Donald Trump made his fortune in commercial real estate — leveraging millions of dollars into billions of dollars.
But what if you’re not Trump and haven’t got millions — or even thousands — to leverage? What if you don’t know the art of the deal — or the first thing about commercial real estate?
You “diversifyund” — leverage whatever you’ve got with what others have got — and maybe end up with millions using just thousands.
Or even just $500.
Craig Cecilio is the founder and CEO of DiversyFund — a Real Estate Investment Trust (REIT). It sounds complicated but unlike a 401(k) or — or hanging drywall — it isn’t.
A REIT is similar to crowd-sourced funding, only with a payoff.
And SEC qualification, including public disclosures and annual audits conducted by a third party CPA firm.
Craig and his team look for deals on multifamily apartment buildings that are already generating positive cash flow via rents but have the potential to generate more cash flow via higher rents and higher value — once spruced up. Using pooled funds of investors, the property is acquired — and improved — increasing the rental income in the short term and the value of the property in the longer term.
The shareholder’s initial investment is turbo-boosted by the profit generated from the increased rental income, which is reinvested in the sprucing up of other properties — increasing their rental income. There are now multiple sources of synergistic wealth creation — higher rents and higher asset values on more assets — each serving to leverage upward the shareholder’s initial investment.
One of the really savvy aspects of this is that by making one property more attractive — and higher rent and of higher value — adjacent properties will also become more attractive and valuable.
In effect, by purchasing and renovating building A, building B almost inevitably becomes more attractive as an investment — and thus, more valuable.
This called forced appreciation.
But here’s the real art of this deal: The price to acquire building B before building A is spruced up and made more attractive and valuable will still be low. The REIT buys both A and B for a low price — knowing that the increased value of A will push up the value of B before it’s even renovated, as the result of the fixing-up of building A.
Then sell both A and B for top dollar . . . and move on to building C!
Craig points out that prior to the REIT concept, commercial real estate was effectively off-limits to the 99 percent — those without huge capital to leverage, the specialized knowledge of the commercial real estate market, the ability to manage commercial real estate — and the ability to deal with large-scale renovation projects often involving a Byzantine permitting process and multiple contractors.
But anyone can buy shares in a REIT — even a high school kid on after-school-job income. The minimum investment isn’t $500,000 or even $1,000.
And that income can — along with the pooled income of other shareholders — leverage into much more than after-school-job income.
“Everyone should have access to wealth-building opportunities,” he says.
Of course, Craig is making money on this deal, too. As he ought to — given that it’s Craig and his team who find the deals, manage the deals — and deal with the dirty work of fixing up those deals.
Shareholders don’t hang drywall — and they don’t have to deal with collecting rent or taking calls from tenants.
But they do collect dividends — based on shares of the rental income generated — from day one. Investors receive the first 7 percent of the initial rental income; the remainder is then divided 65 percent-35 percent, with investors divvying up the 65 percent.
That’s a pretty good deal.
And it’s not a long-term wait, either. The properties acquired, managed and spruced up by the REIT are sold after five years — which also takes advantage of natural appreciation over time. But the take-home point is that unlike a 401(k), this is money you’ll see before you see your first Social Security check.
And without having to do much more than writing that $500 initial investment check.
Or even leave your house.
You can use your phone — and an app — to keep tabs on your investment. The vetted properties — with detailed descriptions and photos — as well as estimated rates of return — are available for your review at any time; pick the properties that seem like your kind of deal.
And leave the drywall hanging to Craig and his team!
Michael Busler, Ph.D., is a public policy analyst and a professor of finance at Stockton University in Galloway, New Jersey, where he teaches undergraduate and graduate courses in finance and economics. He has written op-ed columns in major newspapers for more than 35 years. @mbusler www.facebook.com/fundingdemocracy