s exactly what crowdfunding is. It’s just a say your name for, for syndication. The inception of sort of digital syndication came about through a piece of legislation called the jobs act. It was passed back in 2012 and it essentially was the first time that the securities laws were changed since the securities act of, you know, 19 33, 19 34. So it’d been a very, very long time since there was an and the securities laws to really account for the internet.

Jilliene:
Right. And it’s sort of hard to believe, you know, the Internet’s now been around for a couple of decades and yet the, the securities laws just hadn’t been adjusted to account for it. And so the most critical piece of that for us at least, was the ability to publicly market private transactions. Mm-Hmm <affirmative>. So historically it was illegal to publicly work at a private transaction and through a new rule called 5 0 60. It was now legal to publicly market private transactions. So long as you jump through a couple of extra hoops and hurdles on the legal side, which, you know, we’ve built a lot of automation around in our business and namely that is doing some type of validation for an investor being an accredited investor. So in the us today, private investments are still limited to accredited investors. That’s typically an investor with a net worth over a million dollars, excluding their primary home or an annual income above $200,000.

Jilliene:
And in the old world, you didn’t have to validate that. So an investor could raise their hand and say, I’m an accredited investor, and you could, you know, trust them in the new world. You have to have some type of validation. So that is either a letter from a CPA, a letter from a licensed attorney, or you can get the tax returns and actually sort of do that math and do that calculation on your own. And that was the biggest piece of the jobs act. I would say that’s impacted our business. In addition, another piece of the jobs act was a new regulation called reggae. Mm. And that allowed you to actually build a public company under a regulation called reggae plus, which is a federal exemption. So historically, if you wanted to have a non-trad public company, meaning a company that’s not traded on a NASDAQ or a New York stock exchange, you would have to go state by state, by state and get approvals from each of those states to sell securities states.

Jilliene:
So I’d have to go to Alaska and Arizona and California, you know, et cetera, et cetera. Mm-Hmm, <affirmative> under reggae plus it’s a federal exemption. So you can just do a notice filing to those states. You don’t actually have to get explicit approval from each state. Obviously you have to follow their laws and you have to be a good actor. And, you know, all of those things are true, but those were the two big changes in the jobs act that impact our business. Today. We’ve got two real estate investment trust or REITs that are offered under reggae plus and then in addition, we do a lot of transactions for accredited investors under reg D 5 0 6 C, where those accredited investors are, then validating their accreditation through one of those third party validation tools.

Charles:
OK. So Realty mogul, as I understand, pretty much like a marketplace where as a sponsor, you can put deals and as an investor, I can find deals. Can you gimme a little bit more in depth of what you provide to both sponsors and investors that wanna utilize your platform?

Jilliene:
Yeah, absolutely. So two sided marketplace, as you mentioned, we’ve got investors on one and we’ve got real estate companies on the other side, and those real estate companies might be called sponsors. It might be called developers. That’s all sort of synonymous for a real estate company. So on the investor side of the platform, you know, we, we strongly believe in empowering our investors and what that means is giving them choice, right? And so we provide them with a lot of different choices that they can invest in. The first choice is do you wanna invest in a single transaction? So do you wanna invest in, you know, a specific apartment building, a specific shopping center, a specific office, building a specific self storage facility, as an example, or do you wanna invest into a diversified pool of properties where you’re making one investment and then there’s a diversified pool of, you know, different properties or different geography.

Jilliene:
So that’s kind of the first choice. The second choice is, you know, what, what type of property do you wanna invest in? We have some investors who will come to the platform and say, I only wanna invest in apartment buildings. We have other investors who will come to the platform and they’ll say, I wanna get diversification. I wanna be in office. I wanna be in apartment. I wanna be in retail. And then there’s geography, right? What geography do you wanna invest in? Some investors wanna invest in their own backyard. So they live and work in Columbus, Ohio, and they’ll invest in a deal on the platform in Columbus, Ohio. Other folks maybe want to get broader diversification. So they live in New York city and they want to invest in Sunbelt, in, you know, Atlanta, or they wanna invest in Florida and Tampa or Miami or wherever it may be.

Jilliene:
So on the investor side, it’s really about empowering them, giving them a lot out a choice, but also doing a first level of curation. So we will do E each investment on the Realto mobile platform meets our minimum due diligence standards and our minimum requirements, because we don’t want investors to be seeing the entire universe of real estate transactions. Good, bad, ugly. Right. And we see a lot of off that. We just, it doesn’t make sense, right. Either the sponsor’s not qualified or the real estate doesn’t make sense, or one of the assumptions doesn’t make sense. So we’ll do sort of that first level of due diligence or that first level of curation for the platform, but then it’s really up to the investor to come to the platform and dig in, right. And we provide a lot of information through the website where they can dig in and, and make a really informed decision for themselves because, you know, investing is very personal.

Jilliene:
One investor may have totally different goals than another investor. And so that’s where we go back to empower the investor, give them a lot of choice. On the other side of the marketplace for real estate companies, for sponsors, for developers, we’re giving them access to all of these investors. So, you know, raising equity cash capital is very, very challenging. And it’s an, it’s a sort of an oxymoron because to grow as a real estate company, you have to be good at it, but that’s actually not the same skillset as being good at operating and running real estate. <Laugh> right. So raising capital tends to be more of a sales activity and owning and operate real estate tends to be more of an introverted details oriented kind of skillset, right? And so we’re trying to bridge that gap where these real estate companies can get access to a wide variety of investors.

Jilliene:
You know, they can do one webinar and they can get that message out broadly across, you know, the database of investors who are signed up for real Tmobile. And, and we also really wanna streamline the process for those real estate investors. So one of the things that we do, that’s a little bit different is we stay on for the life of the transaction as an administrative services company. And what that means is that on behalf of that real estate company, we’re issuing the distributions, we’re distributing the K one is we syndicating all of the reporting and the investors are coming to us after those transactions close to ask different questions. Mm-Hmm, <affirmative> now many times we’ll know the answer to the question just because we’ve got, you know, a deep bench of real estate expertise, but sometimes we won’t and then we’ll aggregate those. And we’ll go to the sponsor, you know, with an aggregated list of questions that we need the answer to do in order to, to share those back within a, after the transaction’s closed. So that’s a really big benefit to those real estate companies who, who may not have the infrastructure to manage, you know, hundreds of individual investors.

Charles:
Interesting. Interesting. So what is Realty mobile looking for in a sponsor? I imagine it’s pretty straightforward. If I’m an investor, I come to your platform, I’m accredited. I, you know, I can tell you what I’m looking for and I find it as a sponsor, I imagine you’re a little bit more discerning on who’s allowed on the platform. So yeah. What do you look for in a plat in a sponsor and and then possibly what are you looking for in the deal after you’ve okayed or vetted this sponsor?

Jilliene:
Yeah. So look in the sponsor, we’re looking for professionals, right? These are not folks who do real estate on the side. This is their full-time prevent, they’re running a company that does this, you know, we’re looking for sponsors that have a track record. We’re looking for sponsors that have, you know, a deep resume of being in commercial real estate. And we’re looking for sponsors who I would say have some level of customization. So what I mean by that is, you know, if they’re apartment investors and they bring a deal to the platform, that’s a retail deal in Florida and all of their investments have been apartments in Atlanta. Yeah. It’s not gonna be something that we’re interested in. Right. So we’re looking for folks who are really specialists either in the type of apartment or in the geography that they’re going after. You know, I don’t have a problem if someone, you know, owns office retail and industrial and all of that is in Tampa, right.

Jilliene:
Like they know that market very well. I’m okay if they cross asset classes, but, you know, typically we’re looking for someone who’s got sort of that specialty of that expertise. Mm-Hmm <affirmative> when we dig into the deal, we’re looking at a lot of things and it depends kind of on the property type. If it’s multifamily, we’re looking for certain things. If it’s retails an example, we’re looking for certain things, but I’d say more generally, we’re looking for a business plan that we think is executable and that we think makes sense. Right. Mm-hmm <affirmative>. And so when I say, and, and there’s always risk, right? Yeah. There’s risk in, in any execution of any real estate business plan, but I’ll give you an example. If we see a deal where it’s a multi-family deal and the real estate company wants to spend, you know, a thousand dollars a unit and thinks that rents are gonna go up $500 a unit we know from experience, that’s probably not gonna happen.

Jilliene:
Now, if they wanna go spend $30,000 a unit or $40,000 a unit, and then they think that they can push rents $500 a unit, and there’s rental comps to support that, that business plan might make sense. Right. And so we’re really looking for those business plans. You know, we’re looking at location. One of the things that makes us a bit different is that we have someone from our company go step foot on the real estate. Okay. So we wanna make sure that property actually exists. We wanna understand the neighborhood, we wanna understand what else is around it. So those are the types of things that we’re looking at at sort of the, the real estate level. After we’ve done a lot of research on the real estate company to make sure that they meet our minimum requirements.

Charles:
Yeah. For a sponsor say that are aspiring and they want to have, get future projects onto Realty mobile. You’ve gone through a lot of it specialize in what you’re doing, you know go full cycle. I imagine on certain deals they can show to you. Is there anything else that you would suggest to a aspiring syndicators to that want get put on Realty, mobile or other crowdfunding platforms that would help them to to be allowed to do that?

Jilliene:
Look at the end of the day, you gotta get deals done, right. And you gotta be good at your craft. That’s the most important beyond that? I would say, you know, have a great reputation, which is, you know, cause by the, the former around, you know, being good at your craft. But I think another one is, is be very professional, be very timely. You know, if there’s a question that comes over, get that response out quickly, you know, you’re working with people, right? And in a lot of these deals, we’re signing up for 5, 7, 10 years that we’re gonna be in business with these real estate companies. And so if we’re having problems, getting timely responses, you know, in initially, like that’s not gonna be good for anybody and that’s gonna, that’s gonna harm their reputation. The other thing I would say is have very professional materials.

Jilliene:
So sometimes sponsors will send us, you know, a one page slick that is not detailed is not well formatted. Doesn’t look nice. And those things matter, you know, like that detail orientation matter, because if you can’t put the time, energy and effort, new mat into your materials, how do we know the you’re gonna put the time, energy and effort into, you know, a unit renovation and that you’re gonna care about, you know, the color scheme and the hardware and that, you know, the unit looks nice and, and that’s, what’s gonna, you know, drive rental rates up. So that attention to detail, you know, that attention to design I think is important. But really at the end of the day, it’s, you know, you, you have to, you have to get deals done and you have to build a, a track record, I think, to be able to use a, a crowdfunding platform.

Charles:
So for passive investors getting onto Realty mobile, and you do a lot of vetting on the sponsors, on the deals, you have someone that steps physically onto the property, which is awesome. I wasn’t aware of that. What type of due diligence do you recommend to investors to perform on deals prior to them investing? Is there something that you suggest them to, to, to do or some sort of I mean, anything like that?

Jilliene:
Yeah. So first and foremost, I think is getting a really clear understanding of where an investor sits on the risk and reward curve, you know, and what’s appropriate for their own personal financial situation. So like putting the deal aside, it’s more, you know, there there’s certain investors who should not be investing in development, right. If you’re looking for current income, if you don’t have a long time horizon, like development is just a bad idea, right. There’s other investors who wanna take, you know, aggressive risk and they’ve got a really long timeline and they don’t need the income well development. It might be a perfectly acceptable, you know, risk reward equation. Yeah. So I think the first step is really figuring out, you know, for you as an individual investor, like what makes sense for your own personal financial situation. And then from there, it’s, it’s digging into the details, right?

Jilliene:
I talked about real estate companies being detail oriented. I think that it’s in investors best interest to be detail or oriented as well, and ask a lot of questions. You know, we require that the real estate companies do a webinar on our platform so that investors can ask questions. Right. And if there’s something you don’t understand, ask a question, if there’s an assumption that you don’t think makes sense, ask the question, right. We get a lot of questions around, you know, you’re acquiring the property to four cap, you’re exiting at a five cap. You know, why do you think that that’s appropriate, right. Is an, an example of just something that might come up or if you don’t understand what a waterfall is, you know, ask what a waterfall is, ask what the difference is between the gross returns and the net returns, make sure you understand the fees and the compensation of that real estate company.

Jilliene:
And also, you know, ask questions about the market or the location. I mean, we’ve done transactions where we think the business plan makes sense, but they might be in high crime areas, right. That’s gonna create added risk. That’s gonna create added execution risk. So, you know, ask questions about that, make sure you’re comfortable with that. I think it’s look for the problems in the deal, right? It’s very easy to convince ourselves that deals are great, right? And so I’d say to investors have a more skeptical outlook, you know, look for the problems in the transaction, and sometimes you’re gonna overcome them and you’re gonna comfortable with, you know, the mitigates to those risks. And other times you’re not, and you’re gonna say this just, isn’t a, a deal. That’s a fit for me. And I’d rather take a lower return and invest in something that’s a little bit more core, has a little bit less risk. But I think that, you know, being detail oriented, digging in deep you know, and asking a lot of questions.

Charles:
Yeah. One thing you mentioned too, is on the time horizon, that’s a big thing for investors because they might say, well, the last sponsor did the deal in three years. Well, really this is five to seven years that you have to be ready for. It’s not something where you can just bank off if they did this last deal and execute the business plan in 36 months because the market could change and you have to be aware of that. You know what I mean? So that’s one big thing that I’ve seen when speaking to our investors and potential investors about half of our listeners on the show are foreign investors. So does real team mobile allow foreign investors on, into their platform?

Jilliene:
Yeah, we do. Although they come in through a us entity. So what’ll typically happen is if they’ll create a us entity, they’ll get a, you know, typically an LLC they’ll get a, you know, us tax ID number and they’ll invest through that us entity. So we’ve got a number of foreign investors who have done that. We don’t do tax withholding on behalf of foreign investors. So, you know, they need to come in through that us dity you know, with a us tax ID number.

Charles:
Okay. And as we’re wrapping up here, what do you think are some of the main factors that had contributed to your success? Jillian

Jilliene:
Putting one foot in front of the other every single day, you know, I mean, there’s, there’s no secret, there’s no shortcut, you just show up every day and you, you give a hundred percent of what you can give that day. You know, one of my favorite quotes is opportunity dances with those on the dance floor and have to show up, right? Like if you don’t show up, how are you gonna get lucky if you don’t show up, how is that opportunity, you know, gonna arise? You know I think too, just being prepared, right. Fortune, I think, I think benefits the prepared and, and allows you to have opportunities and seize those opportunities if you’re prepared and if you’re ready, but, but you know, there’s no secret, just show up every day, put in a hundred percent of what you can give, you know, that day and that’s, and that’s good enough and show up the next day and do it again.

Charles:
Yeah. That’s why days say showing ups half the battle how can our listeners learn more about you and your business?

Jilliene:
So go to real T-Mobile dot com. It’s free to create a user account. You can start looking at deals, there’s no obligation, so you can just start learning. We, we have a lot of investors who will come in our platform and learn and listen to the webinar. And I, I love that. I love being a platform where people can get educated. And if you wanna find me I’m on LinkedIn, Jillian Hellman, and feel free to ping me and let me know that you heard me on the podcast and be happy to connect.

Charles:
Awesome. Well, thank you so much for coming on and looking forward to connecting with you in the near future.

Jilliene:
Likewise, thanks so much.

Charles:
Bye bye.

Charles:
Hi guys! It’s Charles from the Global Investors Podcast. I hope you enjoyed the show. If you’re interested in get involved with real estate, but you don’t know where to begin, set up a free 30 minute strategy call with me at schedulecharles.com. That’s schedulecharles.com. Thank you.

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Announcer:
Nothing in this episode should be considered specific, personal or professional advice. Any investment opportunities mentioned on this podcast are limited to accredited investors. Any investments will only be made with proper disclosure, subscription documentation, and are subject to all applicable laws. Please consult an appropriate tax legal, real estate, financial or business professional for individualized advice. Opinions of guests are their own information is not guaranteed. All investment strategies have the potential for profit or loss. The host is operating on behalf of Syndication Superstar, LLC, exclusively.

Links and Contact Information Mentioned In The Episode:

RealtyMogul

About Jilliene Helman

Jilliene Helman is the Founder and CEO of RealtyMogul, a digital Platform for investors to invest in vetted real estate deals.

Founded in 2012, RealtyMogul is ranked the best one-stop shop for real estate crowdfunding by Motley Fool. As of November 30, 2021, RealtyMogul members have collectively invested over $750 million into $4.1 billion of real estate nationwide.

Jilliene has been featured as an expert on startups and real estate alike on Bloomberg, CNBC, The New York Times, Yahoo! Finance and Entrepreneur.

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