Real estate has long suffered from a liquidity problem. Many direct real estate investments—including development capital, private placements, and crowdfunding—lock up your capital for a 5+ year hold period, and larger projects can require a 10+ year commitment. Understandably, this lack of liquidity is a dealbreaker for most individual and institutional investors.
One of the primary advantages of investing with LEX is access to liquidity through our secondary marketplace. Orders can be placed whenever the markets are open, from 9:00 a.m. until 4:00 p.m. ET. Assets on LEX can trade just like any other stock in your portfolio, with a ticker symbol and CUSIP number, and can be held in any brokerage account. LEX securities are already held by investors at Schwab, Merrill Lynch, and more.
Let’s take a look at how trading on LEX works.
After you log into your account, you can navigate into the ‘Properties’ tab to view assets currently trading on the platform. When you click into a specific property, you’re presented with the information you need to make an informed investment decision: business plans, financials, tenancy, management info, and more.
To the right of the main share price chart, you’ll find information about the top bids & asks and fields where you can input order-specific information like limit pricing, share quantities, and order expiration dates.
In financial markets, buyers purchase a security by offering a “bid" price. The “ask” price is the other side of a transaction: the price a potential seller is willing to accept for a security. The ‘Book’ tab offers a breakdown of the current bids and asks for a specific asset. Our trading system matches these bids and asks in real time during the trading day.
In the example above, you can see that current TESLU shareholders are asking for a minimum of $265 to sell their shares. In a situation like this, an investor looking to purchase a stake in TESLU would need to place a buy order at a limit price of $265 to complete the transaction. An alternative approach is placing a limit order below $265 with an expiration date up to 90 days in the future. Then, if a share of TESLU is listed for sale at or below the limit price within the next 90 days, our ATS would automatically complete the transaction.
On the other side of the coin, if you wanted to sell a share of TESLU, you could find a buyer at any price at or below $254. In this situation, you’d be able to exit your investment without any sort of early exit penalty, something few other commercial real estate investments can offer. Trades on LEX settle in the same way as trades in public stocks do, with a “T+2” settlement timeline. Two days after the trade is executed, funds are placed into the seller's brokerage account and the shares are placed into the buyer’s brokerage account.
Potential investors are encouraged to consult with professional tax, legal, and financial advisors before making any investment into a securities offering. This investment may not be suitable for all investors. Distributions and liquidity not guaranteed. Property performance and performance of property tenants not guaranteed. Diversification does not eliminate the risk of experiencing investment loss.
All examples are hypothetical and do not represent any specific investment.
September 20, 2022
The goal of this article is to offer practical guidance on how to begin building a real estate portfolio, and how the risk and return profiles of different assets fit together.