What is LEX?
LEX Markets is a new way to crowdfund real estate investing and one of the most exciting new options for inexperienced investors.
If you weren’t familiar, real estate crowdfunding companies pool money from many investors to purchase, rent, etc., properties and assign equity (or ownership) in those properties based on the proportion of invested capital. In return for fees, the service handles all aspects of the building management, so you don’t have to worry about renting, tenants, leases, or whatever – just enjoy the gains.
LEX Markets sets itself apart in that it acts as a sort of third party between investor and property owner. A real estate property owner approaches LEX Markets to sell “shares” of their commercial buildings; LEX Markets assesses the viability of the property and assigns a proportion of the property to their IPO shares priced at $250. From there, the shares trade on the secondary trading market much like stocks do after an initial offering.
How LEX Markets Started
LEX Markets was founded in the Fall of 2019 by brothers Drew and Dean Sterrett, alongside co-founder Jesse Daughtery. They received $4M in seed funding to get the platform off the ground and an additional $15M in Series A funding in January 2022.
The motivation for the founding was to increase access and liquidity for real estate investment compared to other real estate investment platforms– first; large-scale investing has historically been restricted to accredited investors. Second, equity in real estate can be difficult to sell when desired. The “share assignment” concept of LEX Markets mitigates this issue.
LEX Markets Investment Options
LEX Markets offers investment options in individual commercial properties assessed and vetted by the firm. After the IPO and stock purchase of $250, the individual shares trade on a secondary trading market owned by LEX called LEX ATS (Alternative Trading System), much like stocks do on an exchange. NASDAQ powers LEX ATS, so the underlying technology is reliable.
LEX Markets Pricing
The minimum investment requirement is the price of one share at IPO – this is set at $250, and the property equity percentage varies between deals. After IPO, tradable share costs vary on the secondary trading market.
LEX Market Portfolios
The exciting thing about LEX Markets is the variety and options of available real estate offerings. You can check out their current equities, primarily commercial real estate, at any time on their properties page. Here, you can also see the current share pricing for each property.
LEX Market Performance
LEX Markets has a current historical annual client return of 17.4% – but, since they are so new, we’d like to see some more data as the years go on, although these returns are exciting… especially as the wheels fall off of the stock market.
Strengths and Weaknesses
The sheer accessibility and liquidity offered by LEX Markets is its biggest draw. Bringing real estate equity holdings to the average, non-accredited investor and shaping the platform in a way that allows for easy buying/selling like you would stock is revolutionary.
The fluctuations of the share’s prices may be stressful like stocks are, but never fear – LEX Markets also offers quarterly distributions to shareholders for a constant cash flow. Although property owners are not obligated to pay distributions, any time a property pays any equity shareholder, they are also required to pay LEX shareholders. Think of it like a stock dividend, but one that typically ranges around 8%.
Unfortunately, the biggest downside to LEX Markets is no fault of its own – as such a new company, it isn’t easy to judge its model’s long-term prospects and viability without a more significant period of data. Potential investors should be reassured by the influx of venture capital into LEX Markets – if the big players think that LEX Markets has legs, then that is a good indication of its upside potential and sustainability.
Another mitigant to their newness is that, since they serve as intermediaries, in the unlikely event that LEX Markets liquidates or folds, you still own equity in the original investment.
The fee structure is also confusing. At IPO, a “finder’s fee” goes to LEX Market and varies depending on the property details. There is also a 0.25% quarterly/1% annual fee based on the total public float. The good news is that it is deducted from your distributions, so you never really notice that you’re paying (i.e., if the annual distribution is 8%, you’ll get a dividend of 7%).
Lex Markets Review Final Thoughts
LEX Markets is one of the most exciting opportunities we’ve come across in any market – stocks, crypto, bonds, whatever. This level of accessibility to both accredited and non-accredited investors is unprecedented and game-changing. Also, by ensuring liquidity through a secondary market, LEX manages many issues real estate private equity has when trying to offload individual stakes.
Click here to check out more of what LEX Markets has to offer.