Frequently Asked Questions
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What is the investment threshold of Fundways?
Fundways is an online investment platform. Through this platform, domestic and foreign investors can:
- Browse investment opportunities and choose the right project based on your preference (location, risk, return, etc.);
- Investment in the project via internet, including signing of legal documents, transfer of funds, transfer of ownership, etc;；
- Online tracking and manage investment, viewing earnings status and financial statements;
- Investment in Fundways is more like investing in funds, but it is safer and more profitable.
How Fundways work?
Invest process in Fundways is clear, easy to understand and easy to operate. First of all, the financier submits the project application through Fundways platform. After that, the Fundways team will conduct due diligence and screening on the projects. Relevant survey data and review scoring results will be announced to ensure the transparency of all the projects. In the meantime, investors can choose their favorite investment projects and submit applications through the platform. With the number of investors in the same project increases till the project reaches the target amount, Fundways will pool all investors into project and make payments into third-party project company's account (LLC) to invest in the project. LLC company’s shares will allocate proportionately to each investor's investment amount. Finally, the company will be responsible for the development, trading, operation and management of the real estate. The investors will receive the financial statements of the projects regularly and also receive the return on investment such as interest and rental share.
What’s the project location of Fundways?
All items on the site are in the United States. We currently do not offer non-U.S. project opportunities.
Can I invest through a company or trust?
Yes. You can invest through LLC, LP or Trust. Please contact email@example.com for more information.
What is the minimum investment amount?
The minimum investment is 10,000 US dollars.
Non-US citizens? Can non-US citizens or people outside the United States invest in U.S. projects?
Fundways is facing global investors, non-US citizens can also invest in U.S. projects. Please contact firstname.lastname@example.org for more information.
What is the Fundways rating？
Fundways gives the project rating based on the real project information to make investors compare investment opportunities more intuitively. The rating classes are A +, A, A-, B +, B, B-, C +, C, C-, D +, D, D-. The rating combines the benefits of the project with the assessment of the magnitude of the risk and is for reference only.
I would like to consult with specific details about an investment.
Specific details on investment can be found on the project page, please read carefully before investing. If you have any questions, feel free to contact us at email@example.com.
What is the background of Fundways？
Fundways was established in 2014 and our founders have had 20+ years of successful investment experience in New York City. Our management team consists of leaders from various fields such as real estate development, banking and securities, investment advisory, risk management and financial internet technology.
When the project of Fundways begin to calculate interest？
We began to calculate the interest rate on the day that Investor’s money into the account of third-party. Interest settlement date different based on different projects. For details please refer to the specific introduction of each project.
When investors can take back the investment funds?
Return on all items of Fundways will be described in detail in the project report. For details, please refer to the Investment Term column.
What is Accredited Investor？
Investors who satisfy any one of the following conditions are Accredited Investors. According to the provisions of the Securities and Exchange Commission (SEC):
- Investor's personal net worth or the family's net worth with the spouse is more than one million US dollars (excluding the property used for self-occupation).
- Over the past two years, investors have been earning more than $ 200,000 per year and will have more than $ 200,000 income for this year.
- Over the past two years, investors and spouses have aggregated more than $ 300,000 in revenue and will have more than $ 300,000 in revenue this year.
- The investor is a commercial or investment company with an asset size of over $ 5 million, or both of its equity holders are eligible investors.
For more information, please contact firstname.lastname@example.org
What kind of investment opportunities does Fundways provide?
Debt Financing: The investor loans to the financier and pre-agreed the amount of the loan, the term of the loan, and the interest on the loan. Financing parties pay debt service as agreed.
Equity Financing: The financier transfers the equity of the project to the investor. Investors have the right to ordinary share capital and property distribution. From a revenue perspective, it is one of the most profitable ways to invest. At the same time, its risk is higher than debt financing.
Preferred Equity Financing: Preferred stock is relatively speaking to common stock. Mainly refers to priority over common stock in profit distribution of dividends and the remaining property rights. Preferred shares have two kinds of rights: First, when the company allocates profits, the shareholders who have the preferred shares are allocated earlier than the shareholders who hold common shares, and enjoy a fixed number of dividends, that is, the dividend yield of preferred shares is fixed, the dividend yield of common shares is not fixed, which depending on the profitability of the company. More profit more dividend, less profit less dividend, no profit no dividend. There is no cap, and the bottom is not guaranteed. Second, when the company is dissolved and need to allocation of surplus property, the preferred shares get refund before common shares. Preferred shares have not yet been realized in China, but in the United States it is a more popular way of financing, mainly because the interests of investors are more protected than common shares, and the profit is much higher than the bond financing.
What the investing process is like in Fundways?
After investors decide to invest and sign all the legal documents, the funds will be transferred to the project escrow account. Only when the target financing amount is reached and the real estate transaction is completed, the investment funds for the real estate project can be transferred out and used.
How to understand the investment time horizon?
Each time horizon is for a specific project. Different projects may not have the same time horizon. It is imperative for investors to carefully read and understand the issue documents, including the terms, before investing.
As an investor, when can I get investment income?
Different types of projects will have different expected return of time. Usually, Ground-up will be rewarded 18-36 months after the investment is completed. For projects that have a stable cash inflow, you can sometimes get benefits for months. Please check the project's release documents for detail.
Is my investment risky
In investment activities, risks always coexist with profits. Like stocks or bonds, real estate is impaired as the economy downturn. However, changes in the economic environment are hard to predictable, so it is important to understand your own risk tolerance before investing. As far as possible, Fundways will refine risk assessment and expressed in the project description objectively.
What if the financier overdue or terminate the interest payment?
Before cooperation, Fundways will conducted a rigorous background review of the financiers to minimize the risk of default. If the financier still defaults for some reason, Fundways will take legal measures to maximize the recovery of funds, such as the auction of collateral. The legal documents negotiated and signed by Fundways and the developer stipulate what measures we can take to protect the interests of investors when a breach of contract occurs. So far, there has been no record of default among online and offline financiers that partner with Fundways.
What documents will I receive as an investor
After the investment is completed, investors can view the investment performance online, checking relevant trading documents and obtain project dynamics, revenue and tax documents.
How do I get the progress of investment project update？
Fundways requirements the project company updates on a weekly basis to provide project updates. Investors will receive these updates via email or on the personal page of the website.
What happens if you do not reach the target financing amount？
Investment activity is considered complete only if the target financing amount has been reached and all legal documents have been properly signed. Within a certain period of time, if the financing target cannot be achieved, all investors' money will be fully refunded.
Can I terminate investing？
Fundways’ current lock-up period is 1 year, within one-year investors cannot terminate the investment. Investors can withdraw their funds at any time after one year (120 days ahead of time for noticing Fundways). The interest is calculated to the real deadline and on the basis of the interest of the previous year. Investors must read the offering documents carefully before making their investment decision to better understand the holding period of different projects.
Real Estate Center
1. What is Real Estate Investing?
Real estate investing involves the purchase, ownership, management, rental and/or sale of real estate for profit. Improvement of realty property as part of a real estate investment strategy is generally considered to be a sub-specialty of real estate investing called real estate development. Real estate is an asset form with limited liquidity relative to other investments, it is also capital intensive (although capital may be gained through mortgage leverage) and is highly cash flow dependent. If these factors are not well understood and managed by the investor, real estate becomes a risky investment. The primary cause of investment failure for real estate is that the investor goes into negative cash flow for a period of time that is not sustainable, often forcing them to resell the property at a loss or go into insolvency.
Some real estate investment organizations, such as real estate investment trusts (REITs) and some pension funds and Hedge funds, have large enough capital reserves and investment strategies to allow 100% equity in the properties that they purchase. This minimizes the risk which comes from leverage, but also limits potential ROI.
With the signing of the JOBS Act in April 2012 by President Obama there has been an easing on investment solicitations.
2. What questions should investors consider before invest?
Financial Position & Preferences
Do you have enough capital to invest in real estate?
Do you have the time to invest actively, or would you prefer to invest passively?
What financial gains can you expect?
What is your investment timeline?
How important is liquidity to you at this moment and in the future?
Financially, how would you define a successful investment for yourself?
What is your risk tolerance?
Why is real estate investing attractive to you?
Market & Location
What are recent trends in the specific state, city, neighborhood and block?
How well do you know the real estate market where you want to invest?
Are there local financial risks that could affect a real estate investment?
Are there any natural disaster risks that could affect a real estate investment?
Are there other significant real estate projects near the property that could affect its ability to attract tenants?
3. Why real estate?
Investors who diversify into real estate outperform those who don’t. “20% rule”, developed by the Yale endowment, stating that investors should have a minimum of 20% of their portfolio invested in alternatives like commercial real estate. By diversify from traditional market investing, the portfolio tend to facing less risk and generate more profit.
Unlike most stocks, commercial real estate generates consistent cash flow (income) from rent. For investors in need of regular income from their portfolio, commercial real estate can provide a more attractive choice. Return on real estate investing is also higher than return on average dividend of SP500 stock market.
Besides, real estate is hard asset. As cities grow, demand for real estate increases, while supply is limited by geography. This is why real estate assets have historically appreciated in value over time.
4. A real alternative to investing in the stock market.
Virtually every major institutional investor holds on average 25% of their portfolio in private alternatives, due to their historically higher returns (2016 Blackstone Report). These private investments, however, have been largely inaccessible to the average investor.
Development on technology and federal regulation makes it possible for individual investors to have the chance to make private market real estate investment. Investing in a private real estate market will have a relatively longer investment horizon with also higher trailing 20 years annual return. Traditional portfolio usually invest 70% in stock market and 30% in bond market, however, traditional portfolio theory has one major shortcoming: the only option for investing is in the public markets.Comparing with individual investors, the average institution has over 5x as much of their portfolio allocated to alternative investments than the average individual, and they also more likely to get more profit from the modern portfolio theory.
5. Why public stocks underperform private investments?
In a report for NYU’s Stern School of Business entitled “Private Company Valuations”, finance professor Dr. Aswath Damodaran posits that “the illiquidity discount for a private firm is between 20-30%”. It means public stocks offers daily liquidity to investors for 20-30% premium comparing with private market for the same product. For long-term investors, they don’t need and use the liquidity offered by public market but still need to pay for the cost.
When a private portfolio filed its initial public offering, the price of a share will increase a lot and the value of the portfolio will grow dramatically. Why the public market investors paying a high premium on buying the same products? The main reason is that they need to pay for liquidity premium to have the same opportunity in investing with private investors. Since public stocks pays for such cost, it usually have lower return than private investment.
6. What are the real estate categories?
Real estate breaks down into three categories: residential, commercial, and industrial.
Residential real estate: Residential real estate consists of single family homes, townhomes, condominiums, and multi family homes that people use as a living space and not a working space.
Commercial real estate: Commercial real estate is property that is used for the purpose of business.
Industrial real estate: These properties serve an industrial business purpose.
There are a multitude of ways to invest in real estate with any amount of money, time commitment, and investment horizon. Real estate investment options break down into two major categories: active and passive investments. Active investment requires high effort, while passive investment requires low effort.
Under active investments, there are three fundamental ways to invest in real estate.
In a house flip, an investor purchases a home, makes changes and renovations to improve its value on the market, and then resells it a higher price. House Flipping is generally short-term investment.
Any type of property (residential, commercial, or industrial) can be a rental property. Property owners earn regular cash flow usually on a monthly basis in the form of rent payment from tenants.
Airbnb is a new technology company that allows residents to list and rent their homes on a night-by-night basis on App, usually as an alternative to a hotel. Airbnb rentals are similar to rental properties, but they are confined to residential properties and usually only available for short-term periods.
Under passive investments, there are also three fundamental ways to invest in real estate.
Private Equity Fund
A private equity fund is an investment method where investors pool their money together into a single fund to make investments.The minimum investment are generally high so investors need to have the financial and real estate knowledge to understand the risks and potential returns of each investment.
A real estate investment trust (REIT) is a company that makes debt or equity investments in commercial real estate. Generally, REITs offer a portfolio of real estate to investors. Investors buy shares of the company and earn income from its debt and equity investments in the form of dividends. REITs can be categorized according to investor access in three ways: private REITs, publicly-traded REITs and public non-traded REITs.
Online Real Estate Investment Platforms
Online real estate platforms pool investments and invest in real estate investment opportunities that would otherwise be difficult to find or out of reach. Real estate platforms offer investors the ability to invest in single investments or a diversified portfolio of real estate.
1. Crowdfunding reduces costs
Crowdfunding is simply a term that allows investors to benefit from the efficiency gains provided by timely, transparent information.
2. Crowdfunding offers a new potential way of entry for investors, especially those who may not have enough funds to take large positions in a real estate program. No matter invest as active strategy or passive strategy, investing in real estate naturally need huge amount of money and not a practical choice for most of individual investors. However, crowdfunding offers a platform for individual who wants to invest in real estate.
3. Crowdfunding can benefit investors just as much as entrepreneurs.
Through crowdfunding, investors could get all the information about the investment, including financial position of the program, which developer is sponsor for it and the interest payment process, which makes individual investors could have a more transparent environment.