We know that many people who invest through Real Estate Crowdfunding platforms are experienced investors within the brick and mortar industry, but we are also aware that there is a large part of investors who are very interested in this sector who have not yet taken the last step (to invest) due to a lack of knowledge regarding the procedure and form adopted by this type of investment.
Let’s not forget that until relatively recently, this type of investments was reserved exclusively for professional investors and those with large amounts of capital.
In any case, we consider it interesting to review several of the most important Real Estate Crowdfunding platforms that act to facilitate decision-making today in Spain.
But before beginning to name them and discover the strengths of each one (since, perhaps, for the recent arrivals to this industry, it is important to review some of the basic concepts that encompass this system of investment), we will talk about what Crowdfunding is and what the real estate Crowdfunding portals are (operation, characteristics, and utility), to later offer comparative information about the five main Spanish Real Estate Crowdfunding platforms.
Surely you already know some of them because they have become real giants and they have recognized prestige in our country, although it never hurts to know other viewpoints and information about them.
There are also other, newly created Real Estate Crowdfunding pages that, despite not being as recognized, are opening a hole in the market, which we will also briefly speak about in this post.
What is Real Estate Crowdfunding?
Real Estate Crowdfunding is an innovative way to make investments in the real estate sector without involving a significant disbursement of money.
It is carried out by buying real estate jointly with other investors.
What is a Real Estate Crowdfunding Platform?
A Real Estate Crowdfunding platform is a virtual system that allows savers to participate in collective investments, in one or more projects or real estate investments, in order to obtain a return proportional to the contributed capital, either through the property’s rent (for the duration of the fixed term for the project) and/or sale (once the project term expires or if the target price is obtained sooner).
Real Estate Crowdfunding Platforms, the Ideal Medium to Invest
The Real Estate Crowdfunding platforms have developed enormously in recent years due to the revolution that has brought about the arrival of new technologies.
It amounts to digital portals through which, in real time and in only a few clicks, you can have access to all the information that relates to each one of the projects displayed on your online storefront.
Through these platforms the investor will be able to make queries that they consider to be necessary about the Crowdfunding project or projects that they are interested in and formalize the investments that most interest them in each case.
Its main advantage is that the investor can buy their projects at any time of the day and from anywhere.
How Does the Investment System Function through Real Estate Crowdfunding?
Now that you know what Real Estate Crowdfunding is and its investment portals, it is time to talk about how this type of online portal functions exactly.
Generally, the operation of this type of portal is as follows:
1.The business selects the projects that have the least constructive, financial, and commercial risk.
2.Later a recognized fiduciary provides the legal structure (a trust or a specialized business in the management of this type of projects; it can be a business that the platform works with or that the company itself owns) to allow the investors access.
3.The clients and investors are attracted and attended to by the Real Estate Crowdfunding portals that are offering the products. These platforms normally also allow the clients to self-manage their investment individually on the website.
4.Once the project is chosen by the company, the Real Estate Crowdfunding platform centralizes and coordinates the interaction between clients and the trust to complete the necessary financing process.
5.The recognized fiduciary, respected and outside of the company, administers the funds to ensure their transparent management.
6.Finally, once the subscription period has ended, the asset is acquired in the name of the trust.
7.The fiduciary is in charge of managing the asset and distributing the periodic profits among the investors.
The investments that the clients make offer a certain legal and economic security because the investor is acquiring a share of the trust that guarantees the real estate asset as part of its assets. The client transfers the amount of the chosen project from his account or deposits directly in the bank account agreed on with the trust. This method is known as Direct Crowdfunding.
There are also other legal formulas as we will see below (for example, the constitution of an LP for the duration of the project by all the investors who become partners in it).
Teams of Professionals
The teams that are behind the Real Estate Crowdfunding pages are formed by financial professionals with extensive experience in the sector who analyze and study each one of the projects that reach them before publishing the projects on the storefront.
The consideration compensation is usually a management fee for the services rendered. As a general rule, a percentage is applied to the benefits obtained in the project.
Real and Detailed Information
Each project will include all the relevant information and data so that investors can make their decision objectively.
On the Real Estate Crowdfunding pages, investors will know the types of properties that are offered, the types of projects, if they are renovations or new construction, commercial or residential premises, areas and cities where they are found, etc.
Diversification of Risk
The expert advisors in Real Estate Crowdfunding recommend investing in different projects in the same period of time in order to diversify the risk of the different operations. In this way, if one does not turn out how you had hoped, the loss will not be so great and we will continue earning in our portfolio with other active investment projects that could be profitable. This concept of diversification in investments would correspond with the classic saying “don’t put all your eggs in one basket.”
Sale and the Procurement of Benefits
At the time when the fixed budget for a project has been completed for several investors, it will proceed to the renovation or construction of the real estate good, if they want to increase the value or if rehabilitation is necessary for its use, rent, and sale depending on the type of project. Later it will be leased (for the procurement of income from rent) and/or sold (if it has been optimally revalued, as planned at the beginning of the project) within the fixed time period for the conclusion of the Crowdfunding project.
How much money can you invest in Real Estate Crowdfunding in Spain?
Given that in Real Estate Crowdfunding investors of all types (professional and not) come together, the Crowdfunding platforms in the real estate sector are regulated by spanish Law 5/2015 on Business Financing that puts maximum limits on the investment depending on the type of investor you are.
Non-Professional Investors (or Non-Accredited)
Non-Professional investors will not be able to invest more than 3,000€ per project nor more than 10,000€ annually between all the projects in their investment portfolio and between all the Investment Crowdfunding platforms where they are registered. Also, they are limited in the type of projects that they can participate in, as the project’s budget cannot exceed 2 million euros.
Professional Investors (or Accredited)
This profile has no limit on how much they can invest, although there is a limit on how much they can invest in one project, as they will not be able to exceed 5 million euros.
Professional investors must be legal entities that have assets with a minimum value of 1 million euros, a turnover of at least 2 million euros and their own resources of at least 300,000€.
There are also professional investors accredited as individuals. In this case, they must have a minimum annual income of 50,000€ or an equity of at least 100,000€.
5 Real Estate Crowdfunding Platforms in Spain that You Should Know:
This is a website specialized in Crowdfunding in Barcelona that, together with Privalore, disputes the privilege of having been the first real estate Crowdfunding platform to begin operating in Spain.
Two main strengths that Inveslar possesses are the following:
•Their Crowdfunding investment projects are located in the heart of Barcelona.
• You can invest starting at 100€
• When 100% of the fixed budget for each project is completed, a Limited Partnership will be formed through the increase of capital. At this time, the Limited Partnership will acquire the asset.
• For each euro invested, a participation (or stock) is subscribed, and a different company will be created for each of the projects that are carried out.
• Once the desired profitability has been reached, the sale of the property will proceed with the objective of recovering the investment plus the benefits that have been achieved.
• Once all the operations have been finished, the Company created for this purpose will be liquidated by dissolving.
Privalore defines itself as the first Real Estate Crowdfunding page open to all types of investors and projects in Spain.
Their philosophy is “Building wellness.”
They have a team formed by experienced promoters in the central areas of Madrid and Barcelona with very attractive and profitable projects.
•Projects located in the central areas of Madrid or Barcelona
• Commitment to the environment and environmental health
•Unlike other pages, platforms, and portals for Real Estate Crowdfunding, in the case of Privalore, their expert promoters buy the investment object with their own funds, to later promote the investment in third parties through Direct Crowdfunding.
• They undertake the rehabilitation of houses within a period of less than 2 months and later sell them to buyers who value respect for the environment and profit from the designs and materials used in the property that contribute to greater well-being and environmental health.
• They admit investments starting at 1,000€, offering returns of up to 17%.
• In this case, you will not have to take care of anything since they will be responsible for the work, the reform, obtaining bank financing if necessary, and all those formalities that may be necessary, in general, for the development of the project.
Housers is a Spanish Real Estate Crowdfunding page widely known and valued by the larger part of the community and sector that has become a giant in Real Estate Crowdfunding.
•They accept investments starting at 50€ per project.
• They offer appealing profitabilities.
• They offer a Big Data Tool.
These aspects have undoubtedly contributed to their spectacular growth and current size.
•The first step is to register on their page.
• Once this step is done, an external payment entity will open a current account in which to transfer funds.
• From this moment on, the investor will have a private space on the platform where they can access everything related to their operations and the movements of Housers.
You will also be able to use the Big Data tool in order to check the appraisal prices of other similar properties as well as the returns they obtained, thus facilitating decision-making.
Bricks and People
Bricks and People, even though is it a more recent company than those already presented within Real Estate Crowdfunding, defines itself as a pioneer in terms of its investment process since they are not only offering a large number of properties to invest in, looking for a large number of investors participating in the project, or achieving a certain profitability, but Bricks and People also offers a different way of carrying out this type of investment.
They seek to contribute to the essence of your portfolio and experience, taking into account the emotional side and the union with the client/investor. As they say in their business philosophy, their services would not be defined as Real Estate Crowdfunding, but as Big Data.
•A team formed by real estate experts
• Their careful selection and portfolio of projects
• Their attractive profitabilities
•The process begins with registration by the user.
• •If they can finance 100% of the project which they have invested in, Bricks and People will start by buying the property and then proceed to its renovation or construction (to increase its revaluation), renting the property for 36 months.
• This portal advocates for the sale of the property after that period or sooner if an offer for the target price arises.
The main objective of this page is to offer the user a diversification of their savings by investing in different residential, commercial, and industrial real estate projects.
•They accept investments starting at 50€ per project
• Broad portfolio of projects
•Once the project has been studied, the sponsor will create a company so that all the small investors will be able to invest in it.
• All the investments will go directly to the acquisition and renovation of the chosen property which can be rented or sold with the added value after the improvement.
• Everything will be managed by a professional real estate sponsor who will be in charge of all the procedures.
Other Real Estate Crowdfunding platforms
BrickFunding is a specialized online portal consisting of a search engine and ways to compare Real Estate Crowdfunding projects on a national level as well as international. It brings all the offered results from the previously mentioned platforms and others (such as StockCrowd IN, Civislend, iCrowdHouse or BrickStarter) together on only one website in order to facilitate the search, for professional investors as well as private, for those projects that best fit their expectations and economic objectives.