fractional real estate investing - Concreit review

Ever wish you could invest in real estate without committing money for years at a time?

If so, newcomer Concreit is for you.

Unlike most real estate crowdfunding platforms, Concreit lets you pull out your money at virtually any time. And no, they don’t ding your principal investment with fees.

But the differences don’t end there. Here’s what you need to know before investing in Concreit.

 

Concreit at a Glance

Minimum Investment: $1

Prospective Returns: 5.5% annual dividend (net of fees)

Fees:

    • Withdrawal Fee: 0.1% for ACH
    • Early Withdrawal Fee: 0% of principal, 20% of dividend in Year 1
    • Annual Asset Management Fee: 1% of balance (accounted for in the dividend yield)

My Take: Concreit offers better liquidity than any other real estate crowdfunding investment, hands down. But the 5.5% dividend yield looks modest compared to Concreit’s competitors offering longer-term investments.

 

Concreit Review: Key Features

Founded in Seattle in late 2018 by Jordan Levy and Sean Hsieh, Concreit lets you invest money in a pooled real estate fund through their mobile app. It’s an entirely passive investment, requiring no work on your part.

But before you invest, make sure you understand exactly how Concreit works.

 

Fractional Real Estate Investing in Loans

Concreit owns and manages a pooled fund of real estate-secured loans. As of April 2022, Concreit’s fund owns over 150 loans across the US, the majority of which are secured against properties in the Pacific Northwest.

But these loans aren’t your typical home mortgages, or even rental property loans. Concreit invests mostly in short-term loans, including:

    • New construction projects
    • Refinance and bridge loans
    • Light renovation loans
    • Heavy rehabilitation loans

In other words, much of their portfolio consists of hard money loans, usually purchase-rehab loans. Think of your investment as fractional real estate investing in these secured loans.

Because these loans have such short terms, it keeps Concreit’s turnover rapid, allowing them to offer such easy liquidity.

 

Liquidity

You can request to redeem your shares in Concreit’s fund at any time. In most cases, that means your money transfer starts almost immediately, and the cash hits your checking account within a week.

No other real estate investment allows this kind of liquidity. After all, real estate is inherently a long-term, illiquid investment.

Still, Concreit can’t guarantee a timeframe for redemptions. In rare circumstances, they may not have enough cash in their reserve to cover your withdrawal, for example if many people request redemptions all at the same time.

That’s important to remember, as you compare Concreit’s high yield to other liquid options for storing cash, such as high-yield savings accounts. Also, note that Concreit is an investment, not an FDIC-insured bank account.

 

Returns

Concreit pays a fixed 5.5% annual dividend, in weekly increments. 

While it’s theoretically possible that the share price — AKA net asset value or NAV — could go up in value, Concreit intentionally sets the share price at $1 to keep it simple. That fixes the minimum investment at $1: accessible for any budget, although an investment of only $1 means collecting fractions of a penny each week in dividends.

So, the 5.5% dividend is effectively the only return. Don’t count on appreciation. 

But the weekly dividend distributions mean your investment compounds weekly, which is uncommonly rare and boosts your compounding returns.

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Fees

Concreit charges a 1% annual asset management fee, although that’s already taken into account in the 5.5% dividend yield. If you invest $1,000, you can expect to earn $55 in dividends over the course of a year, net of fees.

However, Concreit does hit you with a 0.1% withdrawal fee, allegedly for the ACH transfer. But as a software provider which offers rent collection by ACH, I know well that ACH transfers don’t cost an arm and a leg, so Concreit comes out ahead here.

Fortunately, Concreit continues to waive this fee, and has never actually charged it to a single investor.

Concreit does charge an early withdrawal fee if you redeem shares within a year of investing. They charge you 20% of your dividend yield over the last year, but don’t hit your principal investment with a fee. So, if you invest $1,000 and leave it invested for just shy of a year before withdrawing it, your $55 dividend yield would drop to $44. You’d get back your $1,000 principal investment, and walk away with $44 in dividends — 20% less than the official 5.5% dividend yield.

 

Referral Rewards for Dividend Bonus

If you refer other investors to Concreit, you can earn up to another 1% per year in additional dividend yield, for a maximum yield of 6.5%.

Each referred customer adds $10 to your dividend rewards balance. You usually receive that bonus as part of your next weekly dividend, assuming Concreit has the liquid funds available.

While it caps at 1% extra in dividends each year, your dividend rewards balance carries forward to the next year. You then start receiving extra dividend payments starting in January the following year.

 

Mobile Investing Platform

There is exactly one way to create an account and invest with Concreit: through their mobile app.

It’s a polished, user-friendly app, to be sure. It includes a live chat feature, a breakdown of the underlying loan investments, and links to dozens of educational articles.

But not everyone likes investing over their mobile phone, and anyone who prefers a desktop portal will be disappointed.

 

Advantages of Concreit

There’s a lot to like about Concreit.

Here are a few upsides worth noting, as you consider investing with them.

    • Strong Liquidity: You can request to withdraw your money at any time, with no penalty on your principal investment. While Concreit can’t legally guarantee a timeframe for withdrawals, you can pull out your money virtually anytime.
    • No Minimum Investment: Technically, the minimum investment is $1. But that’s low enough to count as “none” in my book.
    • Retail Investors Allowed: Any US citizen over 18 can invest in Concreit; you don’t need to be an accredited investor.
    • Strong Dividend: A 5.5% dividend yield, paid out weekly, is better than nearly any stock on the S&P 500.
    • Risk Mitigation: With its portfolio of short-term loans secured against real property, spread over the US, Concreit intentionally seeks out low-risk loans with high LTVs.
    • Automated Investing: Not only can you set up automated recurring transfers to your Concreit account, you can also select to reinvest dividends automatically.
    • Polished Mobile App: Concreit’s mobile app is intuitive and easy to use, including all the features you’d want to see.
    • Referral Rewards: Earn $10 for each referral, with a maximum payout of an extra 1% of your account balance each year.

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We compare several buy-and-rehab lenders and several long-term landlord loans on LTV, interest rates, closing costs, income requirements and more.

Downsides of Concreit

Every investment comes with its share of disadvantages. As you explore Concreit, make sure you understand these drawbacks.

    • Moderate Returns: With a fixed 5.5% dividend payout and virtually no room for appreciation, Concreit’s returns match their moderate risk level.
    • Only One Fund Option: Concreit offers exactly one investment option: their pooled fund of loans. You can’t customize your portfolio in any way.
    • Early Withdrawal Fee: While far smaller than competitors’ early withdrawal fees, Concreit still dings your dividend if you pull out money in the first year.
    • No Desktop Option: Not every investor likes managing their money on mobile. Anyone who prefers a desktop login will be disappointed.

 

How Concreit Compares

Wondering how Concreit stacks up to other real estate crowdfunding platforms?

While Concreit positions itself as an alternative to savings accounts, it doesn’t offer FDIC-insured bank accounts — it offers a real estate crowdfunding investment. Here’s how it compares to competitors in the space:

 ConcreitFundriseStreitwiseGroundfloorArrived Homes
Min. Investment$1 $10$5,000 $10$100
Investment FormatPooled FundPooled Funds & REITsREITLoansFractional Ownership in Rentals
Real Estate TypeResidential (Hard Money Loans)Residential & CommercialCommercial (Office Space)Residential (Hard Money Loans)Single-Family Rentals
Dividend Freq.WeeklyQuarterlyQuarterlyN/AQuarterly
Dividend Yield Last Year5.5%2.9%-5.0%8.4%N/AJust Launched
Total Return Last Year5.5%18.0%-25.1%8.4%9.9%Just Launched
Hold Time w/o Principal PenaltyNone5 Years5 Years3-18 months5 Years
Year Launched20212012201720132021
Brian Invests PersonallyYesYesYesYesYes
Learn MoreConcreitFundriseStreitwiseGroundfloorArrived Homes

 

Is Concreit a Good Investment?

I invest in Concreit personally, so I clearly believe it is.

Concreit fills a different niche than “competing” crowdfunding platforms. Rather than offering high potential upside returns for long-term investments, it offers solid passive income for short- and medium-term investing.

That’s extremely useful, especially for real estate investors. I don’t always know when my next real estate deal will come along, but I need cash set aside to act quickly when it does. That investing capital has mostly sat in my savings account, losing money to inflation.

Concreit offers an alternative place to store that capital, with a decent return. I earn a 5.5% dividend, and can pull out the cash when I need it.

A 5.5% dividend also proves useful for retirees. Investors reaching financial independence and early retirement can use ongoing passive income, in addition to their growth-oriented investments. Sure, the average historical stock market return might is over 10%, but stocks are too volatile to count on for paying your bills each month.

And hey, if you’re earning a 5.5% dividend, you don’t need to worry about withdrawal rates or the 4% Rule for that portion of your nest egg!

So while Concreit is a real estate crowdfunding investment, it doesn’t only work for long-term fractional real estate investing like other crowdfunding platforms. I personally use it as a short- and medium-term holding place for other investing capital, where it helps protect against inflation and provide passive income.

 

Have you tried out Concreit or other real estate crowdfunding platforms? What are your questions or concerns about them?

 

 

More Real Estate Investing Reads:

About the Author

G. Brian Davis is a landlord, real estate investor, and co-founder of SparkRental. His mission: to help 5,000 people reach financial independence by replacing their 9-5 jobs with rental income. If you want to be one of them, join Brian, Deni, and guest Scott Hoefler for a free masterclass on how Scott ditched his day job in under five years.

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