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LEX Markets makes investing in commercial real estate more affordable. It has a minimum investment requirement of $250 and requires no accreditation. It also offers individual contracts instead of cash, although options are limited because the company is so young.
Pros & Cons
Pros
- Minimum initial investment: $250
- Low 1% annual management fee
- You can buy and sell shares at any time
- LEX Markets is a FINRA registered broker-dealer and SIPC insured
- Cash distributions are paid quarterly
- No accreditation required
Cons
- limited history
- Limited number of offers
- You cannot currently invest through an IRA
- Low liquidity of share sales
What Is LEX Markets?
LEX Markets LogoLEX Markets is a real estate securities market founded in 2017. For investors, LEX provides easier access to individual commercial real estate transactions to help diversify their portfolios. And for real estate owners, it provides an efficient way to raise capital.
At first glance, LEX looks a lot like many other real estate crowdfunding sites. However, it offers individual commercial real estate opportunities, while many competitors offer multi-purpose financing. And because shares start at $250, it has a lower barrier to entry than some platforms that charge $5,000 to $25,000 or more for individual trades.
Furthermore, LEX explains how only 1% of bidders are listed on the platform due to their rigorous due diligence process. There are also certain requirements, such as a minimum of $10 million in assets and a positive cash flow history, for the offer to be approved.
How Does LEX Markets Work?
LEX Markets is available to any US investor over the age of 18 and there are no accreditation requirements. After signing up, you answer a short questionnaire about your investment goals, risk tolerance, income level and when you plan to invest.
From there, you can view and purchase shares for various income producing properties. At the time of writing, LEX has two properties open and a third property coming soon. The company invests in commercial real estate such as commercial buildings or apartment buildings. And, most importantly, the buildings are already developed and generating income, so you don't have to wait years for the project to actually come to fruition.
Shares start at $250 at the time of the property's IPO, but can fluctuate thereafter based on supply and demand. And one unique aspect is that it securitizes the assets so that the shares can be traded just like you would REIT stocks or shares. It has its own trading platform, the LEX Alternative Trading System (ATS), built on NASDAQ trading technology to enable day trading.
When buying stocks, you can see a breakdown of the real estate loan-to-value ratio, implied valuation, 30-day trading volume, and declared distributions.
As you can see from the purchase order screen above, the LEX platform works more like an online broker than a crowdfunding company like Arrived Homes or HappyNest. However, the idea is similar in that it allows investors to buy shares of income-producing property.
How do Cash Distributions Work?
With LEX Markets, you invest in commercial real estate that is already generating income. This differs from some fractional real estate investment platforms that also offer residential real estate, such as single-family homes. However, the distribution process is similar to that of most crowdfunding platforms.
LEX calculates and pays cash distributions quarterly. According to LEX, “distributions are calculated at the property owner's discretion to give them flexibility in operating the asset. There is no set formula, but distributions generally come from the net cash flow of the building after paying off running costs and property debt payments.”
However, if owners pay cash distributions to owners, including themselves, they must pay shareholders at the same rate. The cash appears in your brokerage account and you can then withdraw your funds or invest in additional stocks.
A feature that also highlights LEX is that the offerings are structured as a publicly traded company (PTP). This means that only a portion of the income is taxed as ordinary income. Investors actually receive a Schedule K, which is used to report income, losses, and dividends to business partners or S-Corporation shareholders. This transfer tax is different from filing a Form 1099, which is issued to many crowdfunding companies.
I'm not currently invested in LEX Markets, so I can't verify how they fare after tax season. But the transfer tax model is a unique selling point the company emphasizes. If you plan to invest, consider talking to your accountant or learning about the differences in tax rules.
LEX Markets Fees
LEX Markets charges a quarterly fee of 0.25% based on the last 90 days of the property's market value. This translates into annual fees of 1% per year. There are no additional commissions or trading fees for investors to worry about.
Property owners determine whether and what cash distributions will be made on the property and may incur various administrative fees before paying distributions. You can view a breakdown of fees and expenses in each listing to get a better idea of what the operating costs are.
Paying 1% is low in the world of real estate investing. But again, read the financial statements carefully to assess how operating expenses may affect distributions.
Liquidity
Because it has its own trading platform, LEX offers more liquidity than many real estate crowdfunding companies. Investors can buy and sell stocks when the markets are open, and there are no minimum sales requirements or penalties.
However, take this liquidity with a grain of salt. At the time of writing this report, open stocks have 30-day trading volumes of 102 shares and 140 shares, respectively. This is a very low trading volume, so liquidity is not guaranteed. Investors should still consider this a long-term investment unless trading volume shows consistent growth.
How to Contact LEX Markets
You can contact LEX Markets by calling 212-941-2700 or email The site also has a comprehensive FAQ section for both investors and homeowners.
Is LEX Markets Safe?
LEX Markets is a FINRA-registered broker-dealer and regulated by the SEC. This means it is licensed to facilitate securities transactions, allowing investors to trade individual shares of property. And because you work with SIPC member Apex Clearing Corp, you also get up to $500,000 in insurance on your securities and up to $250,000 in cash balances.
There are still risks in real estate investing, especially when it comes to personal property. Cash distributions are also not guaranteed and share prices may decline. Sticking with commercial REITs or real estate funds can help reduce your risk compared to investing in individual deals. Ultimately, you should do your due diligence and consider the risks involved in this type of real estate investment.
Best Alternatives
With no accreditation requirements and access to individual commercial real estate, LEX Markets sets itself apart from many of the big players in the space. Its low 1% annual management fee and custom trading platforms are also advantages.
However, LEX is a new company and it shows when you look at the lack of current offerings. Lack of historical performance data is another unfortunate and unavoidable hurdle that new investment platforms must face.
Fortunately, there are many alternatives you can use to invest in real estate if you want to use more established platforms.
| Highlights |  |
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| Rating | 9/10 | 8/10 | 9/10 |
| Minimum Investment | $10 | $25,000 | $5,000 |
| Account Fees | 1%/year | None | 1-1.25%/year asset management fee |
| Private REIT |
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Fundrise is one of our favorite alternatives because of its low minimum investment requirements and lack of accreditation requirements. You pay 1% annual fees like LEX, but Fundrise allows you to invest in different funds instead of individual transactions. And the $10 minimum makes it ideal for investing in real estate without breaking the bank.
CrowdStreet and RealtyMogul are also great alternatives if you have more money to invest and want a variety of individual funds and offers. Just remember that most of the offers on these two platforms are only available to accredited investors.
Bottom Line
The world of real estate investing has gotten pretty crowded in recent years. Companies like Fundrise, CrowdStreet, and others still largely dominate the crowdfunding world. But we are also seeing new entrants like LEX Markets, Arrived Homes and many others.
I think LEX does a decent job of differentiating itself with its low investment requirement, individual commercial real estate transactions, and transaction structure. But right now, lack of open investment opportunities and limited experience are two disadvantages.
You may want to consider LEX if you want to diversify your portfolio with individual real estate holdings. But more cautious investors are probably better off with more established companies in the space.
