Cityfunds by Nada Deep Real Estate Investement Review

 Cityfunds by Nada: Stocks and Deep Review

A nice model, really. In essence, they are fractionalizing the ownership of cities.
Let's examine what it all entails.

We're delving into Nada's Cityfunds, a collection of distinctive city index funds, today.

Ever wished you could invest in the whole real estate market of a city?

Say you have high hopes for Austin, Miami, or Atlanta's future. You need access to those markets but lack the funds to purchase several homes. How would you put money into them?

For the first time ever, Nada is a firm that offers index-like real estate funds that enable you invest as little as $100 into popular US real estate markets.

Table of Contents

• Summary
• Housing markets are sort of “stuck”
• What is Nada?
• Who’s the team behind Cityfunds?
• What are Cityfunds?
• Structured like ETFs
• Investment philosophyBuy and Rent (10% of portfolio)
• Homeshares Fractional Investment (90% of portfolio)
• Returns
• Who can invest in a Cityfund?
• Mobile app
• Secondary market
• Fees
• How do Cityfunds stack up?Liquidity
• Accessibility
• Returns potential
• Community
• Fees
• Competition
• Usability
• What’s next for Nada’s Cityfunds?

Summary

• Type: Single-family homes (90% owner-occupied, 10% rentals)
• Accreditation: Anyone can invest. Non-accredited investors are welcome
• Geography: US investors only (for now)
• Minimum investment: $100
• Investment horizon: 5-7 years (but a secondary market for trading shares anytime is coming soon)
• Link: http://www.nada.co/reviewerpoints

The housing market is essentially "stuck"

Most individuals are now aware of the situation of residential real estate.

While property values are declining globally, interest rates are still climbing. No one wants to relocate, and rental returns are increasing (excellent for landlords, awful for tenants).

The entire market seems to be in a deadlock with little hope of resolution. Unfortunately, diversity is always a smart idea, especially when prices are low, as they are right now.

But for many investors, this objective is unattainable. The cost of owning a home has skyrocketed, supply is at an all-time low, and the barrier to entry may be higher than ever.

There are REITs, for sure. However, REITs can suffer when interest rates are increasing and frequently don't have the same localised development potential as a private fund.

That's where Nada involve.

Explaining Nada

Nada is a Dallas-based firm that offers a novel method to acquire real estate in fast-growing cities.

Cityfunds, main offering, allows you to participate in a variety of residential real estate portfolios. Some of America's fastest-growing cities, such as Dallas, Austin, Miami, and Tampa, are the focus of the funds.

Everything is handled through their really tidy app. Click here to download, or use your phone's camera to read the QR code below.

Who is the Cityfunds team?

John Green, the CEO of Nada and managing partner of the business' Cityfunds, is in charge.

How Nada selects the cities where it will invest

types of residences included in Cityfunds

Homeshares' provision of home equity to owners

How they manage risk

How the Homeshares 10-year options contract operates

John really spent the most of his twenties as a punk rocker (), but in the 2000s he made a career change and joined Pacific Union Financial, which was bought out by Mr Cooper (that's a corporation, not a person named "Mister Cooper").

He immediately met co-founder Mauricia Delgado, who had served as Tricolour Auto Group's CEO for many years. Together, they realised they could change the tremendous inaccessibility the real estate business.

What is Cityfunds?

Cityfunds can be compared to an index fund. They are a collection of SEC-qualified assets designed to mimic a city's residential real estate market.

It's interesting to note that Compound Asset Management, a New York-based investment firm, and Nada collaborated to create Cityfunds. Nada and Republic collaborated to crowdfund the introduction of their product.

In August 2021, Republic launched the first Cityfunds, which far exceeded its initial crowdfunding targets. They switched everything over to the Nada app in late 2022.

There are various numbers of properties in each fund.

The most exposed are the two Texan Cityfunds. Dallas has 23 properties, compared to Austin's 26.

Tampa (the newest fund) has only four properties, whereas the Florida portfolios are continually expanding, with Miami having 12 properties.

I do wonder if 25–30 homes would be sufficient to serve as a real "index" of a city. However, Cityfunds never expire. Nada is always striving to expand its inventory of properties.

Austin is a great choice among US cities with rapid population expansion. There is a high demand for houses, and costs are relatively modest. It has the second-fastest GDP growth (after San Francisco) among big cities in America.

Designed like ETFs

The portfolios that Nada uses operate more like passive ETFs than actively managed funds. Every portfolio functions as a market index for the city it follows.

In other words, rather than being influenced by the expertise of an active investment manager, the fund's performance should only be affected by market changes.

This is a bit of a cop-out, to be honest. It abdicates the duty of making informed decisions and paying the correct price for the right properties.

On the other hand, the advantages are plain to see: there are significantly cheaper costs, and there is less reliance on outside judgement.

Nada lets each city's real estate performance speak for itself, so you get to choose the city. All there is to it is that.

It's possible that the "tech exodus" from San Francisco to Miami was exaggerated. However, Florida is home to all 20 of America's top cities with the quickest growth rates. After Austin, Miami is the second-fastest-growing major metropolis in the country.

investment ethos

Nada has a two-pronged strategy to acquire real estate: buy and rent and homeshares fractional acquisition.

There are differences between the two approaches. Nada really uses a 10:1 ratio. They make one transaction for rental revenue for every 10 buys with an equity-building goal. Therefore, with just a very little revenue stream from rental returns, this is primarily an equity play.

(10% of portfolio) Buy and Rent

Here, the method is straightforward. Single-family residences are acquired and rented out by Nada.

The team uses a network of real estate brokers with "boots-on-the-ground" experience buying properties in developing nations. Here, an annual yield of 8–12% is the desired result.

90% of the portfolio is invested in fractional homeshares.

However, Nada has a pretty intriguing alternative method of finding properties. The group enables current homeowners to convert their equity into cash.

That's right, residents are free to utilise the funds anyway they see fit, including paying off debt, making an investment in a different property, or purchasing this street-legal Batmobile. It resembles a reverse mortgage in some ways, but it's not exclusively for elderly folks. This programme is referred to as Homeshares.

The procedure is easy. Homeowners submit an application form, and a Nada equity consultant arranges home inspection. Equity is converted into cash if they approve of the residence.

This strikes me as being among Nada's most intriguing qualities.

I've been wondering for years why reverse mortgages aren't more common (or how they came to have such a poor image). As part of their purchase strategy, Nada is over here making small investments in owner-occupied residences.

Without ever having to enter the property, they get to participate as co-investors. The homeowners also benefit from a simple option to convert their non-liquid asset into cash. Why not adore it? Win-win! (In reality, several homeowners invested in Nada's Cityfunds using the money they got from their Homeshares equity.)

Returns

With the exception of Dallas, each of the four target cities' median house prices has increased in value by a factor of two during the last ten years:

• Tampa increased by 251%, from $155k to $389k.
• Miami: from $225 to $525 (around 233%).
• Austin: $223 to $528 (or around 236%)
• Dallas from $186,00 to $331,00 ( 177%)

Currently with $4.2 million in AUM, Nada's Cityfunds aim for an internal rate of return (IRR) of 12–16%. The intended hold time is between 5 and 7 years.

The Cityfunds have only been in existence since August 2021, and throughout that period they have had an average 12% growth. As of January 2023, Austin has the best performance, returning 14.4%.

Similar to a REIT, quarterly dividend payments are made from the income generated through rental yield and equity growth. The leftover money is invested in new properties, raising the net asset value of each portfolio and the value of its shares (more on this in a minute).

Who can invest money in Cityfund?

Each Cityfund offered by Nada is a Regulation A offering.

Like all Reg A offerings, this one allows investments from accredited and non-accredited investors, although the main limitation is geographical. At the moment, only US investors may participate. (Nevertheless, this could alter in the future.

mobile application

The application is neat and well-made. It provides you with the information you require, including current NAVs, without any extraneous information.

The lack of functionality in Nada's app is one of the reasons I enjoy it. It is easy to use, responsive, and fluid.

Everything you want is simple to locate, whether you're opening a new account or keeping tabs on the value of existing investments.

Recurring investments are one appealing aspect of the programme. You may automatically contribute to your Cityfunds holdings by setting away $100 or more of your weekly income.

Secondary market

One of the biggest problems for real estate investors is liquidity. Selling a home may take months and be a huge effort and money drain while waiting 10+ years for the property to rise adequately.

Fractional platforms are able to address this issue. You must hold onto your shares until the portfolio manager sells the assets because the majority of the ones we've seen don't have a secondary market for selling.

Nada, on the other hand, is collaborating with North Capital, a reputable business, to develop a secondary market where Cityfund investors may exchange their shares at any time.

The secondary market is scheduled to debut in Q3. The NAV (Net Asset Value), which is updated each month for the Cityfund, will be used internally to alter share prices.

(Note: Investors have an intriguing possibility to profit from arbitrage because Nada changes the share prices on a monthly basis. For instance, you may utilise openly available information to learn that the NAV of the Austin Cityfund will rise at the end of the month. However, if you invest in the portfolio before Nada modifies pricing, you would potentially receive exposure to the portfolio at its initial value.)

Fees

Because of its passive management approach, Nada has a very straightforward fee structure.

This isn't a "2 and 20" hedge fund, for example. Their 1.5% annual management cost is slightly over average compared to the 1% that global REITs and Fundrise generally charge, and the team also assesses a 1% acquisition fee for each transaction.

Still, that's it. There are neither performance fees nor incentives. Nothing carries.

Straightforward, like an ETF.

How does Cityfunds compare?

Liquidity

Typically, the largest problem for real estate investors is liquidity. Cityfunds is developing a secondary market where you may exchange Cityfunds for shares.

Although it isn't yet ready, when it is, the liquidity given will be comparable to that provided by real estate tokenization.

Good Accessibility

It's amazing to invest just $100 in a challenging asset class like real estate. Investors of all types, including non-accredited ones, are welcome. The main problem here is geography; Cityfunds cannot currently be purchased by investors outside of the US.

Solid potential returns

Despite being in a difficult situation right now, real estate has historically been a great performer. The growth areas that Nada's Cityfunds focus on have experienced returns of two times or more since 2013.

Over the following 7+ years, each fund aims to achieve an IRR of 12–16%, which looks plausible (but relies on Nada's cost base).

The absence of active management is a drawback. Basically, all you're doing is following each city's real estate trend. (Which isn't always a negative thing, but worth mentioning).

Community-minded and encouraging

The investing community at Nada is close-knit. Republic provided $8.1 million in investment for their 2022 seed round. The Nada banking software has thousands of active users, and the team's initial Austin offering was quickly sold out.

Fees

Quite impressive for a passive fund

With regard to other real estate ETFs as well as some of Cityfunds' rivals, the 1.5% management charge is a little higher. However, given the originality of Cityfunds, it is by no means a deal-breaker.

Competition

There are several options for investing in fractional real estate. Cityfunds and REITs are somewhat comparable, while firms that tokenize real estate (like RealT and HoneyBricks) provide additional liquidity.

Having said that, I believe a few essential features distinguish Nada's offers. For this sort of fund, the method they use to find equity in properties is extremely unusual.

The majority of Cityfund's rivals don't offer index-like exposure to a single city; instead, you generally invest in one property at a time (which is riskier).

Simple usability

The Nada smartphone app appeals to us. Easy to use, with a minimalist UX.

It's important to note that while some reviews have cited compatibility concerns with particular mobile devices, the Nada developers have responded quickly to address these errors.

How will Nada's Cityfunds proceed?

The objective of Nada is to keep creating new Cityfunds.

Nada doesn't plan to confine its operations to the US in the long run. Nada wants to expand internationally as it develops. They have very nothing to prevent them from entering expensive international markets like London, Sydney, Dubai, and Hong Kong.

But in the meanwhile, they will be concentrating on the Mile-High City. Nada's next ride will likely be a Denver Cityfund, which is scheduled to arrive later this year. When the team debuts its ground-breaking secondary marketplace, this will coincide with another significant upgrade.

According to the SEC circular, they presently have 10 cities that qualify under the SEC: Austin, Dallas, Miami, Houston, Tampa, Denver, Nashville, Phoenix, Las Vegas, and Los Angeles. They intend to expand the Cityfunds family to more than 30 US cities.

Each Cityfund will eventually become a publicly traded entity, increasing its accessibility to regular investors.

Nada is certainly a wise investment if you want $100 worth of exposure to some of the US real estate markets that are growing the fastest.

Visit Nada.co and get the app from Google Play or the iOS App Store.

Is Cityfunds by Nada legit?

With a CIK number of 0001874979, Cityfunds by Nada is a reliable investing platform connected to Nada Holdings, Inc. It is formally registered as Cityfunds I, LLC. In accordance with regulatory regulations, the firm has submitted a number of documents and reports, including annual reports and offering statements.