Make investments In Business Actual Property With $250

What Is LEX Markets?

LEX Markets is an actual property securities market that was based in 2017. For buyers, LEX offers simpler entry to particular person industrial actual property offers to assist diversify their portfolios. And for property house owners, it offers an efficient solution to elevate capital.

At first look, LEX appears similar to many different actual property crowdfunding websites. Nonetheless, it gives particular person industrial actual property alternatives, whereas many rivals provide funds of assorted properties. And since shares begin at $250, it has a decrease barrier to entry than some platforms that cost $5,000 to $25,000 or extra for particular person offers.

Moreover, LEX explains how solely about 1% of candidates are literally listed on the platform on account of its rigorous due diligence course of. There’s additionally sure necessities, like a $10 million minimal asset measurement and optimistic money stream historical past, for an providing to get authorised.

How Does LEX Markets Work?

LEX Markets is on the market to any U.S. investor over the age of 18, and there is not any accreditation requirement. When you join, you reply a short questionnaire about your investing targets, danger tolerance, revenue degree, and once you plan on investing.

From there, you’ll be able to view and buy shares for numerous income-generating properties. On the time of writing, LEX has two open properties with a 3rd property coming quickly. The corporate invests in industrial actual property like industrial buildings or multi-family houses. And, extra importantly, buildings are already developed and producing revenue, so you do not have to attend years for a undertaking to really get developed.

Shares begin at $250 upon property “IPO” however can then fluctuate primarily based on provide and demand. And one distinctive facet is that it securitizes belongings in order that shares commerce identical to you’d commerce shares of a REIT or inventory. It has its personal buying and selling platform, the LEX Alternate Buying and selling System (ATS), that is constructed with NASDAQ buying and selling know-how to permit day by day buying and selling.

While you buy shares, you’ll be able to see a breakdown of the property’s loan-to-value ratio, implied valuation, 30-day buying and selling quantity, and declared distributions.

As you’ll be able to see within the buy-order display above, LEX’s platform features extra like an on-line dealer than crowdfunding corporations like Arrived Properties or HappyNest do. Nonetheless, the concept is comparable in that it lets buyers purchase shares of income-generating properties.

How do Money Distributions Work?

With LEX Markets, you spend money on industrial actual property that is already producing revenue. That is completely different from some fractional actual property funding platforms that additionally provide residential actual property like single-family houses. Nonetheless, the distribution course of is much like most crowdfunding platforms.

LEX calculates and pays money distributions quarterly. Based on LEX, “Distributions are calculated on the discretion of the property proprietor to permit them flexibility in working the asset. There isn’t a established formulation however the distributions are typically derived from the online money flows of the constructing after paying present bills and servicing debt funds on the property.”

Nonetheless, if property house owners pay house owners, together with themselves, a money distribution, they need to pay shareholders at an equal charge. Money seems in your brokerage account, and you may then withdraw your funds or spend money on further shares.

One characteristic LEX additionally stresses is that gives are structured as a publicly traded partnership (PTP). This implies solely a few of the revenue is taxed as bizarre revenue. Traders truly obtain a Schedule Okay which is used to report revenue, losses, and dividends for companions in a enterprise or S-Company shareholders. This pass-through taxation is completely different from submitting a Type 1099 many crowdfunding corporations concern.

I have not invested in LEX Markets presently, so I am unable to confirm how issues break down come tax season. However the pass-through taxation mannequin is one distinctive promoting level the corporate stresses. If you happen to plan on investing, contemplate speaking along with your accountant or familiarizing your self with the variations in tax guidelines.

LEX Markets Charges

LEX Markets prices a 0.25% quarterly price that is primarily based on the trailing 90 days of market worth for a property. This works out to 1% per 12 months in annual charges. There aren’t further commissions or buying and selling charges buyers want to fret about.

Property house owners resolve if and what money distributions to make on properties, they usually can think about numerous administration charges earlier than paying distributions. You possibly can view a breakdown of charges and bills on every itemizing to get a greater concept of what operational prices there are.

Paying 1% is low on the earth of actual property investing, however once more, learn monetary statements rigorously to gauge how operational bills would possibly influence distributions.

Liquidity

Because it has its personal buying and selling platform, LEX gives extra liquidity than many actual property crowdfunding corporations do. Traders should buy and promote shares when markets are open, and there is not any minimal holding requirement or sale penalties.

Nonetheless, take this liquidity with a grain of salt. On the time of writing, open properties have 30-day buying and selling volumes of 102 shares and 140 shares respectively. That is very low buying and selling quantity, and liquidity is not assured. Traders ought to nonetheless contemplate this as a long-term funding except buying and selling quantity exhibits regular progress.

Methods to Contact LEX Markets

You possibly can attain LEX Markets by calling 212-941-2700 or by emailing clientservices@LEX-markets.com. The web site additionally has a complete FAQ part for each buyers and property house owners.

Is LEX Markets Protected?

LEX Markets is a FINRA-registered broker-dealer and is regulated by the SEC. This implies it is licensed to facilitate securities transactions, which is why buyers can commerce particular person shares of properties. And since it really works with SIPC-member Apex Clearing Corp, you additionally stand up to $500,000 in insurance coverage in your securities and as much as $250,000 on money balances.

There are nonetheless dangers to actual property investing, particularly when coping with particular person properties. Money distributions aren’t assured both, and share costs can go down in worth. Sticking with industrial REITs or actual property funds may help decrease your danger versus investing in particular person offers. In the end, it’s a must to do your due diligence and contemplate the dangers of this kind of actual property funding.

Finest Alternate options

With no accreditation requirement and entry to particular person industrial actual property, LEX Markets differentiates itself from most of the bigger gamers within the area. Its low 1% annual administration price and customized buying and selling platforms are additionally perks.

Nonetheless, LEX is a brand new firm, and it exhibits once you take a look at the shortage of present choices. A scarcity of historic efficiency information is one other unlucky, inevitable hurdle new investing platforms need to cope with.

Fortunately, there are quite a few alternate options you need to use to spend money on actual property if you wish to use extra established platforms.

Fundrise is one in every of our favourite alternate options as a result of low funding minimal requirement and lack of accreditation requirement. You pay 1% in annual charges like LEX, however Fundrise enables you to spend money on a wide range of funds as a substitute of particular person offers. And the $10 minimal makes it nice for investing in actual property with out a lot cash.

CrowdStreet and RealtyMogul are additionally wonderful alternate options you probably have more cash to take a position and need a wide range of particular person offers and funds. Simply observe that almost all offers on these two platforms are solely obtainable to accredited buyers.

Backside Line

The world of actual property investing has turn out to be fairly crowded over the previous few years. Firms like Fundrise, CrowdStreet, and others nonetheless largely dominate the crowdfunding world. However we’re additionally seeing newer entrants like LEX Markets, Arrived Properties, and loads of others.

I feel LEX is doing a good job at differentiating itself with its low minimal funding requirement, particular person industrial actual property offers, and the way offers are structured. However proper now, an absence of open funding alternatives and a restricted monitor file are two downsides.

You possibly can contemplate LEX if you wish to diversify your portfolio with particular person actual property holdings. However extra cautious buyers are most likely higher off with extra established corporations within the area.