They are the first Real Estate Institution to launch a Crowdfunding Platform, opening up their exclusive network to a new class of investors. They founded ArborCrowd to give individuals who previously did not have access to commercial real estate opportunities the ability to invest in institutional-quality investments. ArborCrowd is part of the Arbor Family of Companies which includes Arbor Realty Trust (NYSE: ABR), a publicly traded real estate investment trust (REIT). They hand select every deal from The Arbor Family of Companies’ proprietary network, and choose the ones that survive their rigorous underwriting process.
How you make money
Like a dividend-paying stock, ArborCrowd provides steady monthly dividend income (under normal circumstances). You can choose to receive your dividends in cash or reinvest them. You will also benefit from the increasing property value over time. This can result in higher dividend payments due to rent increases or if the property is sold.
How ArborCrowd makes money
They charge an asset management fee (0.25%-0.5%), an acquisition fee (1-1.25%), a disposition fee (1%), and refinance fee (1%). The other sites don't charge this at the platform level, but then the investor pays at the sponsor level. So both end up being pretty equivalent. After an 8% preferred return and return of capital, investors get 80% and the sponsor gets 20% up to 14% IRR. This part is average for most multifamily deals (investor gets anywhere from 75 to 85% typically).
Is it safe?
Potential For Loss: With any investment, there is a potential for loss. There is less risk with real estate that your investment will go to $0, since it is still backed by real property (unless you invest in an unsecured investment). However, there are plenty of ways to lose money - from vacancies, to incomplete rehabs, poor selling markets, inability to refinance, and more. Lack of Liquidity: Real estate investments are not liquid. Once you invest, typically you can't get your money back until there is a liquidity event - refinancing or sale. Platform Risk: With any online platform, there is a risk of fraud and lack of due diligence. Many investors rely on the platform to help assess this, but as an investor, you need to do your own homework.