What is Real Estate Crowdfunding ?.

What is Real Estate Crowdfunding?

El Real Estate Crowdfunding It is also known as Real Estate Crowdfunding in Anglo-Saxon terminology. The term Crowdfunding comes from the union of two English words, crowd which means crowd and funding which means financing, and we could define it as a collective financing network that finances projects of other people, organizations or companies.

This activity is a type of Crowdfunding that is carried out through participatory financing platforms in which monetary contributions are made for the acquisition of real estate or for new real estate developments, in order to obtain a return through rent and / or profit obtained by the revaluation of the asset in its subsequent sale.

It is a system that allows both small investors and professional investors to invest in real estate projects with high potential through a technological platform. This is where its advantage lies, since it makes investment accessible to the small investor, offers greater diversification to the professional investor and allows easy access to real estate projects that until now were not.

How does Real Estate Crowdfunding work?

Investments are usually made, through various types of modalities, in Spain the most frequent is through the acquisition of shares, for which a company is created, normally an SL

Investors, once they have decided on which real estate project from among those offered on the website of the crowdfunding platform They want to invest and what is the volume of the investment they want to make, by prior registration on the platform, they must formalize their investment by bank transfer and in some cases by online payment.

Once 100% of the financing required to address the purchase and, where appropriate, the necessary reforms of the real estate has been reached, the shares are subscribed in a new SL, in which the different investors participate in the capital of the same. in proportion to the investment they have made and it is the newly created company that acquires the real estate asset.

If the percentage necessary to cover the financing needs of the project is not reached, the amount contributed to the investor is returned.

Another of the forms of investment also used is through the so-called Crowdfunding of loans or Crowdlending, which consists of financing a real estate project to a company that is the promoter of the same, through a loan that investors make so that it can develop the project. The investor receives in exchange, within a previously established term, that of the money loaned plus a certain interest, previously agreed.

Is Real Estate Crowdfunding at risk?

Like any investment, those made in this business model are not exempt from the risks that may occur due to market fluctuations that affect the rental and / or sale prices of real estate assets.

In order to reduce the risk in investments, the most advisable thing is to diversify into different projects, as in any other type of investment, plus diversification, less risk.

In what types of Real Estate Projects can you invest?

It will be based on the different real estate projects that a real estate crowdfunding platform is published, and that in general they can cover different types of real estate projects. As an example, we can cite the following types: Homes and housing developments, offices, tourist apartments, commercial premises, offices, industrial buildings, hotels, etc. and both new construction and existing assets for reform and subsequent exploitation and / or sale.

Real estate Crowdfunding platforms normally have staff with extensive experience and training in both the real estate, legal and financial sectors, who previously analyze the viability of each of the projects both from their technical, financial and commercial aspects, with the added advantage of permanent monitoring of the proper development of the project and control of financial returns.

Companies that offer Real Estate Crowdfunding in Spain.

The companies that manage this type of investment are part of the so-called Participatory Financing Platforms (PFP) and must be authorized by the National Securities Market Commission (CNMV).

Currently they are authorized and registered with the CNMV: Icrowdhouse, Housers and Civislend and StockCrowd IN.

There are other platforms such as BrickBro, Ethicinvestors, Myfunding or Propcrowd that operate in association with any of the Participatory Financing Platforms that are authorized by the CNMV.

Urbanitae is pending authorization and other platforms such as Privalore, Inverslar, Bricks & People and Brickstarter, among others, are not registered with the CNMV.

How much money can be invested in real estate Crowdfunding?

Law 5, on the promotion of business financing, which governs real estate investments through crowdfunding, establishes a series of protection measures for both professional and non-professional investors, for which it distinguishes between two types of investors:

• Accredited Investors
• Uncredited Investors

The Requirements to be considered an Accredited Investor are the following:

• Have an annual income of more than € 50.000 or financial assets of more than € 100.000.
  
• Request to be considered as an accredited investor, renouncing your treatment as an uncredited investor.
• In addition to the aforementioned persons, the natural or legal persons accrediting the contracting of the financial advisory service on the financing instruments of the platform by an authorized investment services company will also be considered an accredited investor.
• Individuals or legal entities that prove that they have contracted a financial advisory system.
• Entrepreneurs who meet at least two of the following conditions:
  • The total of your asset items is equal to or greater than € 1 million
    • That the total of the asset items is equal to or greater than 1 million euros.
    • The amount of your annual turnover is equal to or greater than 2 Millions of euros.
    • That their own resources are equal to or greater than 300.000 euros

Any investor who does not meet these conditions is considered an uncredited investor. Accredited investors do not have any investment limits, however investors considered as non-accredited cannot invest more than 3000 euros in the same project published by the same real estate crowdfunding platform, nor more than 10.000 euros in a 12-month period in platforms of this type.

If you are interested in investing in real estate crowdfunding you can consult the investment projects assets on the iCrowdHouse website.