Brackman said the company employs two people full time and has two more contractors. Invown also has 10 investors who collectively invested about $500,000 in the concern.
Brackman said the platform does not hold any of the money that is invested with a project.
“The funds are held in escrow with a third-party escrow agent and the sponsor gets access when the round ends,” he said. “If this is for the purchase of the property, then the funds are released to the other escrow agent that is responsible for disbursing funds related to the purchase of the property.”
The company, he said, makes its money through fees that investors and sponsors pay.
“The investor pays a 2% platform fee and the sponsor pays up to 5% platform fee. All fees are held in escrow and are only paid out to Invown at closing,” Brackman said.
The First Deal
After a little more than a year of planning, getting Securities and Exchange Commission (SEC) and Financial Industry Regulatory Authority (FINRA) approval, raising money from investors, building the platform and networking for partnerships, Brackman launched the website in May with the first investment deal, a four-house project in Conover, NC.
The developer, Kurt Chen, and his company, Golden Eagle Real Estate, formed Delta Housing 30X LLC, set aside $400,000 of the $1.2 million real estate deal to build four single-family homes that Invown clients can invest in. Initially the floor for getting in on the deal was $1,000, but Chen agreed to lower the minimum to $500 to attract more investors and increase accessibility.
As of mid-June, 13 people have invested $14,000 in the project, which is under construction and expected to close by August.
Chen’s plan is to rent the houses for the first five to seven years before selling at an expected market peak. The investors, who are asked but not required to stay in for the seven years, are slated to receive their first quarterly return on investment three months after closing, with a targeted annual return of 20.7%.
Chen said Invown’s funding portal was attractive to him because it gives him access to a unique investor class.
“My typical investment is $200,000,” Chen said. “Levi’s investors don’t usually have access to private equity. Levi’s platform opens the door for them.”
Chen said he had no expectations of how much money would be invested or how many would get involved for the first project, especially since the platform is so new.
“It takes some time to ramp it up, but I believe the floodgates will open,” Chen said.
Brackman believes the first project will be a success if the portal transacts $100,000 in investments by the time the deal closes.
Can It Work?
David Sacco, a practitioner in residence at the University of New Haven finance department, believes the platform can thrive.
“It’s definitely viable, a Robin Hood for real estate instead of stocks,” Sacco said. “It will democratize real estate investment if the platform is successful.”
Sacco also believes that Invown is a safe investment because of the regulations applied by the SEC and FINRA and that it will eventually lead to more acceptance of smaller investors in the real estate realm.
Daniel Gould, who was part of an Angellist syndicate that invested in the startup, had some early reservations about Invown around regulatory risk, but Brackman spent enough time working with the regulators and keeping him informed to the point that he felt the risk was well-managed.
Gould said Brackman has identified a white space or open area in proptech that was not yet well served, but that will have significant demand based on his own experience with real estate investing.
“In five years, I see Invown as a multi-billion dollar marketplace (primary and secondary) providing a new type of low friction marketplace for real estate investing, similar to what Robinhood has done for equities and what Coinbase has done for crypto,” Gould said.