This article discusses how to track crowd-sourced real estate investments in software like Quicken or iBank.
For the past several months, I’ve been experimenting with crowd-sourced real estate (P2RE) investing, having placed investments at RealtyShares, RealtyMogul, Fundrise and Patch of Land. In this article, I outline how I track the performance of these investments using the iBank 5 software for MacOS X.
Similar to how P2P lending platforms such as LendingClub allow investors to participate in consumer debt, P2RE platforms allow investors to participate in real estate investments. Investments can range from a six-month loan to a two-person partnership renovating and flipping a single-family home in Atlanta, to purchasing 10-year equity in a mobile home park operating LLC.
So far, my experience has been positive; all of my investments have paid their scheduled interest on time, and one has even closed ahead of schedule, returning my capital plus 19% APR interest.
To track the performance of these investments in iBank, I utilize its ability to track traditional securities within a brokerage account:
- I created a new “brokerage” account, called “P2RE”.
- For each investment, I create a new “security” to track. For example, for a RealtyShares investment in a home on Johnson street, I created a security called, “P2RE-RS-Johnson”.
- To record my $5,000 investment in this RealtyShares deal, I recorded the transfer of $5,000 of cash from my checking account into the P2RE brokerage account, and then recorded the “purchase” of 5000 shares of the P2RE-RS-Johnson security, at a price of $1 per share.
- Whenever I received interest from RealtyShares on this investment, I recorded the reception of interest on this security.
- When the deal finally closed, and I was returned my initial capital, I recorded the “sale” of 5000 shares of the P2RE-RS-Johnson security, at a price of $1 per share.
- If a deal defaulted, and I lost my invested capital, I would record the sale of the associated security at a price of $0 per share (or whatever percentage of each $1 I recovered.)
Tracking my P2RE activity in this manner, iBank will report the return on investment (ROI) and internal rate of return (IRR) of these investments over time. Unfortunately, iBank only reports these performance figures at the account (brokerage) level, and not on the individual investments (securities). Hopefully iBank will improve on that in the future.
HOW DO WE VET CROWDFUNDED REAL ESTATE?
As a long-time real estate investor myself, my concern is not so much with tracking returns as it is in trusting—vetting—our intermediaries. Real estate is such a shaky, optimism-driven business, how do we find out how close the presentations come to reality? And which crowd-funded site will be the first big scam and exploding BOMBSHELL on the nightly news?
Thanks for your thoughtful analysis of your situation thus far.