Over the past few decades since the 1970s, it has been increasingly challenging in the Bay Area for average Americans to save enough money to buy a home. For most Americans, home purchase is one of the largest equity investments they can make, and barriers to ownership can hurt their ability to build long-term wealth.
In recent years, home ownership has been further exacerbated by the lack of housing in California. While there are other alternative equity investments average Americans can tap into to build wealth, nothing could compare to private equity syndicates, which offer high returns on professionally managed commercial real estate. To date, these fractional ownership opportunities are available only to some of the wealthiest people in America.
Transforming the investment experience
Rettex, a young startup based in Mountain View, led by Chris Moris and John Bradley, is changing the game of private equity investment in multi-
“We are working with a team of high-caliber developers and hatching an online, commercial real estate investment platform that automates the end-to-end investing process – from identifying deals and finding investors to managing the investor’s portfolio, Moris said. “These online syndicates offer lucrative annual returns which often exceed 15%. Real estate syndication is an effective way for investors to pool their financial and intellectual resources to invest in properties much more valuable than they could afford or manage on their own. It’s a simple transaction between a sponsor and a group of investors.”
According to Moris, the typical select-invest-manage process of a private equity syndicate often involves general partners (also known as sponsors) and limited partners (passive investors), with lots of pencil-and-paper work in between: from identifying and selecting the buy, ensuring investor suitability, fundraising to get multiple fractional investors on board and obtaining exorbitant subscription to access and invest in deals.
“The process can be time-consuming and overwhelming. Competitors such as Juniper Square and CrowdStreet are offering expensive enterprise investment management tools which require website integrations and setup fees,” Moris said. “Rettex is seeing a larger opportunity which benefits the majority of the market: local, small businesses managing real estate in the community, as its target today. Rettex eliminates the hassles and headaches for general partners and investors by moving them away from a set of disparate and antiquated tools and onto an integrated, efficient and accessible system.”
Over time, the Rettex platform will leverage machine learning and artificial intelligence to tap into local market information and past deal performance, to predict return potentials on future private equity investments.
Through working with general partners of the private equity syndicate, the platform allows accredited investors with $200,000 in salary to be invited to invest in “on-market” deals, Moris said. For those who already know of a real estate sponsor, Rettex also offers access to online investment for “off-market” deals, enabling individuals or families with disposable income of less than $200,000 to invest as well.
“Millennials are one targeted demographic who can benefit from using Rettex,” Moris said, adding that he believes the company can democratize commercial real estate investment so that millennials can invest $5,000 to $10,000 of their savings to start building equity as an alternative to the purchase of a single-family home that may be out of their price range.
The model could lead millennials and future Gen Z’s to change their first property purchase to income-producing real estate as a tool to getting to a first home, Moris noted, by investing in commercial real estate in and outside the Bay Area, thereby helping them build and realize wealth by staying closer to their roots and families.
Rettex has general partners as initial users in the South Bay, including some in Mountain View and Palo Alto. The website is free for investors. Real estate businesses pay a nominal annual subscription fee to access the platform. The startup launched its beta last month and expects incremental uses continuing into early 2020. Once it reaches solid user adoption, Rettex aims to bring its platform to scale and get to Series A funding before the end of the year.
For more information on Rettex, visit rettex.com.