Jilliene Helman started Realty Mogul, a Los Angeles-based online marketplace for investing in real estate, in 2013. This spring, she was in Chicago to check out a few investment opportunities for her company and made some time to chat with REALTOR® Magazine about her work, changes coming to the industry, and how to out-execute the competition.
Why should we get excited about crowdfunding real estate?
Crowdfunding from a thousand-foot view is pulling capital together on the Internet to finance a transaction, whether it’s real estate or otherwise. The really cool thing that we’ve done is getting capital out of the system back to investors, so in two years we’ve been around, we distributed over $8 million back to investors through our online technology and it’s really cool to see it go full cycle. When you have money coming through crowdfunding and you’ve also got money going out through crowdfunding, that’s a lot harder to do in other verticals that are not real estate, like if you’re financing a private company or something that’s not going to have dividends on a regular basis. We focus on real estate and specifically cash-flow real estate, so crowdfunding to me is as much about getting capital into the system as it is about getting capital out of the system.
Tell me about your role at Realty Mogul and what the differentiating factors are for you guys versus the rest of the crowdfunding market?
Sure. I’m the CEO of the company, which means I do a little bit of everything. I’m in charge of staffing the company, so hiring, first and foremost. We have 55 people at the company now and it’s growing pretty rapidly. We’ll probably double head count again by the end of the year. I’m also in charge of capitalizing the firm. We’ve put out over $70 million of capital for real estate transactions, so we’re one of the largest players in the crowdfunding arena and continue to grow very, very quickly.
There are a number of things that differentiate us from some of the other companies in this space. One, we’re looking to be a broad-based capital markets platform. What I mean by that is if you think about a traditional real estate transaction, say a $10 million apartment building. You typically have about 70 percent or $7 million that is debt and 30 percent or $3 million that is equity. So in our platform we’re able to capitalize both debt and equity. So for our equity transactions we have 16,000 high-net-worth investors who invest in our equity, and then we have institutional investors who invest in our debt transactions. It is very different than some other platforms. Some platforms say we are going to only do debt or only equity and we’re saying we want to have a one-stop shop for all of real estate financing needs.
With the coming expansions possible thanks to Reg. A+, is the crowdfunding niche getting into a place of saturation?
I don’t think we’re anywhere near saturation. I mean, if you look at the domestic commercial real estate market you’ve got $300-plus billion in annual trades. There is such a massive piece of the market that is not capitalized online. You are years and years away from online even measuring a significant blip on the radar. So these real estate transactions and companies like ours will continue to grow.
Reg. A+ is going to open up private commercial real estate transactions to nonaccredited investors. Right now we are limited to working with accredited investors, which are high-net-worth investors who have $1 million dollars in net worth or $200,000 in annual income.
We are not actually doing anything with Reg. A+ because we’re concerned about the regulatory implications. We are strictly focused on high-net-worth investors. Our choice is from a regulatory perspective and then also just from the fear of having investors who potentially aren’t properly educated in transactions. We want to make sure people who are investing in transactions on our platform are, number one, educated; and number two, can afford a loss. There are no guarantees behind these transactions. We don’t want dinner-table money being spent to invest with us.
And it depends, right? I think if the regulations loosen up a lot and it’s more of a capitalistic free market, maybe we’ll change our stance. Right now there’s so much regulatory burden, but what it really means is costs. So, when it comes right down to it, we can deal with regulatory burdens. That’s not an issue for us; we deal with regulators all day long and we consider ourselves partners to the regulators. We welcome regulation. But when you have a lot of regulation it also brings along cost. If we have to take that cost and spread that across to these smaller investors, a significant portion of what they’re investing goes into regulatory cost, which doesn’t make sense.
There’s a big push in the real estate industry to get younger people into the business. As a CEO who is under the age of 30, do you have advice for young people looking at the sometimes daunting task of “making it” in real estate today?
Yeah, the struggle is the same as in any sales position and it’s even the same for people running a company. There’s really no secret in the sales role; it’s a numbers game. You need to make more phone calls than the next guy. You need to expect a pipeline. You’re going to get X number of calls, X number will call you back, leading to X number of clients, and X number of them are going to be buying a home or buying commercial real estate so it’s absolutely a numbers game.
I think there’s an opportunity for real estate agents to use technology. It’s an advantage to younger real estate agents who may be more tech savvy. That’s not to say that older folks aren’t tech savvy; I know a lot of older agents who do great things with technology. But if you can use technology to scale and streamline your business, you can make tons and tons of money. You can spend your time on relationship management and have the technology doing the back-end, infrastructural work. You’ve got technology like DocuSign and DotLoop and all of these other things that make being a real estate agent more efficient, but at the end of the day it’s still hard work. You still have to hustle and out-execute.
There’s no secret, you know? I speak on entrepreneurship a lot and people will say, “What’s the secret? How did you build this company to be so big in two years?” And I’m like, “We just worked longer hours and we just put in the time, energy, and effort to get things off the ground.” I wish there was a secret. My life would be easier and I would get more sleep!
Reprinted from realtormag.realtor.org, May 2015, with permission of the NATIONAL ASSOCIATION OF REALTORS®. Copyright May 2015. All rights reserved. realtormag.realtor.org