I recently had lunch with Jilliene Helman, co-founder and CEO of RealtyMogul. I was struck by her dedication to building a sustainable business rather than chasing every real estate deal for growth. This conversation led me to explore how RealtyMogul conducts due diligence on their investments, especially post-COVID, when strong due diligence has become even more crucial.
Currently, I’m evaluating various platforms as my investments begin to mature and payouts are expected. I’m particularly interested in how real estate crowdfunding platforms, like RealtyMogul, vet their deals.
RealtyMogul, established after the 2012 JOBS Act, has refined its due diligence process over the years, learning from past investments. The process begins with a fundamental assessment: Is the market viable? Do we trust the operating partner? Is the property promising? Most deals don’t make it past this stage.
For those that do, a dedicated due diligence team takes over, employing what we call “zero-based underwriting.” This means we disregard initial financial models provided by partners and start from scratch. We build our projections using data from major commercial real estate analytics firms, CoStar and Axiometrics, and scrutinize everything from expenses to potential new revenue streams like parking or laundry services.
The financial scrutiny is just one part of our comprehensive evaluation. We delve deep into market trends, vacancy rates, and employment stability to understand the sustainability of the rents our tenants pay. A thorough review of our operating partners is also critical. We assess their track record, financial stability, and even run background checks to ensure there are no red flags.
Once our team is satisfied, the deal goes to our investment committee, led by me and our Chief Investment Officer, Chris Fraley, a veteran with over 20 years in commercial real estate. If the committee tentatively approves a deal, we then conduct a site visit—RealtyMogul insists on physically inspecting each property, differentiating us from some competitors. You can’t fully understand a property’s nuances from just spreadsheets and documents.
If a property passes this extensive scrutiny, only then is it listed on our platform for members to invest in. Our goal is to ensure that each investment we approve is capable of delivering strong, risk-adjusted returns. Despite our efforts, not all investments meet their projections, but we strive to manage them actively to steer them back on track whenever feasible.
Investor protection is our utmost priority at RealtyMogul. Our rigorous due diligence process is designed to safeguard our investors and provide them with quality real estate opportunities. We pride ourselves on being accessible to everyone, not just those with deep pockets or insider knowledge.
Join our platform to access carefully vetted commercial real estate investments and be part of our community of informed investors who trust in our thorough due diligence process.
