Real Estate Debt vs Equity Investing (Infographic)

In today’s low-interest rate environment, many investors are seeking opportunities to achieve higher yields than what their traditional investment options offer. RealtyShares is a real estate crowdfunding platform that can help to fill that void. The following infographic portrays the difference between our two main types of investment offerings: debt vs equity.

When an investor participates in a debt offering, it means that the investor becomes the lender on the property (or properties). The borrower of the loan that the investors provide is the property owner. The payments to the investors are made in fixed installments. Because a debt investment is secured by a lien on the property, in the case of non-payment by the borrower, the investors may initiate legal action to take possession of the collateral to recover their investment.

When an investor participates in an equity offering, it means the investor becomes a shareholder in the ownership of the property. There may also be a third-party lender on the property whose debt interest is “senior” to the equity. The most senior interest stakeholders get priority in the return of their investment. Equity investing tends to be riskier than debt investing because the equity investment is unsecured; consequently, equity investors often demand a higher return on their invested capital.

 

 

This is our first in a series of infographics about real estate investing. Please let us know if you’d like particular topics addressed. We’d also be glad to answer any questions you may have about RealtyShares. Contact us at invest@realtyshares.com. We have new real estate investment opportunities available on our website all the time, so please check in with us often.