Every time we find more alternative financing options to the traditional one to be able to obtain investment and funds. There are different ways that can mean an opportunity to have the capital of your project. The most common is through Investment Funds or Fund Managers, which offer you capital for the project in the form of a guaranteed loan. Depending on the phase of the project and its risk, the cost will be different: clearly 1 million euros for the purchase of land without a license is not the same as 1 million to complete a construction with 100% pre-sales.
However, not all promoters can access this type of financing, and those that do, know that the double-digit interest rate is difficult to lower. In this type of alternative financing, a financial cost commitment is assumed, since the project has a deviation in terms, either due to execution or sales, where the final profitability of the project is reduced, and it is even put at risk for the shareholder .
However, there is another form of project financing: retail investment. It is like a "blue ocean" for financing projects yet to be exploited.
But who is this retail investor? A retail investor is simply a "saver." A citizen who has more income than expenses and, therefore, who has the possibility of having capital to invest. Usually he usually invests in fixed income, equities, stock market, or other financial products. However, you can also keep this money in the bank without any return. It is important to say that they are not investment professionals, so they allow themselves to be advised on financial investments or keep their capital in the Bank.
Specifically in Spain, there are 965.000 million euros in this retail market. Each year 66.000 million euros are generated and according to the INE in the 2nd and 3rd quarters of 2020, due to the pandemic and the consequent reduction in spending, this number has increased to an extra 34.000 million euros. It is clear then, that after all, the most important financing today to be able to promote projects has been alternative financing.
Here are links to the complete # CápsulaIRM series so that you do not miss any step on the way to create your investment club:
Introduction
Background
- What difficulties do developers find in accessing bank financing?
- Retail investment, a blue ocean yet to be exploited
- Alternative financing, the solution to boost the real estate sector
- The investor club: the best tool for promoters to get investment
Why create your own investment club
How to create your investment club
