addy Invest Review: Real Estate Crowdfunding for as Little as $1
The Canadian real estate market has proven to be an excellent investment in recent years. But whether the goal is to buy a principal residence or an investment property, too many Canadians are left on the sidelines.
The problem is that in the strongest markets, Canadian real estate is among the most expensive anywhere in the world. And it’s not just the housing prices. Homeownership is a pipe dream for too many Canadians when you factor in legal and other closing costs, property taxes, house maintenance, and monthly utilities.
Introducing addy Invest
Addy Invest has been a real estate crowdfunding platform since 2018. With addy, investors can buy slices of real estate located across Canada without all of the headaches (and high costs) of homeownership.
At the moment, addy is available to British Columbia, Alberta, and Ontario residents. You can own multi-family and commercial real estate shares with addy Invest, starting with as little as $1. Here’s how it works.
How Does addy Work?
Real estate crowdfunding begins with the addy acquisitions team. With the help of the Board of Directors, addy acquires properties that fit into one of four categories: Core, Core Plus, Value-Add, and Opportunistic (more on that later.)
Once the real estate is acquired, addy divides the asset into equal parts, each valued at $1. If the total investment is $750,000, then addy creates 750,000 units of $1.
This is where you come in. Once the investment is listed for sale on the addy platform, you can purchase shares for as little as $1 per unit, to a maximum of $1500 per property. The cap is set at $1500, but you can invest in as many different properties as you would like.
How to Get Started with addy
The addy signup process is similar to most other online fintech apps or companies.
- Head to the addy website, select Join Now
- Addy will ask you to provide some personal information, along with a piece of government-issued ID.
- Once your account is approved, it’s time to fund your addy Wallet. You can do this by connecting your primary bank account.
- Scroll through the available properties to find one that fits your investor profile.
- Once you’ve selected a property, you are eligible to invest up to $1500. All you need to do is move the funds over.
addy Membership Benefits
Addy Invest offers two membership levels – Charter and Believer. Here’s what you get at each level:
- Charter members pay a $25 annual membership fee
- Access to all addy properties
- Access to the online addy community
- Up to $500 in instant funding
- Unlimited transactions
- Cancel your investment within 60 days
- 100% money-back guarantee
- Check out properties before committing
When you pay $500 upfront for a 5-year Believer Membership, you get all of the Charter perks, plus the following benefits:
- Access to a Believer-only online community
- Up to $1500 in instant funding
- Invite-only opportunities
- 100% money-back guarantee (of $500 membership)
- Few secret perks
When addy purchases a new real estate property, it falls into one of four investment categories, with varying risk profiles: Core, Core Plus, Value-Add, and Opportunistic. Let’s take a closer look at each one:
Addy Core properties are suitable for investors seeking a steady income from the real estate asset class, without high levels of risk. In most cases, addy takes a buy-and-hold approach with its core holdings. When properties are purchased, they tend to have existing tenants signed to long-term leases, providing consistent rental income.
Good examples would be a property occupied by a national franchise or an established multi-unit family dwelling (apartment complex.) With these properties, little day-to-day oversight is required, and the income is predictable. However, they offer the lowest return potential because of the low-risk lever.
Core Plus Opportunity
Core Plus real estate investment properties carry a low to moderate level of risk for addy investors. They are suitable for investors who are willing to take a bit more risk to increase their potential returns.
With Core Plus properties, addy sees the potential to increase rental income cash flows through minor property improvements, increasing tenant quality, management efficiencies, or any combination of the three. Addy identifies this downtown Vancouver apartment complex as an example of a Core Plus property.
Value-Add real estate investment properties are considered moderate to high-risk investments. Investors should expect a longer-investment time horizon to realize higher returns because Value-Add opportunities are not usually cash-flow positive when they are initially acquired.
Instead, addy sees the long-term potential once significant physical upgrades, improved management, and better marketing strategies have been implemented. Willowglen Business Park, located in Calgary, Alberta, is an example of Value-Add real estate property.
Suppose your primary goal is long-term capital appreciation, and you don’t mind the prospect of not seeing any returns for several years. In that case, you may be interested in addy’s Opportunistic real estate.
These properties are often vacant or require rezoning at the time of acquisition. However, there is an opportunity to generate incredible cash flow over the long term once they have made the necessary property improvements.
How Much Does addy Cost?
The only fees you’ll pay with addy are the annual membership costs. At the Charter level, it’s a yearly fee of $25. The Believer membership covers five years and adds perks for $500.
Addy does offer a money-back guarantee on the membership fees. If ever you become unhappy with your addy experience, they will refund you your membership fee in full, no questions asked.
Addy Invest Pros and Cons
- Low barrier to entry
- 100% passive income
- Potential for high returns
- Opportunity for portfolio diversification
- No hidden fees
- It lets you own multiple properties
- The small number of available properties
- Principal investment is not guaranteed
- Only available in British Columbia, Alberta, and Ontario
- Income is taxable
- Low liquidity
Is addy Invest Legit?
It’s important to understand the risks of investing with addy. For starters, your principal investment is not insured, nor is it guaranteed by addy. That means that you could lose money. To mitigate your risk, make sure that you never invest money you can’t afford to lose.
You can minimize risk with addy by sticking with Core Opportunity properties. Their focus is to provide a modest level of passive income with low levels of risk – also, addy’s crowdfunding model lowers the risk for individual investors. When hundreds of people own a property, the downside risk spreads across the entire ownership. Of course, this limits the upside as well.
If the safety of principal is your number one priority, and you cannot sustain any capital depreciation, I would recommend another investment, like guaranteed investment certificates or money market mutual funds.
Addy Invest vs. REIT
Some people confuse real estate crowdfunding platforms like addy, with REITs. But the two are not the same.
A Real Estate Investment Trust, or REIT, is a pooled fund that holds real estate-related investments. REITs are traded like stocks on the stock market. Like addy, REITs give average investors a share of ownership in real estate, but that’s where the similarities end.
With REITs, the fund managers decide which properties to hold, and investors are only given general information about the underlying real estate investments. With addy, you decide which property to invest in.
You get access to the due diligence documents on the property as well as the Offering Memorandum. You can even drive by the property and check it out in person if you want – you can’t do that with a REIT.
Lastly, addy always shares ownership in the properties they sell on their platform. They have a shared interest in the success of the properties you invest in.
addy Invest Review: Final Thoughts
That’s it for my addy Invest review. If you know anything about me, you know that I shy away from traditional real estate investing. Aside from my principal residence, I’ve never been all that interested in owning a rental property or flipping a house for profit.
There’s good money to be made in the real estate market, but to me, it’s not worth the complexities and costs involved, nor do I want the headache that can come with being a landlord.
I hold a portion of my portfolio in REITs, which gives me access to the real estate asset class. But I’m intrigued by addy’s crowdfunding concept, and I plan to use it in the future. I love the control addy gives you by letting you choose the properties you want to buy.
Also, I can’t think of any other real estate investment opportunity that lets you get started for as little as $1. But therein lies the problem with addy as a real estate investing platform.
Addy heavily promotes the idea that you only need 1 dollar to invest, but the $25 annual fee means that you’d never make any money if you only purchased a couple of units. Even if you invest $100, it’s the equivalent of a 25% fee every year.
The bottom line? I like addy as a real estate investment if you want to diversify a small portion of your overall portfolio but are prepared to contribute at least $1000.