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Author: Jason

Crowdfunding Investing – Platform Comparison

Disclaimer: I am not a financial specialist. The information in this post is for informational purposes based on my own experience and opinion and does not constitute legal advice in any way. I am not liable for any damages resulting from using the information in this article. Please consult a financial planner or tax advisor for advice on your unique situation.

Below is a quick comparison of several major crowdfunding platforms, from my personal experience investing with them. Links in the table below take you to their websites. Links to detailed reviews will follow.

PlatformTypes of InvestmentsAccredited Investor Only?Investment MinimumsInvestment FeesNoteworthy
YieldstreetReal estate, art, transportation, crypto, legal, venture capital, etc.YesVaries but typically 10k+Fee structure varies per investmentA melting pot of investment types. Short term notes offer higher rates than CDs.
Several investments are IRA eligible.
CrowdStreetReal estateYesVaries but typically 25k+Fee structure varies per investmentHistorically large marketplace of real estate investments.
Some investments may be IRA eligible, 1031 exchange eligible, or QoZ.
EquityMultipleReal estateYesVaries buy typically 10-15k+Fee structure varies per investmentShort term notes offer higher rates than CDs.
RealtyMogulReal estateYesVaries but typically 35kFee structure varies per investmentGrowth and Income REITs are diversified and have lower minimum investment of 5k.
Some investments may be IRA eligible or QoZ. 1031 exchange coming soon.
Real estate funds, venture capitalNo$2501% total fees
(1.85% for the venture capital fund)
Fundrise IPO – an opportunity to own private shares in the company.
FarmlandYesTypically 10k; 100k for farmland fundFee structure varies per investmentInvest in sustainability.

Photos credit: Pexels.com. Platform logos from platform websites.

Crowdfunding Investing – overview

Disclaimer: I am not a financial specialist. The information in this post is for informational purposes based on my own experience and opinion and does not constitute legal advice in any way. I am not liable for any damages resulting from using the information in this article. Please consult a financial planner or tax advisor for advice on your unique situation.

I started crowdfunding investing in 2019, when real estate deals dominated the space.  Crowdfunding investing gained popularity and expanded.  Art, cars, wine, farms, and other forms of private equity, you name it – anything that can be monetized can be crowdfunded.

Real estate investing

Crowdfunding, or Crowdsourcing, refers to multiple investors taking part in an investment opportunity or deal.   This movement was jump started by the JOBS Act of 2012, which then-President Obama signed into law.

I personally like this space because it offers diversity vs. stocks and bonds which have historically been the staple investments for the masses.  It also enables commitment of a smaller amount of capital vs. for example a mortgage to buy a fixer-upper house.  Depending on the crowdfunding platform, participation in investments may require “Accredited Investor” or “Qualified Purchaser” (refer to definitions below).  These designations allow investors to participate in investments which are not registered with the SEC (Securities & Exchange Commission).

I also like this space for “passivity”.  I don’t need to coordinate a bunch of contractors, deal with tenant issues, drive an Uber, etc.  I can continue working my full-time job and supplement my income, which gives me options later.

Crowdfunding has been a great opportunity for me to learn and grow.

Below are some ins and outs of crowdfunding from my personal experience.

Who Are The Players In Crowdfunding Investing?

  • Platform – the marketplace for investments
    • They get a piece of the pie for each investment on the platform
    • They perform some level of vetting (investments that don’t meet their criteria don’t make it onto the platform).  Note: this is not a substitute for the investor’s due diligence.
  • Sponsor
    • The entity who brought the investment to Platform for funding
    • Typically a team who also deals with other entities, for e.g. construction, banks, legal, etc.
  • Investors
    • Aside from investors via the Platform, there are often other investors involved, including the Sponsor
    • Investors typically interact with Platform and/or Sponsor, depending on the nature of information being exchanged

Crowdfunding vs. Traditional Investments (Stocks/Bonds)

  • Evaluating/due diligence
    • (Hopefully) you wouldn’t fork out a big chunk of money solely based on someone’s hot stock tip on social media.  This is no different.
    • Due diligence is extremely important due to the illiquid nature of crowdfunding investments and the nontrivial amount of capital that may be committed
      • How experienced is the Sponsor?  What is their track record?  Is this deal in their wheelhouse?
      • What are the terms of the deal?
      • What are the risks and are reasonable mitigation plans in place for the risks that can be controlled?
      • How much $ is the sponsor co-investing (skin in the game)?
      • Get your questions answered.  Attend the investors webinar (if there is one)
    • The Sponsor typically provides a pro forma or projection of how the investment may perform based on information they have
  • Risks
    • Same as stocks and bonds, there are risks involved in crowdfunding investments, including loss of principal
    • Crowdfunded investments are usually much less liquid than stocks and bonds.
    • The pro forma is just a projection – the investment may be exited sooner or longer than projected, and produce a different return profile than projected.
    • The current economic environment of high interest rates presents challenges to access capital, and the number of deals has decreased accordingly. If there are loans associated with the investment, it’s important to know the terms of the loans when evaluating the investment.
  • Realizing the gains, special event, final disposition
    • Like stocks and bonds, these investments can be categorized by the gains they may deliver:
      • Cash distributions, or “return on investment”.  This is akin to a dividend in stocks or interest on bonds and is normally taxable
      • Capital gain on sale of investment.  This is similar to capital gain on stocks/bonds upon sale and is normally taxable
    • Different from stocks and bonds, some of these investments may return part or all of the original invested capital before the investment is exited.  This is called “return of investment” (vs. “return on investment”) and is not taxed.
      • Also, an investment may have a special event for example refinancing a loan, which may result in “return of investment” or “return on investment”
    • In addition to gains per se, some investments, particularly in real estate, can pass through losses (for e.g. depreciation), which is can reduce your basis for taxes.
  • Exiting the investment
    • Once invested, exiting the investment is usually not in your control (it will be exited according to the terms of the investment offering, depending on how things play out), vs. stocks and bonds having a liquid secondary market
  • Other noteworthy:
    • Retirement account
      • Some investments accept being held in a retirement account (self-directed IRA)
      • Since retirement accounts are long term investment vehicles with tax advantages depending on the account, they can be well aligned for crowdfunding investments
      • Crowdfunding investments are generally not accepted in retirement accounts from mainstream fiduciaries – I am hoping this will change
        • The investor needs to create an SD IRA with a fiduciary who accepts these type of investments, typically with higher fees than a traditional retirement account, and transfer funds in like kind from an existing retirement account, to have ready for the crowdfunding investment
      • While gains from these investments are typically not susceptible to taxation in a retirement account in the year the gains are realized, there are corner cases for e.g. UBTI (Unrelated Business Taxable Income).  When considering an investment for a SD IRA, this should be on your list of things to check
    • QoZ / QoF
      • Occasionally, real estate investment opportunities pop up that are classified as QoZ (Qualified Opportunity Zone)
        • There’s ample information online about QoZ/QoF, but in a nutshell, the Fed created this in 2017 as a stimulus to invest in underserved communities
        • There are tax advantages for e.g. deferral of capital gains, through 2026 for qualifying real estate investments.  Further, holding the QoZ investment for at least 10 years has further benefit (i.e. beyond 2026) of not owing capital gains for the appreciation of the real estate investment upon sale
        • When evaluating a QoZ investment, due diligence is needed to confirm QoZ status and whether the projected performance of the investment, taking into consideration the special benefits, would be a better investment vs. non-QoZ, given one’s own circumstances and goals
    • 1031 exchange
      • Real estate crowdfunding sites may accept 1031 exchanges
      • A 1031 exchange is where the investor sells a property and uses the proceeds to invest in another “like kind” property, with some rules/restrictions
      • I have not done this personally, but I can see how this can be advantageous someone who has actively managed property/ies, and wants to switch to a passive role while retaining the tax benefits of 1031 exchange

Types Of Crowdfunding Investments

  • Funds vs. individual deals.  Funds can comprise of like-kind investments for e.g. real estate, or across investment areas
  • Real estate
  • Art
  • Wine
  • Legal
  • Farm
  • Private equity / venture capiltal
  • Other investments – novel investment vehicles keep coming…

Capital Stack

  • Capital stack typically consists of Common Equity, Preferred Equity, mezzanine debt, and senior debt, in order of increasing priority when it comes to servicing in the case of default
  • Usually the lesser priority position is higher risk and has the higher potential for return
  • Investor’s position in capital stack depends on the organization of the investment

Setting Expectations

  • Be prepared to fund the investment you decided upon when it goes “live” on the Platform
    • If investment participation requires verification (for e.g. Accredited Investor status), make sure you have that verification already taken care of, according to the Platform’s rules
    • Be ready to formalize the investment without delay, after committing to the investment on the Platform
  • Don’t expect quick returns
    • Each investment is unique and may or may not provide return on investment capital or return of investment capital anytime soon
  • Exit timing is not under your control.  Don’t invest money that you may need soon.
  • Tax considerations
    • Tax planning is difficult due to variable nature of return on capital and exit timing
      • Expect a tax document (for e.g. K-1) for each investment
    • Pass-through losses/depreciation can help reduce tax burden
    • QoZ – discussed above
    • Don’t expect tax docs in time for April 15.  File an extension
    • Taxation in retirement account due to UBTI – discussed above
  • Stay out of the hospitality space – it’s volatile and correlated with consumer discretionary spend.  Platform investment disclosures have shown that several hospitality deals have gone belly-up – full loss of principal.
  • Some Sponsors have had offerings on a Platform and then stopped using the Platform for future offerings.  Follow Sponsors who have gained your trust off-Platform for future deals.
  • While real estate has been a great hedge to inflation, the current high interest rate environment is a double-edge sword. Investments with variable interest loans or needing to refinance loans have additional risk and shrinking returns.

Accredited Investor [Wikipedia]

Qualified Purchaser [Yieldstreet]

2023 Tesla Model 3 Performance – Does It Achieve Rated Range?

There’s no shortage of debate, complaints, and even lawsuits about Tesla cars’ range. Many factors affect an EV’s range, even more-so that an ICE car. YMMV has never been a truer statement. Even how much power is used for climate control is debated (US News vs. Tesla claim).

I did a brief trial trip with my 2023 Tesla Model 3 Performance, with conditions noted below:

  • Miles on car: ~1k
  • Highway: 70mph 2/3 of trip
  • Town: 40mph 1/3 of trip
  • Temp outside: 101 (ouch!)
  • AC set: 73, no passengers
  • No preconditioning of inside temp
  • Distance traveled: 15mi
  • Non aggressive driving
  • Regenerative braking
  • Reflective roof liner, no side tint
Tesla Model 3 energy consumption

Calculations (82kWh battery pack, 315mi rated range)

14.8% (0.8/5.4) was consumed on AC

Including power consumed by AC: 4.428kW used in 15mi = 277mi

Excluding power consumed by AC: 3.772kW used in 15mi = 326mi

Observations

AC has a big impact on range. As owners know, the front climate control is dual zone and in my case with no passenger, only the driver zone was actively cooling. With a passenger, the impact of AC would have been more.

While driving in such heat, external/battery fans are engaged. It’s not clear how much energy that uses, or where it’s accounted for in the usage breakdown.

Highway speeds (like 70+mph) increase rate of energy consumption, though the M3P is quite aerodynamic. My last ICE car (Mazda 6) began to noticeably suffer on fuel economy around 80mph.

Want to test drive a Tesla? Use my referral link.

Tesla Model 3 Premium Audio System – secret to success

The secret to the premium audio system’s great sound is in physics

Tesla front corner

I’ve been a car audio enthusiast for years, having designed and fabricated my car stereo systems and competed with them. No car I’ve owned had a good-enough sound system, until my 2023 Tesla Model 3 Performance. Let’s see why it’s so good, and what can be improved.

Boasting a total of 15 speakers (including a subwoofer), multiple amplifiers, and an equalizer, the premium audio system means business.

More impressive than the number of speakers, though, is their environment – where the speakers are located in absolute terms and relative to one another. Let’s take a closer look at how the environment plays a big role in sound.

The dash sets the (sound) stage

Tesla Model 3 - front stage

Literally, the dash is the main responsible party for setting the front sound stage. Midrange speakers at the corners of the dash provide a high soundstage, while the symmetric dash provides an unobstructed path for audio goodness to fill the cabin. Since the dash is so far forward, the Path Length difference (delta in distance of left vs. right speaker to your ears) is minimal. Low PL delta minimizes the soundstage from skewing to the left (for driver) and to the right (for passenger).

Helping the front stage are the image tweeters, whose level can be set via the audio controls. This is part of the ambient sound and provides a more immersive experience (high frequencies determine sound stage height).

Tesla Model 3 - image tweeter
Tesla Model 3 - front door speakers

The speakers at the front-bottom of the doors are proper midbass drivers – the mid/high frequencies are filtered out. Path length to left door midbass is almost identical to left dash midrange – likewise for the right side. With the door speakers and dash speakers equidistant from your ears, there is less chance of phasing issues that can negatively affect the listening enjoyment.

There is a single enclosed subwoofer along with its amplifier tucked away in the rear quarter panel. This sub/amp combo is reported to weigh less than 10 pounds, which is an extraordinary achievement in weight vs. performance vs. space. The trunk corner is ideal for sub placement because of close proximity to environment boundary. Close boundaries reduce bass cancellation from sound wave reflections. I’d employed similar in a box I built in my previous car (2016 Mazda 6).

Tesla subwoofer

Verdict and what can be improved

There are a lot of positives to the Tesla Model 3 performance audio system. It’s well designed and sounds wonderful. I haven’t mentioned the streaming apps and ability to play downloaded music via USB. (A USB hub is required for newer Model 3’s if you want to also store security cam footage – there’s only a single data USB port in the glovebox).

What can be improved:

  • Subwoofer has limited displacement and I’d like a bit more output. Ideally the sub would be larger and be in a solid box, with more power. Obviously that has trade-offs regarding weight, cost, and sacrificing trunk space. If I do tackle any audio upgrades in the M3, the subwoofer will be first.
  • Mid/high frequencies can be straining at times, for e.g. female vocals. This isn’t an issue from volume too loud – it’s an issue with the response of the midrange speakers and/or their environment. I’ll play with the equalizer more, but it has fixed bands/frequencies. If those frequencies don’t line up with the “problem zone” then I’m out of luck.
  • More advanced equalizer – increase the number of bands and make it parametric (variable frequencies and “Q” )
  • Road noise is definitely a thing at highway speed. This can be countered somewhat by turning up the volume, but this still results in an imbalance in the music since you are trying to un-mask the lower tones from road noise whereas higher frequencies in the music become too loud. Aside from Tesla redesigning the M3 to be a quieter car, to fix the root cause of this would entail different tires and ample placement of composite materials for noise reduction in the cabin – costly and time-consuming.

Update: reading up on the revamped Model 3 Highland project, looks like Tesla is already making further improvements on noise and sub bass

Want to test drive a Tesla? Use my referral link.

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