Small Investments For Big Housing

Levi Brackman’s Invown seeks small investors looking to invest in real estate.

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Staff Writer

What If someone told you that you could buy the Brooklyn Bridge for just $200?

You probably wouldn’t bite, even though a surprisingly larger number of people than you’d expect fell for con man George C. Parker’s famous scam at the beginning of the 20th century.

But what if someone told you that you could get in on a $1.2 million real estate deal in North Carolina for as little as $500?

You still might think it’s too good to be true, but Levi Brackman swears the deal, and his idea, is on the level, and so do regulatory authorities.

Brackman, a former rabbi from England, has created Invown, a unique two-sided marketplace where he hopes to help scores of people, normally shut out of the high-priced world of real estate investment, get in the game.

“Real estate is expensive and incredibly hard for the average person to buy or invest in,” said Brackman. “By creating a marketplace where owners seek investors and everyday investors get into real estate at a low financial barrier, everyday people participate in an asset class traditionally dominated by the wealthy.”

The Big Idea

Brackman, a business author published internationally, came up with the idea for democratized “real estate and investment opportunities” after a deal to buy a home he was renting fell through because the owner jacked-up the previously agreed upon price.

“My landlord wanted at least $50,000 more than the market value of the property,” he said.

To mitigate the risk of paying too much for the house, Brackman looked for companies that would invest in the equity with him.

“I found a few but when I ran the numbers and turned their return, based on a modest 3.9% annual appreciation rate, into an annualized interest rate the cost was equal to about 30%,” he said. “In other words, it was a bad deal for me.”

Brackman said the revelation led him to think deeply about homeownership and real estate investing and the roadblocks facing the little guy. He recalled his own childhood with nine siblings and limited resources. Still, his father tried to get into investment opportunities, which were closed to him because he didn’t have wealth or influence

“I wake up every day and think about who I am building this for. It is to allow people like my father — hard working, honest people — the types of financing and investment opportunities the wealthy and accredited have access to,” he said.

By creating a marketplace where owners seek investors and everyday investors get into real estate at a low financial barrier, everyday people participate in an asset class traditionally dominated by the wealthy.

The Details

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.

What’s Next?

The next move, Brackman said, is to get the word out through various media to attract sponsors and investors and to get more real estate projects onto the platform.

Beyond that, Brackman has short term and long term goals for Invown.

On the revenue side he is hopeful that the company will achieve $12 million in investments through Invown by the end of the first year.

And down the road the vision is more philosophical than financial.

“By creating an efficient and fair two sided marketplace for real estate equity, we will have revolutionized how people finance and invest in real estate,” he said.

No Bridges For Sale … Or Anything Else

For those who remain skeptical, Brackman wants them to understand that Invown is not trying to sell anyone a bridge, and that his platform is not actually selling anything beyond access to the platform.

“We facilitate the sale of securities and have the responsibility to ensure that fraud does not occur,” he said, adding that the company is closely watched by FINRA and takes the notion of fraud very seriously.

“Our mandate as a FINRA-regulated entity is to ensure that fraud does not take place against investors,” he said. “No one can guarantee that fraud wont happen. But the concept of funding portals (Invown’s full legal name is Invown Funding Portal LLC and legally designated as an SEC registered funding portal) was set up to do everything humanly possible to limit fraud being perpetuated against the public by issuers.”