For those who don’t know, Tulsa Real Estate Fund (TREF), the first 100 percent black-owned Tier 2 Real Estate Crowd Fund, has launched. As of recently, they have raised over $7.1 million smackers with the goal of investing in real estate and combatting gentrification. 

TREF is not based in Tulsa, Oklahoma despite the name. They were inspired by the horrific events of what happened at the historic Black Wall Street of Tulsa. The company states the following:

"Tulsa Real Estate Fund is an SEC qualified Tier 2 crowdfund and economic vehicle inspired by the historic Black Wall Street of Tulsa, Oklahoma, created for the revitalization of urban communities and as a means for investors to own shares and equity in a portfolio of real estate assets that will combat gentrification."

I understand that a lot of people resonate with the mission, but I ask you to slow your roll and keep reading before you send over your cash.

What is a Real Estate Crowdfund?

Similar to many other crowdfunding campaigns hosted on Kickstarter, a Real Estate Crowdfund is crowdfunding with the goal to invest in real estate and provide an ROI for investors. The concept behind crowdfunds is that many people who are willing to invest small amounts can raise large sums quickly.

What is a Real Estate Market Tier 2

In terms of investing there are three tiers that categorize real estate funds depending on the stage of development of their real estate market. According to the site, TREF is at tier 2. My favorite finance source, Investopedia, defines each tier as the following:

Tier I - Cities have a developed, established real estate market. These cities tend to be highly developed, with desirable schools, facilities, and businesses. These cities have the most expensive real estate.

Tier II  - Cities are in the process of developing their real estate markets. These cities tend to be up-and-coming and many companies have invested in these areas, but they haven't yet reached their peak. Real estate is usually relatively inexpensive here; however, if growth continues, prices will rise.

Tier III - Cities have undeveloped or nonexistent real estate markets. Real estate in these cities tends to be cheap, and there is an opportunity for growth if real estate companies decide to invest in developing the area.

In layman terms, TREF is focused on new developing areas for real estate investing.

Things to know about the TREF (Read this twice)

  • There is a minimum $500 investment (10 shares) to become a member. This amount is locked in for 12 months.
  • After 12 months you can request money back, but the company isn’t obligated to liquidate assets to pay the money. In layman terms, you may not get all of your cash back.
  • No fee for processing ACH payments, unless rejected for insufficient funds which will trigger a $5 fee
  • $25.50 processing fee for each time your account is funded. $3 additional for countries outside for UK & Canadian investors. $60 additional fee for countries outside the UK & Canada.
  • You can fund your account anytime after June 1st up until we reach our $50 million dollar cap.
  • Before it’s IPO the company had $0 in cash and total liabilities of $15,350. This is a red flag because owners don’t have much skin in the game.

Important Money Facts

  • TREF does have a 5.5 percent Management Fee on your investment.
  • TREF has an 8 percent preferred return for investors (ROI before the company makes a profit).
  • TREF is aiming to distribute 50 percent of profits to investors. The other 50 percent will go to the company.

TREF Signing Up

The other night I signed into the website and went through the typical process of making an initial investment. The site is user-friendly and walks you through each step to invest. I believe all fees are in the open, but investing intentions are still vague at this time.

Personal Opinion (If You Care)

Disclaimer – I am a straightforward (handsome, too) kind of guy. The following is just my personal opinion and not in any form investing suggestions. If you are considering about investing, I suggest to do additional research (as you should for any investment) and/or speak with your financial advisor. If you don’t have a financial advisor, I am going to need you to fix that, though!

I wasn’t able to find much information on how the money will be invested besides the areas and in single-family homes. The company states: “created for the revitalization of urban communities and as a means for investors to own shares and equity in a portfolio of real estate assets that will combat gentrification.” I’m curious about how profits will be made in gentrified areas. Simply put, how is the company going to combat gentrification while earning a profit? If a home is purchased, renovated and sold, that is already what happens in gentrified areas. Another option is to rent homes in the areas, but I imagine that would be fewer profits. Needless to say, I am concerned with how the company makes profits, or will the mission change down the road?

My wife and I are likely to invest down the road after the hype goes down after to see what actual work is being done. We aren’t investing in making a profit, but because we resonate with the message. Making an ROI is an added bonus, if that does happen. Honestly, if we were focused just on ROI we would look toward more established REITs. And I hate to say it, but this may be another hyped up investment like bitcoin, where once the excitement goes down, so does everything else. Only time will tell.

Bottom Line

TREF was established in 2016 and the reality is the investment is purely speculative at this moment. Meaning there isn’t enough (or any) history of data to determine investing patterns, how the company handles money and (very important) what types of investments will be purchased.

I would only recommend this fund to savvy investors who can understand the concept and have funds before a decent payout. The fund will “lock” your investments for 12 months, which means if you needed the money back after six months, the company will not liquidate any property to return your money. Also, let me reiterate that they have no known experience or track record. This is a risky investment!

At the end of the day, there are other REITs that have a reputable track record. So, it really comes to a personal decision of why you want to invest in the fund. Are you a believer in the mission and want to put your money where your mouth is? Are you looking a high ROI? Or are you looking for both?  As always neighbors, be careful before making big investments. In addition, if you have to struggle to invest the minimum $500, then it’s likely you need to focus on other financial areas (a harsh reality check).