Yellowbrick is a relatively new real estate investing platform that offers exposure to institutional-quality real estate for accredited investors. By using technology and data, Yellowbrick aims to make commercial real estate investing more accessible. In recent years, Yellowbrick has attracted attention from investors looking to add real estate to their portfolios. This article will provide an overview of yellowbrick investing, examining its investment strategy, fees, risks, and more. Key factors such as diversification, illiquidity, and returns will be analyzed to determine if yellowbrick provides a viable avenue for accredited investors to gain exposure to commercial real estate.
Yellowbrick focuses on established, income-producing properties to provide stable cash flows
Yellowbrick’s investment strategy centers on acquiring established, income-producing properties across sectors like industrial, multi-family, and office spaces. The goal is to generate consistent cash flows from tenant rents. Yellowbrick targets properties leased to creditworthy tenants on longer-term leases of 10+ years. This provides stable, predictable income streams for investors. The focus is on major metro markets with strong fundamentals, such as New York and Los Angeles. While investors don’t select individual properties, Yellowbrick’s disciplined approach provides diversified exposure across multiple cities and sectors. Stable properties with quality tenants is key for investors seeking recurring cash flows from real estate.
Fees range from 1-1.5%, higher than traditional investments but competitive for crowdfunded real estate
Yellowbrick charges an annual investment management fee ranging from 1-1.5% on assets under management. There are no platform fees. This fee structure is higher than traditional investment vehicles like REITs or rental properties which have fees around 0.5-1%. However, for real estate crowdfunding platforms, Yellowbrick’s fees are competitive. Many leading crowdfunding sites charge 1-2% in platform and management fees. Compared to non-traded REITs with high upfront costs up to 15%, Yellowbrick’s ongoing management fee is reasonable. The value proposition is providing institutional-grade real estate at affordable fees compared to other crowdfunding options. While the fees are higher than going the DIY landlord route, for accredited investors, the hands-off approach and high-quality portfolio may justify the annual 1-1.5% fee.
Liquidity is low, with redemption windows only every 2-3 years after initial lockup
A key risk to evaluate is yellowbrick’s liquidity terms. Investments are illiquid, with an initial lockup period of 2-3 years before investors can make redemption requests. After that, there is a quarterly redemption process, but redemptions are not guaranteed. The manager has discretion on fulfilling requests based on available liquidity. This is standard for private real estate funds. However, it presents a risk for investors if cash is needed before the next redemption window. The illiquidity is a tradeoff for the stable returns from the long-term leased properties. Investors must be comfortable with multi-year lockups to access the private commercial real estate Yellowbrick provides.
Target returns are 6-10% net IRR, derived from property price appreciation and stable rental income
Yellowbrick aims to deliver 6-10% net IRR annually across its real estate portfolio. This target return range is derived from both property price appreciation over time and consistent rental income from tenant leases. The bulk of returns is expected to come from recurring cash flows, not market timing or property flipping. Top-tier properties in major metros tend to see steady, low-to-moderate price growth, so high double-digit returns are unlikely. However, the stable tenant income prevents the volatility and vacancies associated with individually-owned properties. For accredited investors comfortable with illiquid assets, Yellowbrick provides smart exposure to commercial real estate with target returns exceeding bonds, CDs, or money markets.
Yellowbrick offers accredited investors access to institutional-grade commercial real estate at lower minimums versus traditional private funds. Its strategy focuses on stable, income-producing properties to generate consistent cash flows. While fees are higher and liquidity lower than conventional options, target returns of 6-10% net IRR are compelling for long-term investors. Overall, Yellowbrick provides a solid real estate allocation for diversified portfolios.