LEX Real Estate Investing Platform Review

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What is LEX Markets?

There is no shortage of online real estate investing platforms for investors to choose from. One of the great strengths of these platforms is they allow investors to access real estate deals in markets all over the country. Unfortunately, one drawback many of these platforms have in common is that the best opportunities are largely restricted to accredited investors. 

Another one is the fact that the offerings are typically done through real estate investment trusts (REITs) or crowdfunding, and have hold periods that render investors’ capital illiquid for several years at a time. For years, this combination of non-accreditation, inability to commit to long holding periods and lack of sufficient capital to satisfy high investment minimums has kept most investors frozen out of the best institutional real estate opportunities. 

LEX Markets wants to shatter that paradigm by combining the wealth-building power of real estate ownership with the liquidity of stocks. Instead of raising capital through REIT offerings,  LEX Markets makes their investment offerings public, which allows investors to buy equity shares in a secondary market. Sweetening the package even more, LEX Markets allows investors to buy these equity shares of institutional real estate assets for only $250 per share! 

The LEX Markets business model is not just new, it has the potential to be revolutionary. Contrary to popular belief, the wealthiest investors and most successful institutional funds have significant holdings in institutional quality real estate as opposed to stocks and bonds. With most traditional investments like stocks, you have to sell to earn a profit (although some preferred shares do pay dividends) after it appreciates in value.  

Of course, once you’ve sold it, you can no longer profit from it. By contrast, investors can earn passive income on the rent revenue generated by institutional quality real estate without having to liquidate the asset. Then, as the rents go up, which increases the asset’s value, owners can take another profit if and when the asset is sold. 

LEX Markets offerings give investors the liquidity of stocks with the wealth-building power of real estate ownership. It’s this combination of liquidity and passive income that makes LEX Markets offerings so appealing. 

Imagine, for example, you saw an $11,000,000, class-A mixed-use building in a prime area of New York City, but didn’t have $11,000,000 or even six figures to buy an equity share. With LEX Markets you can buy ownership shares of this building as a stock offering for $250/share. 

You can hold on to those shares, and reap the profits they generate for as long as you like, but if your situation changes and you need to get out of the deal, you can sell them on the stock market.  Sounds good, doesn’t it? Well, this isn’t an imaginary offering. It’s an actual LEX Markets deal on Lennox Avenue in New York City. 

As part owner of a LEX Markets offering, you will be able to enjoy all the benefits of real estate ownership, including the ability to make an annual tax deduction for depreciation. 

The package LEX Markets offerings give investors is incredibly impressive. With that said, they don’t have the diversity of offerings you will find on other platforms. However, when you consider that a small percentage of investors are able to take advantage of the offerings on other platforms, LEX Markets deserves a strong 4 star rating here. 

A platform with such a radical take on investing as LEX Markets must have a comprehensive customer service program. As with all investing platforms, especially one with a new business model, consumer education is a key plank of customer service. LEX Markets consumer education is very solid. Simply clicking on the “Resources” tab of the splash page will reveal a scroll-down menu with the following three choices: 

• Learn
• FAQ (Frequently Asked Questions)
• Blog

The “Learn” section walks investors through everything they need to know about how to invest in LEX Markets. The first article in this section is “How Trading Works on LEX”. After reviewing this section, even a novice investor will be able to understand the workings of the platform and the life cycle of a LEX Markets deal. 

The follow-up sections are LEX vs. REITs (which compares and contrasts the difference between the two investing models) and Making Sense of Cap Rates (an important metric for real estate investments). If you had no understanding of the difference between REITs and the LEX Markets business model, or why Cap rates are so important, you would be informed enough after reading these primers to feel confident making an investment. 

The FAQ page does a very good job of dealing with any other questions investors might have. Covered topics include:

• Compliance, risk and taxes
• Getting started 
• About LEX
• Account, privacy and security
• Reporting (taxes)
• Legal
• Property owners

If you have questions that this very well-stocked section doesn’t answer, simply emailing the customer service team at [email protected] will get you a quick and thorough answer to your inquiry. The only thing missing from here is a Youtube channel explaining everything. However, the total customer service and client education package LEX Markets is very impressive. This is a strong 4 star effort. 

No investing platform is complete without a robust set of security measures. After all, the financial data maintained by a platform like LEX Markets is the type of info hackers drool over. It’s obvious LEX Markets realizes this. They take very strong steps to secure their client’s information. That starts with what they call “institutional-grade” security protections such as SSL Certificates and periodically conducting “penetration tests” to ferret out any potential weaknesses. 

Investor funds are held with a third-party custodian, Apex Clearing Corporation. LEX and APEX are also members of the SIPC (Securities Investment Protection Corporation), which is the investor equivalent of the Federal Deposit Insurance Corporation (FDIC). That means investor deposits are insured for up to $500,000 in securities (stocks) and a maximum of $250,000 in cash. 

Best of all, LEX Markets does not sell investor information to any third parties or data mining corporations. That means you don’t have to worry about getting a dozen phone calls from their cooperating vendors after investing because LEX Markets doesn’t monetize your information in that way. The more security the better.

LEX Markets does have a mobile app that is available to iPhone and Apple users, who rate it very highly. Currently, it’s rated at 4.2 stars out of a possible 5 by the Apple community. Functionality is high and the user experience largely mirrors that of the dashboard or account section on the desktop application.

 It’s always a nice value add for users when a platform has a corresponding mobile app. That’s especially the case with a platform like LEX Markets, which allows investors such a high level of liquidity with their investments. The addition of an Android option would take them to 5 stars here. Until then, the LEX Markets mobile app earns a solid 4 stars.

The user experience at LEX Markets is certainly on par with that of competing platforms. Finding offerings, accessing important information and signing up is all very simple. The same holds true for getting basic questions answered or contacting the LEX Markets client services team. All of that is in addition to the fact that LEX Markets lets “regular guys” invest in institutional offerings without breaking the bank. Overall, it’s definitely a 5 star user experience. 

LEX Markets vs. Competitors

At the moment, LEX Markets stands alone in this particular method of real estate investing (taking buildings public like stocks). With that said, there are some competing platforms in the real estate tokenization arena such as AKRU and Redswan that offer investors high liquidity and low buy-ins. 

However, one major difference between LEX Markets and the tokenization platforms is that you can only liquidate your tokens on blockchains run by the platform. Other similarities and differences between LEX Markets and competing platforms can be found in the chart below.

The ingenuity and appeal of LEX Markets’ business model is obvious. Allowing investors to take advantage of institutional quality real estate offerings by taking the underlying assets public is one of those ideas that’s so good, you can’t help but wonder why more platforms aren’t doing it. It’s important for investors to understand that potential liquidity is not a guarantee of liquidity. Just because you can put your share up for sale doesn’t mean someone will buy it. 

However, the fact that you can trade it publicly instead of being limited to a REIT’s secondary market or real estate tokenization platform’s blockchain gives you a much better chance of liquidating your investment. The only thing keeping LEX Markets from a 5 star rating is the comparative lack of offerings, which is something that may change in the future. Non-accredited real estate investors should take a long, hard look at this 4.5 star platform. 

Frequently Asked Questions

The post LEX Real Estate Investing Platform Review by Eric McConnell appeared first on Benzinga. Visit Benzinga to get more great content like this.