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Ever since the JOBS Act made online crowdfunding possible in 2012, new platforms offering attractive real estate investment opportunities for accredited investors have popped up. One of the big players is Origin Investments.
If you’re interested in crowdfunding investments in real estate, our Origin Investments review has you covered. Here’s everything you need to know to make a smart investment decision.
About Origin Investments
Origin Investments is a Chicago-based real estate investment company. Founders David Scherer and Michael Episcope established the firm in 2007. Today, the company has executed more than $1 billion in real estate transactions. The firm has experienced zero losses across all its realized assets and has produced strong investment returns for its first two funds.
Origin buys, runs and develops multifamily properties. Before the JOBS Acts, commercial real estate funds were unable to market to the public. Due in part to the JOBS Act, Origin Investments transformed from a traditional real estate investment firm to a tech platform. Origin’s commercial properties reside in 11 of the fastest-growing U.S. markets, including:
What makes Origin unique is that it’s a real estate company first and foremost that leverages crowdfunding and digital technology so more people can invest. It strives to purchase, operate and develop income-generating real estate that appreciates through renovations, operation upgrades and other efforts to boost value.
Origin Investments Features
Investors have a lot of choices when it comes to private real estate investing. If you choose Origin, you should make sure that your preferences and goals align with its platform. Here are some of Origin’s key features:
- Minimum Investment: $50,000
- Time Commitment: 5 years
- Account Fees: 1.25% per year
- Offerings: Equity and Preferred Equity
- Property Types: Commercial and Residential
- Accreditation Required: Yes
- Private REITs: Yes
- Self-Directed IRA: Yes
- Pre-Vetted: Yes
- Pre-Funded: Yes
- 1031 Exchange: No
- Secondary Market: No
- Mobile App: No
Origin has completed two funds that netted investors an average of 30% gross IRR weighted across 21 realized deals since 2014. The company recently finished raising $151 million for Origin Fund III. At the time of publication, Origin has two open funds available for investment: the QOZ Fund and Origin IncomePlus Fund.
The QOZ Fund invests in multifamily ground-up development projects in fast-growing markets. The Fund includes multifamily residences such as the Union at Roosevelt in Phoenix, the NoDa Greenway in Charlotte, and the Pilsen Gateway in Chicago. The diversified projects spread investors’ risks across different geographic areas.
The QOZ Fund projects robust returns, even before investors factor in the opportunity zone-specific tax benefits. The Origin QOZ Fund invests in Class A multifamily properties to ensure consistent cash flow. The firm estimates that investors will increase their after-tax earnings on real estate by as much as 75% versus comparable investments. For example, if you were to invest a million dollars in the QOZ Fund over ten years with deferred taxes on the original capital gains, you would likely receive back nearly $2.3 million. The same investment in a non-QOZ Fund would only net you just over $1.6 million.
The QOZ program, which stands for Qualified Opportunity Zone program, came out of the Tax Cuts and Jobs Act of 2017. It provides an incentive for investors to target real estate development in economically disparate areas. The act offers significant tax benefits that Origin passes on to investors who roll over their taxable capital gains into the QOZ Fund.
The tax benefits of the Qualified Opportunity Zone program include deferment of capital gains tax from a previous investment until 2026, reduction of capital gains taxes by up to 10% if invested in the year 2020 and paying $0 on capital gains earned by the QOZ Fund if held for at least ten years. The tax and social incentives make the QOZ Fund an investment that’s equally rewarding and transformational.
Origin IncomePlus Fund
The Origin IncomePlus Fund offers accredited investors the means to earn a stable and passive income that appreciates with time. It targets properties across all 11 of Origin’s target markets. Some of the multifamily assets include Aspire of Westminster in suburban Denver and Anatole at Westinghouse in suburban Austin.
Returns on investment are inherently speculative. That said, the Origin IncomePlus Fund’s goal is to deliver an 8-10% annualized return, inclusive of a 6% annual distribution yield. Investors have the option to withdraw that hard-earned income or reinvest it into new funds.
The Origin IncomePlus Fund provides a relatively safe and stable way to grow wealth. As of June 2020, the IncomePlus Fund had a 6.5% distribution yield. In comparison, a U.S. 10-Year Treasury Note only appreciated 0.68% in that same time, while investment-grade bonds grew 2.41%.
Learn More: Beginner’s Guide to Real Estate Investing
Fees and Account Minimums
Origin’s fees aren’t the highest, but they’re not the lowest. The amount you pay varies based on your investment amount. Most people can expect to pay:
- A one-time administrative fee of up to 2%, depending on the amount invested
- A 1.25% annual recurring asset management fee based on your net asset value
- A 0.5% acquisition fee for new real estate projects, based on the asset purchase price
- A performance incentive fee of 10% after 6.0% preferred return (50/50 catchup) for the IncomePlus Fund and 15% after 7% preferred return (50/50 catch up) for the QOZ Fund
The performance fees only apply if the fund hits certain thresholds. The IncomePlus Fund must reach a 6% profitability for investors, while the QOZ Fund must reach 7%. The system helps align asset managers’ goals with those of investors.
Origin offers a reasonable fee structure, especially for fund-based firms. These platforms tend to have higher acquisition fees, which incentivize asset managers to find investment-grade properties. The performance fees are on par with those of competing firms.
Origin is only available to accredited investors. Investors must commit at least $50,000 to the QOZ Fund or $100,000 to the IncomePlus Fund.
Signing up on Origin only takes a few moments. You select whether you’re an individual investor or a financial professional before filling out some basic information. Origin will ask about your net worth, investment goals, and accreditation.
Once you create your account, Origin will show you current private real estate investment opportunities. The investments come with short summaries about the property and how much you need to commit to the project. You can schedule a call with an associate or indicate interest online.
Anytime you deal with large sums of money, it’s nice to know that it will stay in good hands. Origin protects your capital and information from unauthorized access. Its website explains how it stays up-to-date on security and follows best practices.
All external traffic between investors and Origin’s website goes over a 2048-bit SSL connection. The company also encrypts traffic, passwords, and other sensitive information via SSH. Its Origin Investor Portal uses Extended Validation certificates, which are the gold standard for authentication.
Once you log into Origin, your data remains secure. The website uses Amazon Web Services for cloud computing services and further certifications. AWS receives an annual SOC 1 audit and has other clients, such as the U.S. federal government and the Department of Defense.
Origin makes it easy to get in touch with customer service. The company takes pride in a personalized approach where you can talk with real investment associates. When you create your account, Origin connects you with an account manager, with whom you can schedule one-on-one calls.
You can also reach an Origin representative through its online messaging system and phone at (800) 628-8008. The company even offers a variety of educational resources for investors interested in learning more about the industry. Some of its latest webinars cover “How to Pick the Best Markets for Real Estate Investing” and “How to Decide When to Sell a Property.”
Pros & Cons
Strong Track Record — Origin has earned a 30% average gross IRR across 21 realized deals since 2014.
Founder’s Commitment — The founders committed $56 million out of their own pockets to Origin’s funds
Low Risk — Real estate has a reliable record as a low-risk investment.
Attractive Incentives — Origin only takes its cut when the fund reaches a specific profitability level.
Industry Expertise — Origin’s founders and associates have decades of commercial real estate experience.
High Investment Minimum — The QOZ Fund has a minimum investment of $50,000, while the Origin IncomePlus Fund requires at least $100,000.
Limited Fund Availability — The QOZ Fund and Origin IncomePlus Fund are the only two options available to investors. Fund III closed in June 2017.
Illiquid Assets — Real estate, by its nature, is an illiquid asset, so if you invest in Origin, you must be willing to let your money sit for a few years.
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CrowdStreet caters to clients who want to invest in commercial real estate for the long term. The platform connects investors with project developers across the U.S. The minimum investment for projects varies, though it usually falls between $25,000 and $100,000.
CrowdStreet lets you invest in two ways. You can select individual projects if you want to interact with the developers directly or purchase CrowdStreet funds, which contain a mixture of real estate assets. The platform appeals to accredited investors and people willing to let their money grow for a long time.
Fundrise is an online investment platform that lets everyday people invest in real estate. The company primarily offers real estate investment trusts (REITs). Users can buy into residential and commercial properties, even if they’re not accredited investors.
Investors buy shares of the REITs, which Fundrise mixes into its portfolio. It currently offers four different options, including Starter, Supplemental Income, Balanced Investing, and Long-Term Growth. People interested in purchasing shares in additional properties can check out the Advanced and Premium accounts.
Related: Fundrise vs. RealtyMogul
RealtyMogul is an online commercial real estate platform for accredited and non-accredited investors. It allows users to select from REITs and joint venture equity investments. RealtyMogul has a minimum investment of $5,000, which may dissuade average investors.
RealtyMogul currently has 190,000 registered members who, collectively, have earned $136 million to date. The company has also invested $2 billion in private properties. The investment platform favors individuals looking to diversify their portfolios in hopes of higher rates of return.
Learn More: Best Crowdfunding Sites for Real Estate
Is It Safe?
Origin is a safe and legitimate investment platform. It has several factors going for it that make it safer than other crowdfunded real estate investing options. Those factors include:
- Origin invests in multifamily residential real estate, which has a long track record of high demand and recession resistance.
- The average leverage goal is 60% to 65% loan-to-value, which falls into a moderately safe risk level.
- Origin diversifies real estate portfolios to limit investor risk.
- Founders David Scherer and Michael Episcope have already invested $56 million of their own money in Origin Funds, showing a commitment to the company’s mission.
From the outside, Origin appears to be a sound investment. It aligns with investor goals, working with them to provide a profitable return. You can think of Origin as one of the safest crowdfunded real estate investing platforms.
Origin Investments appeals to a particular type of investor. Its $50,000 minimum investment quickly eliminates non-accredited individuals. The company has a strong track record of profitable investments, so it deserves a look if you have immediate capital.
Ask yourself a few questions before you invest in Origin Investments. Are you willing to let your money grow for at least five years? Do you want to invest in multifamily residential real estate? Are you ready to let other people pick the properties that your money will purchase and operate? If you said yes to all these questions, Origin merits your consideration.