Real estate holds incredible investment opportunities for anyone able to get their foot in the door. Although challenging in the past, LEX Markets makes it possible for more than just institutional investors to make money in the space. Check out our LEX Markets review to find out everything you need to know about the opportunities on offer.
What Is LEX Markets?
LEX Markets LLC is a commercial real estate marketplace offering a new means to get involved in real estate investing. Property owners sell equity shares in commercial real estate buildings, allowing investors to purchase them. This allows owners to access a capital source for future projects.
A stable underlying real estate property pays out quarterly distributions to equity owners as an incentive for investing.
Is LEX Markets Safe?
When signing up, LEX shares your information with Apex Clearing Corp. This custodian holds your cash and helps manage securities sales. Both companies are members of SIPC and insure your account for up to $250,000 in cash and $500,000 in securities.
Anyone making an investment decision should be aware there’s no guarantee of a profit on selling your equity, or for the owner of a commercial real estate building to provide constant distributions.
How Does LEX Markets Work?
Property owners list their individual commercial properties in an initial public offering (IPO) and subsequently trade them on the secondary market. Investors can buy or sell equity through the LEX alternative trading system (ATS), fueled by NASDAQ’s marketplace services platform. LEX makes its platform available to accredited and non-accredited investors alike.
What Happens When a Property Is Sold?
When commercial real estate owners sell a property, anyone invested before the sell date will receive their pro rata portion of the sale price in the form of one final payment.
Who Owns the Real Estate?
The commercial property can be controlled by an individual, family office, REIT, or institutional investors. All real estate owners must pass through a series of checks to list their property on LEX’s platform.
Owners are required to keep at least a 50% equity stake, and a portion of the remaining equity is owned by LEX investors. This allows investors direct property ownership and the tax advantages it brings.
Are IRAs Supported?
At this time, it’s not possible to purchase shares with funds from your IRA. LEX Markets Corp intends to implement this feature at some point in the future.
Who Can Use LEX Markets
LEX’s alternative trading system is available to any U.S. citizen or permanent resident age 18 or older. Those signing up need not be accredited investors.
Currently, international investors cannot use LEX’s investment services. The trading platform hopes to make its system available to those living overseas.
How Does LEX Markets Make Money?
LEX Markets collects a one-time placement fee from property owners when listing a property during an initial public offering.
LEX does not charge a commission on its alternative trading system. To make money, the trading platform collects a quarterly fee of 0.25% (1% annualized), based on a trailing 90-day market value. This amount is taken straight from an investor’s regular distributions.
How Do I Make Money with LEX Markets?
The team at LEX markets screens each of the commercial real estate buildings and determines the property’s likelihood to pay out quarterly distributions to LEX shareholders. When investing in commercial real estate on LEX’s platform, investors can make money whenever a property owner pays distributions, or when the property appreciates in value.
There is no guarantee that commercial real estate properties will be able to make distributions regularly or at the rate that LEX estimates.
In addition to generating passive income from such an investment, it is also possible to make money when you sell shares at a higher price than you paid to purchase them because of market factors make the property more valuable.
LEX Markets Features
As you browse commercial real estate properties on the LEX Markets trading platform, it’s your choice which buildings to invest in. The detailed information for each holding helps determine locations with the highest potential.
Through this process, you can build your portfolio of investments and aren’t stuck with a set number of buildings that come along with a REIT.
You can buy actual equity shares of commercial real estate buildings through LEX Markets. Both accredited and non-accredited investors can partake in IPO and secondary trading through the LEX ATS.
Investments you make will hopefully generate cash distributions through rent from tenants in the commercial real estate building. Property owners then pay your proportional share of rental income back to you in the form of dividends.
Because this rate depends on the financial success of the commercial space, there is no guarantee you’ll receive the estimated amount each quarter. Reduced tenant demand or another economic risk can affect distributions.
All investors with LEX shares in the property will get paid the same dividend per point of equity.
Just like trading on the stock market, it’s also possible to earn appreciation from buying and selling equity if the value of the asset increases. LEX’s alternative trading system makes it easy to do so on the secondary market.
You can buy and sell shares between 9:30 and 4 pm EST on the LEX trading system. When purchasing shares as part of an initial offering, you won’t have access to these previously unlisted equity securities until the offering closes. At that point, you can trade as normal.
There are no lockups or holding periods when it comes time to exit holdings.
The lowest you can go on LEX Markets is the cost of a single share. When a property hits initial public offering, each share is priced at $250. As it slides to the secondary market, share values can move up or down with supply and demand.
LEX Markets Fees
As an investor, you’re never charged transaction costs for any trades you make. Instead, LEX Markets pulls 0.25% of your distribution earnings each quarter as it’s cut for doing business.
Withdrawing some or all of your available cash from LEX Markets couldn’t be easier. After navigating to your account page, you’ll have the option to either add or remove money from your account.
Should you want to transfer securities to another brokerage account, you will need to contact customer services.
Is LEX Markets Legit?
The brains behind LEX Markets saw the need for a real estate investment company where it was possible to directly own property even as a non-accredited investor. The concept came to life in 2017 as a secondary marketplace and has been making waves ever since.
Using the Jumpstart Our Business Startups Act (JOBS), LEX Markets can issue shares that even non-accredited investors can purchase. The process even allows shares to be listed as low as $250 at initial public offering.
To date, more than 20,000 investors are making use of LEX Markets’ commercial real estate investment opportunity.
LEX Markets Pros and Cons
LEX Markets has a lot of positive momentum, being the first platform of its kind to provide such a service to the masses. It isn’t without its flaws, however.
Let’s take a look at its pros and cons.
- Available to most investors
- Simple, easy-to-use system
- Can buy shares for as low as $250
- Allows for self-directed investing
- Able to purchase shares of individual properties
- No lockups or holding periods
- Zero commission on trades
- Opportunity to generate passive income
- 1% distribution fees per year
- Direct ownership of commercial real estate
- Not available to individuals outside the United States
- Can’t use an IRA to purchase shares
- Only focuses on real estate
LEX Market Reviews
There aren’t many LEX Market reviews floating around the internet, but what is out there looks quite favorable. Listen to what investors have to say about the service:
Similar positive reviews appear on the Apple Store, where users can download a mobile version of the platform. Overall, LEX Markets has a review score of 4.2.
LEX Markets Final Review
There’s a lot of money to be had in property ownership. LEX Markets offers a unique access point for individuals to get involved in real estate where only institutional investors could previously tread.
Its simple trading system makes it possible for anyone to purchase direct ownership of commercial properties with the click of a button.
Better yet, LEX Markets doesn’t charge a fee to sign up or trade. The platform takes only a small percentage of the dividends you earn at the end of each quarter.
While there are still risks with any investment, LEX Markets is a great way to get involved in real estate.