Holdfolio 2024 Comprehensive Review and Ranking

What is Holdfolio?

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To avoid the financial conflicts-of-interests that are rampant on virtually every other review site, I DON'T accept any money from any outside sponsor or platform for ANYTHING (including but not limited to affiliate ads, advertising etc.). See code of ethics  for more.
 

Holdfolio specializes in equity investments (such as multifamily value-added deals and formerly single-family residential rentals although they appear to have moved away from that). After moving to 3rd party sponsors (from directly managed), they now claim their current portfolio contains "multi-family, self-storage, senior living, mobile home parks, mixed-use commercial and hospitality". Most deals are a single property while others are multi-asset funds. Projected returns vary from 15 to 19% IRR.

Claims of full bankruptcy protection and skin in the game are pluses while lack of full-real estate cycle experience may be a deal-breaker for some. Volume is exceptionally low compared to other platforms and minimums are a little higher. (More on these in the "pros and cons" section).

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What's the Latest Feedback on HoldFolio?

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Yearly Investor Survey (updated August 30, 2023): 
 

For the second year in a row, there was a very low volume of investors saying they had used the site in the last year. Prior to that, the site had a larger number of these responding.

And, for the third year in a row the site continues to have exceptionally low volume. Currently there is only one offering available.

And without sufficient volume, even the best site becomes useless to investors. And, many times a severe lack of volume has preceded a site shutting down.
 

So, HoldFolio is being moved from "Up and Coming" to "On probation".  And hopefully we will see improvement next year.

 

How does Holdfolio work?

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Update August 26, 2024:  Holdfolio says they no longer acquire, operate, and manage assets themselves (and instead offer 3rd party sponsors).

They charge a one-time fee of 2.5% of the investment amount upfront and no ongoing fees. And they say they have a profit sharing provision where they share in 20% of the returns over a 10% annualized return. For example, if a deal earns 15% annualized return, then 14% goes to investors and 1% goes to Holdfolio.

Holdfolio claims that since they invest in their own deals, they personally handle all communication, follow up, and details directly with the sponsors. So investors do not have direct access to the sponsors. Instead, if investors have questions, then Holdfolio addresses them as an intermediary. 

Having an intermediary could be more convenient for investors while also being an extra risk factor (should Holdfolio go out of business).
 

What are Holdfolio Pros and Cons?

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• Advantages: Platform claims to co-invest an average of 4 to 10% of equity in each deal, with full bankruptcy protection.
   

• Disadvantages:  Exceptionally low volume. Minimums are average to a bit high at $10,000-$20,000. (average is $20,000). No full real estate cycle experience.
   

• Accolades: Platform co-investment

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Skin in the game is one of the best ways to mitigate the fact that the sponsor promote compensation structure otherwise incentivizes sponsors to push the risk envelope.

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So if Holdfolio typically coinvests, as they claim, 2% to 5% of the equity in its deals, then that is better alignment than no skin in the game. 

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On the other hand, I personally like to see 5-10% co-investment, and so below 5% is too low for me. A different investor (with a different risk tolerance and /or coming from a different place) will view this differently.
 

It also claims to have full-featured bankruptcy protection including bankruptcy remote LLC's and the ability for shareholders to vote on a new administrator should Holdfolio go bankrupt.
 

The fees range from average to higher than average (see the analysis of a sample deal below).
 

The platform's biggest weakness is the extreme lack of volume. Currently, there is only 1 deal on the site, and in the last couple months beforehand, there were none. So an investor who is regularly checking the sites for investments may find it frustrating to keep checking Holdfolio. (Note: the site claims they have averaged a deal per month over the last few years with dry spells of "several months possible"). 

Its biggest flaw to many may be the fact that they don't appear to have full real-estate-cycle experience. With so many much more experienced sponsors to choose from in multifamily, some investors may find it difficult to go with Holdfolio.

Also, the minimums are average to a bit high at $10,000-$20,000. (The average is $10,000).​​

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Is Investing In Holdfolio Legal?

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Holdfolio markets to investors primarily under 506B On these deals, new investors are generally not able to view investments immediately and there's a waiting period. On these deals they accept accredited investors and up to 35 qualified non-accredited investors per deal. They also do some 506c deals on occasion.  

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What does a Holdfolio deal look like?

 

Here is my step-by-step due-diligence on a random Holdfolio  investment. So it may or may not be a typical investment. Also I'm a very conservative investor, so something that's way too risky for me might be the perfect fit for someone else who is more aggressive. Finally, I'm not a financial advisor, attorney or accountant. So this is just my personal opinion and always consult your own financial professionals before making any financial decisions.
 

The investment is an acquisition of an 80-unit multifamily property located in Louisville, Kentucky. The property is currently 57% occupied and consists of 16 one bedroom and 64 two bedroom apartments. Projected IRR is 14.6 to 21.3%. Minimum investment is $25,000. The term is indefinite.
 

The first step is to make sure that the asset class and strategy even make sense for my portfolio. (If you don't know how to do this, please see The Conservative Investor's Guide to Due Diligence). Let's assume that it does make sense for me, and dive in.

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Sponsor experience: as a conservative investor and someone who believes that we are late in the cycle, I don't want an inexperienced sponsor learning expensive mistakes with my money. In a mainstream asset class like value-added multifamily, I require full real estate cycle experience in that exact strategy with no money lost.

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The offering documents are not complete enough to detail the historic track record of HoldFolio. If I were interested in this deal, I would follow-up and find out the complete performance of all of their past multifamily deals (both realized and unrealized).

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However, there are some clues in the history of past deals of the website. The vast majority appear to have been single-family housing, and they more recently moved into doing multi family. This would be only their third deal, and apparently all have been within the last couple of years only.  If this is accurate then for me this would be a red flag. An investor who's more aggressive or who is not concerned about a downturn may not have an issue with this.

 

The other two multifamily deals that they did were also around the same size as the current offering (very small: around $1 million). So that is better to see, than to see them stretching into something completely beyond their past experience.

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Skin in the game: as a conservative investor, I want to see considerable skin in the game (5 to 10%) to offset the fact that the promote structure incentivizes the sponsor to take risk. If the sponsor doesn't have much money, I at least want the skin the game to be considerable to them. In this case they are putting in $50,000 or 4.7%. That to me is a little low but probably okay.

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Debt: At this stage of the cycle I require conservatively underwritten debt at 65% LTV maximum, to minimize the risk of a complete collapse in a downturn. This deal is at 70% which to me is either a yellow or red flag. I would have to really love everything else about this deal to go forward. An investor who is more aggressive or not concerned about a downturn might be fine with this.

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To eliminate refinance risk and interest-rate risk, I require long-term debt (7 to 10 years) at a fixed rate. This debt is a seven-year term which to me is a big positive. The interest rate is not fixed however and is an adjustable rate mortgage. For me this is a red flag. Someone who is not concerned about the risk of interest rates going up might be fine with this. 

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Fees: 2% asset management fee is well above average. (1 to 1.5% is average). The other fees are within average ranges (acquisition fee of 3%, disposition fee of 2%, construction management fee of 3%).

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Profit split. The typical crowdfunding/syndication deal has a preferred return between 5%-8% and the investor is entitled to that before the sponsor starts to take any of the profit. The conventional arrangement is fair because the investor is the one putting up all the capital, and is entitled to first dibs.

 

However, there does not appear to be any preferred return at all listed in the operating agreement. If that's correct, then this is equivalent to a 0% preferred return, which is extremely uncompetitive. For me this would be a red flag, but someone who really likes the sponsor might be fine with it. The other issue I have with any above average promote is that it incentivizes the sponsor to take more risk.

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HoldFolio appears to start taking its cut on distributions right away with an 88% investor/12% sponsor split. The investor is getting a little bit more than average (typically 75% to 85% investor). However, when combined with the lack of preferred return, it is not competitive with other options.

 

In this case, there is also a clause that says that after the investor gets back all their capital, the split degrades to 40% investor/60% sponsor. I look at hundreds of deals monthly and can't remember ever seeing an investor split on a multifamily deal this slanted against the investor.

 

Maybe someone might argue that this has a very low chance of kicking in because it requires a very high level of distributions in order to happen. The counterargument is that it wouldn't be in the legal agreement if there was no chance of it happening. For me this is another red flag, although others might disagree. 

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When the sale occurs, after the return of capital the split is

70% investor/30% sponsor. This is on the low side of average (70 to 85%) and in my opinion is fine.

Miscellaneous: Holdfolio is probably one of the most difficult sites in which to read legal documents. Rather than displaying them in the full browser like others do, they instead show them in a tiny lightbox. So for example, to read a single page, you have to scroll several times. This is beyond irritating when you have to read something that is 70 or 80 pages. Hopefully they will change this soon.

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If the investment passed all my initial checks, I would have dived in further to check out the sponsor, the property itself, the projections, etc. To learn how I do those things, check out The Conservative Investors Guide to Due Diligence.

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Where can I discuss other HoldFolio deals?

You can do this with thousands of other investors in the private investor club. While the club is free, membership is restricted to investors who have no business connections to sponsors or platforms. Also, all members must agree to keep all club info confidential by signing a nondisclosure agreement. Click here to join or get more info.

 

Who are HoldFolio Competitors?

Here are the reviews and rankings for other similar sites.

 

• CrowdStreet

• 1031 Crowdfunding

• Real Crowd

• ArborCrowd

• Carlton Crowdfund

• Share States

• Roofstock

• Roofstock One

• SBRE Funds

• First Real Fund

• Realty Shares

• Equity Multiple

• Realty Mogul

• C.K. Mack

• Lending Home

• Holdfolio

• CityVest

• Prodigy Network

• Instalend

• Cadre

• All other sites (ranked and reviewed)

How do I invest in equity and/or debt?

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Looking to learn more about real-estate investing?

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• What are the 4 investment strategies? (Part 1: core and core+)

  • What are the 4 investment strategies? (Part 2: value-added and opportunistic)

• Should I invest in residential or commercial real estate? (Part 1: residential)

  • Should I invest in residential or commercial real estate? (Part 2: commerical)

• What is the difference between equity and debt?
   

Related:

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How to pick? Check out our step-by-step guide.
 

• The quick guide to picking conservative real-estate deals
   

• Top 100+ accredited investor sites (ranked and reviewed)