Real estate crowdfunding: 12 major platforms in Europe and the USA
It’s hard to believe how new the idea of crowdfunding really is: back in 1997, the British rock band Marillion collected $ 60,000 through an online platform – this is how the fans provided the US with a tour.
The difference between modern crowdfunding – it gives the opportunity to earn both parties. The market for collective real estate investments is fairly simple: online platforms collect investors for the implementation of rental, renovation or construction projects, while they acquire shares of companies or provide loans, in exchange for a percentage of profits.
Why is this investment scheme becoming more popular? Unlike other tools, crowdfunding platforms are open to investors with a small budget. They do not require the participation of the investor in asset management. On average, they generate higher income than a number of other instruments (for example, securities, deposits, or commodities). Internet access makes collective investments as easy as possible. According to Preqin, over the past three years, the volume of funds raised to global closed-end real estate funds has increased by an average of 11% per year.
Tranio offers an overview of large crowdfunding platforms in the real estate markets of the UK, Germany, Spain and the USA.
The main features of British crowdfunding platforms:
relatively high fees;
focus on rental business;
low investment threshold.
Property Moose (Liverpool)
Real Estate in Liverpool
“Invest online. Anytime, anywhere, ”the British platform Property Moose simply explains the advantages of crowdfunding. Focused primarily on the British, the company does not exclude the possibility of cooperation with foreigners (except US citizens). The platform is designed for investors with any budget: from £ 10 to several hundred thousand. The Property Moose service is used by more than 26 thousand people.
As a rule, the property in which the investor invests belongs to a company created specifically for this project (SPV). He, along with other SPV members, is involved in making strategic decisions: for example, in settling or evicting a tenant. The investor, in exchange for investment, receives a stake in the SPV, which he can sell at any time within the framework of the same platform. Most projects are designed for a period of 12 to 18 months.
At each stage of this type of investment, the participant is subject to fees: when purchasing an SPV share, 5% of the contribution is used to pay the costs associated with fundraising, conducting due diligence and structuring the transaction. 10.5% of the monthly rental income is deducted from the management company. When selling real estate, the investor pays a 15% fee from the income received, when reselling his share in an SPV – 15% of its value. In projects where the investor does not buy the company’s share, but provides it with a loan, it is exempted from platform fees.
Real estate in london
In October 2015, the first year of the launch of the Property Partner site, the crowdfunding platform set a record, collecting more than 843 thousand pounds sterling in 10 minutes. Property Partners can also participate in citizens of any country other than the United States. Today the site has more than 10 thousand registered users.
Property Partner specializes in investing in student apartments: studio apartments or residences with a shared kitchen, dining area and living room. Relations with investors are built according to the same scheme: buying a share in SPV (commission on buying is 2.5% taking into account stamp duty) brings the participant a monthly rental income of 3.4% on invested capital. Of these, 10.5% is paid by the Property Partner, which controls the property and rents it. Taking into account the growth of capitalization, the project’s profitability rises to 4.3%.
An important difference of this platform is the lack of collection when selling an SPV share. As the creators claim, on average, this process takes 4.7 days. There is another way out of the project: every five years, the platform offers a share buyback at a price set by an independent appraiser.
Another option offered by Property Partner to investors is contributions to potential projects that have not yet been acquired by the platform. The money is withdrawn from the investor’s account on the platform, but not from the real account – until the full amount for the project has been collected. In such projects, the investor receives a monthly income of 5% for two years.
The interests of investors are protected by the British FSCS (Financial Services Compensation Scheme) compensation program, and the activity of the platform itself is regulated by the Financial Services Authority of the United Kingdom (FCA).
The House Crowd call themselves the first crowdfunding platform in the world: founded in 2011, by November 2017, the company implemented almost 340 projects, collecting more than 60 million pounds for them.