If you’ve ever wanted to start investing in real estate but thought you didn’t have the money, you actually now have the chance.
If you’ve ever wanted to own some of the most beautiful vacation rental properties in the Berkshires but thought you didn’t have the money, you now have the opportunity.
Recently, laws were changed to allow real estate investment through crowdfunding, which means people can become investors for as little as $1,000.
“Think of it like GoFundMe for real estate investment,” said Daniel Dus, managing director and general partner of the Shared Estates Fund, a carbon-neutral real estate development company. “Each project has its own SEC-registered LLC. Our investors are a part-owner in that property, which is owned by that LLC.”
This fund is focused entirely in Berkshire County, and its goal is to save failing historic properties from the 1800s and early 1900s, to refurbish them and to install amenities such as private tennis courts, pools, spas and even virtual reality gaming rooms and fine art.
“Our most recently-completed project, the Freeman Berkshires Project, is an 11,300-square-foot estate in Egremont, Massachusetts. We equity crowdfunded $890,000, raised from 141 investors,” Dus said.
His group tends to work with extremely exclusive properties that, in the past, have only been used a couple of times per year as second, third or fourth homes. Through their efforts, Shared Estates is able to make the homes accessible to the public through vacation rental markets by lowering the cost per person.
One of the group’s properties, The Playhouse, was featured on Netflix’s “World’s Most Amazing Vacation Rentals.”
“Our first project was built by George Westinghouse, our second by a senior finance executive at Mercedes-Benz. We did a project that was developed by the actor Christopher Reeve, and we’re currently closing on one that was built for a U.S. secretary of state,” Dus said.
The idea is to target the small-group travel market, primarily multigenerational family travel or small groups, such as a family reunion or an executive retreat. And the per-person cost often will work out to be less than a standard hotel rate.
Plus the group will have the entire property to themselves, which means you’re not sharing it with other groups or other guests. The group cost is roughly $100 per person per night.
The group also tries to offer the best possible amenities in their properties, such as Tesla cyber trucks, gaming rooms, outdoor and indoor activities and high-quality art from notable artists.
“We have globally-renowned artists, like John Lennon pieces signed by Yoko Ono, Maurice Sendak (Where the Wild Things Are) and Caldecott medalist Jared Pinkney (The Little Mermaid) hanging in our properties to enhance our guests’ experiences,” Dus said.
“In our Freeman Berkshires property, we have tennis courts, 40 acres of property, its own pond, two dining rooms, exercise rooms, gaming rooms and a library,” he said. “If you compare that to a standard hotel room in the Berkshires this weekend, it’s going to be $450 for a single bed and not much else. You just get your room.”
Shared Estates aims to expose travelers to new experiences. For instance every Shared Estates property boasts Oculus virtual reality headsets.
“When is the last time you checked into a hotel and there was an Oculus headset there?” Dus said.
He is quick to point out that this is not a timeshare. Investors do not get to choose a block of time to stay at the vacation rental property. Rather, they are part-owners of that particular property, and they will earn a return based on their investment amount.
“We do give investors a 15% discount off our nightly rate, and we give any guest who has a Berkshire County home address a 20% discount,” Dus said. “But we are not a timeshare. Full stop.”
Who can invest in a Shared Estates project?
In the past, investing in real estate projects like this was often only for the extremely wealthy who could afford the hundreds of thousands of dollars or even millions of dollars of down payments and deposits.
But thanks to the changes in law, if you have as little as $1,000, you could have invested in a Shared Estates project such as the Freeman Berkshires and owned a portion of that membership interest in that LLC.
“This opens up real estate investing to the many at a time when home prices are escalating and real estate investing is getting further away for most people,” Dus said. “This is a real game-changer. We have folks from Wall Street who invest, but we also have a lot of people in the local community investing in our projects.
“It’s especially compelling to me because I grew up here. My mother’s a teacher, and my father ran a martial arts school and was an engineer. So we would drive by these estates, and I would look out at them but never dreamed of being able to set foot in them, let alone be able to own them.”
Dus said teachers, truck drivers and other area residents have invested in a Shared Estates property. He calls the recent legislation a boon for small investors.
“Historically, you had to be an accredited investor to invest in private equity deals, and you had to be worth a million dollars or more to be an accredited investor,” he said. “And now that dynamic has completely changed. You can invest very small sums of money as long as you’re over 18 years old.”
Another goal of Shared Estates is to make each property as much of a public resource as possible. Each property donates 1% of its net income to a local charity. The Freeman Berkshires project donates to the Elizabeth Freeman Center, a Pittsfield-based nonprofit that fights the cycle of domestic violence. The Kemble project in Lenox will donate its 1% to the Lenox library system.
Shared Estates also works hard to connect its guests with local service providers, such as names of local dance instructors, local yoga teachers, caterers and massage therapists.
“The properties are a major driver of the local economy,” Dus said. “Plus, the properties drive property-tax revenues to schools and towns.”
How do investors make their money?
Like most other investments, Shared Estates makes annual distributions based on the size of each investor’s pro-rata ownership of the total equity raised. In the Freeman Berkshires’ case, that was $890,000. So if you invested $10,000, you would own 1-89th of the property.
As money is raised through all the different rental cash flows — Airbnb, VRBO, Flipkey — the investor earns back capital through what’s called a “waterfall,” which flows from top-line — or gross — income. Costs are deducted, and the rest of the cash — the net — is distributed to the investors over time until they get all their money back, plus an 8% preferred return on top of their invested capital.
Once investors have earned their principle and that 8% preferred return, they receive 80% of all returns until they have doubled their money. Beyond a doubling of their initial investment, they receive 60% of the property’s returns.
To learn more about real estate investing with Shared Estates, you can visit sharedestates.fund or connect on Facebook. You can also call (917) 808-6377 with more questions.