Invest In Real Estate Loans

Upright is a fintech that gives accredited investors the opportunity to invest in individual and pooled fund real estate offerings. 

While a few crowdfunded real estate platforms
have made it possible to get real estate loans online, the hard money market remains underserved.

Upright is a small but growing startup that is creating a more efficient market for hard money loans. It matches borrowers with high-risk projects and investors who want handsome profits along with exposure to real estate. Here’s how Upright works.

Upright is a real estate fintech company that helps accredited investors issue real estate loans to borrowers who are unable to secure funding through traditional banks.

Upright uses investor money to issue individual hard-money loans (loans secured by real property), a pre-funding note fund (a line of credit that Upright uses), or a fund that manages short and medium-term loans. You can invest through Upright as an individual, jointly, as a company, trust, or under an SDIRA.

Upright was founded in 2014 after realizing that the capital markets for real estate projects are slow and inefficient. By focusing on hard-money lending, Upright is creating a more efficient market for risky but potentially profitable real estate loans. Upright offers a unique type of alternative investment that can add diversity to your investment portfolio.

At this time, Upright has three primary offerings for investors. You can invest in any one or all three.

Borrower Dependent Notes

Upright’s original offering is borrower-dependent notes. These are short-term, hard money loans that go to real estate investors seeking funding for three to 24 months. Most of these loans go to investors who require funding for new construction or home rehab projects. As the investor, it’s up to you to consider the fundamentals of each deal. 

According to Upright, 99% of all principal invested has been returned to investors, along with an average return of 10.8% annually. However, each note that you invest in will perform differently, and each loan has a $5,000 minimum. That means you may need a multi-six-figure portfolio of loans to create a fully-diversified portfolio.

Pre-Funding Note Fund

As an alternative to individual notes, you can invest in Upright’s line of credit. Upright uses the Pre-Funding Note Fund as a line of credit to underwrite every single one of its loans. As an investor, you can choose from fixed terms ranging from 3 to 12 months with a low minimum investment of $1,000. Upright advertises an average of 10% returns, but the actual returns depend on the APR advertised at the time of investment. The current advertised rate is 10.5%.

This Pre-Funding Note Fund appears to be very similar to a certificate of deposit (CD) since it pays out set interest rates. But don’t be mistaken, this is still a risky investment despite Upright’s strong record of principal repayment.

Horizon Residential Income Fund

The Horizon Residential Income Fund is a privately held REIT that invests in short and medium real estate loans. It has a one-year lock-up period where you cannot request a return of funds. After that, you may request a return of funds, and the funds will typically be distributed within 90 days. Investors in this fund receive an 8% preferred return. If the fund returns more than 8%, the additional profits are split 80% to investors and 20% to the fund managers.

There are no investor fees associated with the Borrower Dependent Notes or the Pre-Funding Note Fund. All fees associated with these are paid by the borrower rather than the investor.

The Horizon Residential Income Fund has a fee structure that mimics a typical hedge fund. It charges a 1% annual management fee no matter the fund’s performance. Each year, investors receive a “preferred return” of 8%. Once the preferred return is paid, any additional profits are split with 20% going to the fund manager and 80% going to investors. 

Upright is not a typical crowdfunded real estate platform. Instead of offering direct exposure to real estate, it allows investors to invest in real estate debt.

Concreit is another platform that focuses on real estate loans, but it has both short and long-term offerings. Concreit also has more liquidity options and is open to all investors instead of just accredited investors.

Like Concreit, Fundrise is a popular crowdfunded real estate platform open to non-accredited and accredited investors. You can start investing in a taxable private real estate investment trust, called an eREIT, for as little as $10. Other investment opportunities include its Goal-Based Portfolios, private equity investing, and most recently, venture capital funds.

Overall, Upright has an impressive set of offerings with proven track records of returns. It is a platform that may be right for accredited investors who want to add a high-returning debt product to their investment portfolio.

To get started, select the Sign Up button in the upper right corner of the Upright website. Before you can create an online account, you need to confirm your accreditation status. You’ll also provide your full name, email address, and phone number.

At this point, you’ll get an email with a temporary password which you can use to log in to the Upright platform. Once you’re on the platform you can read the Private Placement Memorandums, browse offerings, and more.

Before you can start to invest, you need to verify your identity which includes adding your name, Social Security Number, Date of Birth, and US-based address. Then you’ll need to agree to the site terms and connect your bank account. After that, you can select investments and move forward with funding them.

From a technology perspective, Upright uses best practices including multi-factor authentication, verifying your identity before you connect bank accounts, and using encryption and safe money transfers. It is great to see an alternative investment company that takes digital security seriously. While there are always risks of identity theft, Upright’s multiple layers of digital security are best in class.

On the investment side, Upright’s investments shouldn’t be considered “safe.” The loans it offers are rigorously considered, but hard money loans are generally risky. Your investment is not guaranteed and may lose value if one or more projects fail. 

Upright is headquartered at 1300 E 9th Street, Suite 800, Cleveland, Ohio. You can email the team at [email protected] or by calling 646-895-6090. If you have investment-specific questions you may want to email [email protected].

While it’s exciting to see a fintech company like Upright working in the hard money lending space, it has not altered the fundamentals of hard money lending. Hard money lending is a high-risk, high-reward kind of space. You could lose every dollar you put in, or you may face long delays in getting your money out. 

On the other hand, you could see double-digit growth in investments. Accredited investors who add some of Upright’s offerings to increase the diversity of their portfolio may enjoy excellent returns with volatility that they can handle. This is a great way to add passive real estate income to a well-diversified portfolio.

Check out Upright here >>