Want to invest in real estate with your spare change?
HappyNest lets you round up your spending and put the remaining cents into real estate crowdfunding investments. You can also set up recurring investments, and reinvest dividends automatically.
But for all their technical slickness, HappyNest comes with a few glaring drawbacks. Make sure you understand exactly what you’re getting into before you invest even your pennies.
Key Features of HappyNest
HappyNest is a real estate crowdfunding platform that lets you invest in shares of commercial properties. Here’s what you need to understand about its most important features.
Private REIT
HappyNest structures its investment opportunity as a real estate investment trust (REIT). The HappyNest REIT owns the properties, and you own shares in the REIT.
However, HappyNest does not trade on stock exchanges like public REITs. Like other crowdfunded REITs, you buy shares directly from the company.
That means you also sell shares back to the company, rather than to other investors on the secondary market. This has important implications for your experience as an investor.
Commercial Real Estate
HappyNest owns three commercial properties in their investment portfolio. These include:
- A CVS store in Easthampton, MA
- A FedEx Ground shipping center in Fremont, IN
- An AutoZone store in Brick Township, NJ
When you buy shares in HappyNest’s REIT, you indirectly buy shares in these three real estate properties. The only investment option is the one REIT that owns all three properties.
Accessibility
Anyone can invest in HappyNest, not just wealthy accredited investors. Many real estate crowdfunding platforms only allow accredited investors to participate.
HappyNest also makes it easy for everyday people to invest by setting a low minimum investment of only $10. Contrast that against competitors like Streitwise, which requires a minimum investment of $5,000.
However, you must be a U.S. citizen or legal resident to invest. HappyNest does not allow foreigners to participate.
Long-Term Investment
Selling HappyNest shares isn’t as easy as buying them.
HappyNest expects you to leave your money invested for a minimum of three years. They do allow one redemption within the first three years — but only if certain conditions are met.
Selling Within the First 3 Years
You cannot sell back shares within the first six months of buying, which HappyNest makes you acknowledge as a disclaimer when you sign up. HappyNest also only reviews redemption requests twice a year.
If HappyNest does allow you to redeem shares within the first three years — and it may not — it hits you with a penalty. Like many real estate crowdfunding platforms, the penalty is higher at first, and gets smaller on a step-down basis as you get closer to three years. You can read this early redemption penalty schedule here.
Early Redemptions Not Guaranteed
HappyNest also leaves itself the following escape clause: “Share repurchases are limited to an annual aggregate repurchase of no more than than 20% of the weighted average number of shares of common stock outstanding during the previous fiscal year and, semi-annually, to not more than 10% of the weighted average number of shares of common stock outstanding during the previous fiscal year.”
In other words, don’t invest any money you might need back within the next few years.
Automated Savings & Investment
HappyNest offers several ways for you to invest automatically.
To begin with, the platform lets you set up automated recurring transfers from your bank account to their investment platform. When you first create an account, you can connect your checking or savings account securely to your investment account with HappyNest.
HappyNest also lets you set up automated spare change investing, similar to Acorns. Just link your existing debit card or credit card so that HappyNest can track your purchases. The app rounds up each purchase to the nearest dollar, and when the sum surpasses $5, it automatically transfers the total from your checking account to your HappyNest investment account.
HappyNest also lets you automatically reinvest dividends. In fact, it’s the default setting — you have to manually switch it off if you prefer to collect dividend payments in cash.
Dividends
HappyNest pays quarterly dividends and aims for a 6% annual yield.
While the share price — net asset value (NAV) could also rise, it appears that HappyNest focuses on the dividend as the primary return on investment. The NAV might rise, or it might not, but HappyNest’s sales pitch is the steady, high dividend.
Fees
The platform advertises “0% Broker Commissions” and “$0 Platform Fees.”
Which means they’re burying their fees and income structure within their public offering statement, a strategy I particularly despise as an investor in many real estate crowdfunding platforms.
These platforms have to collect money to keep the lights on. So when you dig into how HappyNest makes money, you’ll see it’s done through Sponsor and Advisor fees.
The Sponsor in a real estate deal is the professional investor who finds, finances, buys, and oversees management of the properties. But the founder and CEO of HappyNest, Jesse Prince, also a principal of the Sponsor and the CEO of the Advisor. So HappyNest makes its money by charging fees as the Sponsor and Advisor.
HappyNest pays up to 3% of gross money raised to the Sponsor, although this fee cannot cause the share price of their REIT to drop below $10. HappyNest also pays a 0.0417% monthly asset management fee to their Advisor, plus 3% in additional fees when they buy or sell a property.
Note that HappyNest doesn’t deduct these fees from your account. It simply reduces the returns you earn on money invested with HappyNest.
The SEC filing does say that HappyNest can charge you an administrative fee of $1 per month if your balance exceeds $5,000. However, as far as I can tell, HappyNest is not currently charging this fee to investors.
Mobile App Access Only
Unlike their competitors, HappyNest does not offer a desktop investing platform. The only way to invest with HappyNest is through the mobile app. It’s available on Android through the Google Play Store or iPhone through the Apple Store.
On the plus side, HappyNest’s real estate investing app feels quite slick and modern. But not everyone prefers managing their investments on their phone, either.
Advantages of HappyNest for Real Estate Investing
HappyNest comes with some compelling features and upsides, particularly for investors new to real estate crowdfunding.
- Low Minimum Investment. At just $10, anyone can afford to dip their toe in the waters of real estate crowdfunding with HappyNest.
- Open to Non-Accredited Investors. Many real estate crowdfunding investments only allow wealthy, accredited investors to participate. HappyNest joins a growing field of platforms available to all investors.
- Passive Way to Invest in Real Estate. Traditional brick-and-mortar real estate investing requires time, skill, and knowledge to do right. But real estate crowdfunding platforms like HappyNest offer truly passive income, with no labor required on your part.
- Automation Options. HappyNest lets you automate your real estate investments in several ways, from recurring transfers to purchase round-ups to dividend reinvestment.
- Uses Your Existing Payment Cards. Some automatic savings apps require you to use their own debit card, but HappyNest ties into your existing debit and credit cards.
- High Target Dividend Yield. HappyNest claims to target a 6% dividend yield each year — a strong income yield, on top of any gains in share price.
- Goal Setting Tool. The HappyNest app lets you enter your investment goal amount and date, and it will tell you how much you need to invest each month to achieve it, along with a button to set up automated investments in that amount.
Disadvantages of HappyNest for Real Estate Investing
For all those perks, HappyNest is far from perfect. Beware these downsides to HappyNest as you decide whether and how much to invest.
- Poor Liquidity. HappyNest is not obligated to buy back your shares. If you sell within the first three years, expect to pay financial penalties.
- Small Portfolio. HappyNest only owns three properties in their real estate portfolio, and they aren’t massive skyscrapers or apartment complexes either. Two of them are individual retail stores, and the other is a shipping fulfillment center. While HappyNest could expand their portfolio in the future, right now it’s a party of three.
- Opaque Fees. HappyNest hides its fees within the legalese of its SEC offering circular — a deceptive practice which calls everything else about them into question.
- Can’t Invest in Individual Properties. You can only invest in the pooled REIT fund that owns all of HappyNest’s properties, not individual ones.
- No Desktop Access. HappyNest only offers a mobile app. There’s no desktop browser login.
How HappyNest Stacks Up
In comparing HappyNest to other real estate crowdfunding platforms, they appear to compare well.
Still, the weak liquidity and lack of transparency with fees isn’t necessarily obvious at a glance. If you’re new to real estate crowdfunding, I recommend starting with Fundrise instead.
I couldn’t find HappyNest’s 2021 dividend yield published anywhere online. I never received a firm answer from them after contacting them several times to ask.
| HappyNest | Fundrise | Streitwise | |
| Underlying Investment | Commercial real estate | Residential & commercial real estate | Commercial properties |
| Ownership Type | Shares in pooled fund | Shares in pooled funds | Shares in pooled funds |
| Ease of Selling Shares | Difficult | Moderate | Difficult |
| Minimum Investment | $10 | $10 | $5,000 |
| Availability | All investors | All investors | All investors |
| Portfolio Size & Diversity | Low | High | Low |
| Dividend Yield in 2021 | Undisclosed | 2.9% to 5.0% | 8.40% |
| Operating Since | 2017 | 2012 | 2017 |
Final Word
Despite being a young field, some real estate crowdfunding platforms feel far more mature than others.
HappyNest feels young to me, as a real estate investor. Its portfolio is extremely small and doesn’t offer much diversification. The liquidity and share redemption plan doesn’t guarantee you can sell shares when you want, and I don’t like the lack of transparency around fees on their website. That said, HappyNest’s team did explain the fees clearly when I emailed them to ask.
For more established platforms offering better transparency, check out Fundrise, Streitwise, or Groundfloor. Or, for truly passive investments offering high historical average returns, just plow more money into the stock market.