Fancy earning a bit of passive income from the multi-trillion dollar real estate industry? Ordinarily, you would be required to purchase a property outright. This means that you’ll either need to have a seriously large amount of cash at the ready, or commit to a super-long mortgage agreement.
With that being said, crowdfunding platforms such as Crowdestate allow you to gain exposure to real estate projects from just €100 per investment.
The platform offers a range of real estate investment opportunities that mainly centers on project developments and mortgage financing. All of the deals facilitated by Crowdestate are pre-vetted by the platform’s due diligence team, and they all yield regular cashflow payments. As such, Crowdestate is a notable option if you’re looking to earn passive income.
If you think the platform is suitable for your long-term investing goals, then be sure to read our in-depth Crowdestate review. We’ll cover the ins and outs of how the crowdfunding site works, who is eligible, how much you can make, and whether or not your money is safe.
Crowdestate at a Glance
- 1 Crowdestate at a Glance
- 2 What is Crowdestate?
- 3 Eligibility at Crowdestate
- 4 What Will I be Investing in at Crowdestate?
- 5 How Much can I Make at Crowdestate?
- 6 Crowdestate Fees
- 7 When do I get my Money Back?
- 8 Can I Exit an Investment Early?
- 9 What are the Risks of Investing with Crowdestate?
- 10 How do I get Started at Crowdestate?
- 11 Crowdestate Review: The Bottom Line?
- 12 Crowdestate
- 13 Pros
- 14 Cons
|Crowdestate - Visit|
|Product Type||P2P Crowdfunding in Real Estate|
|Property Types||Commercial & Residential in Europe|
What is Crowdestate?
Launched in 2014, Crowdestate is an online crowdfunding platform that allows everyday investors to gain exposure to the European real estate arena.
Based in Estonia, the platform claims to have returned investors an average annual yield of 17.26% since its inception. This covers more than 43,000 active members across 117 countries.
Interestingly, the number of investment opportunities hosted by Crowdestate is somewhat thin on the ground in comparison to its market rivals. In fact, the platform has facilitated just 214 investment opportunities since 2014, with Crowdestate noting that 95% of applicants fail to make it to the funding stage.
We like this, as it illustrates that the due diligence team is super-picky about the borrowers they deal with.
In terms of the types of real estate opportunities that you’ll be able to invest in, Crowdestate typically focuses on financing. This could be to help finance a real estate developer that wishes to build a property complex, or a construction company that needs a business loan to develop a new supermarket.
Either way, all of the loans that you invest in will be secured by physical real estate and/or the underlying land plot.
While this does offer an element of protection on your investments, Crowdestate still comes with its risks. After all, with average annual yields of 17.26%, the ‘risk vs reward’ ratio is towards the upper end of the scale.
As such, were the end-borrower to default on their loan, you stand the very real risk of losing all of the money that you injected into that particular deal.
Most of the investment opportunities hosted by the platform will have a fixed term of between 1-4 years. Although you will ordinarily need to wait until the loans mature, Crowdestate does have a secondary marketplace.
This gives you the chance of offloading your investments to other members of the platform, should you need to liquidate some of your holdings.
Eligibility at Crowdestate
Although Crowdestate focuses entirely on real estate investment opportunities in Europe, the platform offers its services globally. However, not all nation-states are eligible.
Notably, this excludes residents of the US. As such, we would suggest checking to see if your country is supported before going any further.
Other than your country of residence, you need to ensure that you are at least 18 years of age, and that you are able to execute an international bank transfer. This can be via SEPA or SWIFT.
What Will I be Investing in at Crowdestate?
Crowdestate offers a number of different investment types on its platforms – all of which are pre-vetted by the due diligence team. As noted earlier, just 5% of financing applications make it to the platform for funding.
It is important to note that Crowdestate does not invest in properties per-say. Instead, it typically facilitates loans for real estate companies that need to raise finance.
Let’s take a look at a few investment examples so that you have a firm grasp of where your money is likely to end up at Crowdestate.
Example 1: Mortgage secured row house development project
An investment opportunity that recently achieved 100% funding on the platform is that of a terraced house project. In a nutshell, the project developers were looking to raise €400,000 to complete the construction of three small apartment blocks. Located in the Estonian city of Viimsi, the project will yield 4 separate apartments across each block.
Upon further exploration, the development was 45% completed by the time it made the Crowdestate platform, with 4 of the 12 apartments already sold.
An investment like this offers a range of safeguards on your investment, not least because you have the physical apartments securing the loan. In terms of the fundamentals, Crowdestate investors engaged in an 11-month term, with an expected rate of return of 11% per year. This was split across 719 individual members of the site.
Example 2: Purchase, renovation and resale of a large apartment
An additional opportunity that also received 100% of its target funding amount is that of a purchase, renovation, and resale of a large apartment. Located in the Italian city of Novara, the end borrower required €80,000 to help with the costs of purchasing the apartment and then refurbishing it for sale. Crowdestate notes that the apartment already has interest from potential buyers, although this cannot be verified.
Nevertheless, once the 100 m2 apartment has been fully renovated, it will then be listed for sale. Once again, your investment comes with certain safeguards, not least because the apartment has been used as collateral to secure the loan.
In terms of the fundamentals, the €80,000 was covered by 599 Crowdestate members, and the term of the loan is 7 months. Investors will receive an expected rate of return of 12.15% once the funds are repaid in full.
Example 3: 220 apartments in Bucharest
One of the most ambitious investment opportunities that we came across at Crowdestate was that of an apartment complex in Bucharest. The project requires €1.1 million in funding and has thus far raised €890,000. Firstly, some of the funds will be used to purchase the respective land plots. Next, the end-borrower will fund the development of 220 apartments.
Crowdestate does not state how long the construction phase will take in total, although the term of the loan for those investing is just 11 months. The opportunity will yield an expected rate of return of 15.77% annually, and 1,323 Crowdestate members have so far backed the deal.
In terms of the risks, the investment is backed by the underlying land that the developer purchases. Whether or not this will be sufficient to cover the effects of a potential default remains to be seen, although this is fully reflected in the high yield on offer
How Much can I Make at Crowdestate?
There is no one-size-fits-all answer to how much you will make by investing at Crowdestate, not least because each opportunity comes with its own yield. With that being said, let’s take a look at some of the averages.
Crowdestate itself notes that since the platform’s inception, investors have netted an annual return rate of 17.26%. This is significantly higher than the types of yields available in traditional asset classes, such as the S&P 500. However, as are the risks.
When we explored the investment opportunities available for funding at the time of writing, these typically start at 11% per year, up to a maximum of 17% for higher risk deals.
Crucially, the specific interest on offer will depend on a number of factors. This includes the creditworthiness of the developer, how much they wish to borrow, and for how long.
Furthermore, the interest rate will also be dependent on the underlying security. For example, if the project is backed by bricks and mortar that is suitable for resale at the time of the investment, the yield will be lower. On the contrary, if the collateral is based on purchased land, the yield will be higher.
Crowdestate does not charge any fees to open an account, nor will you need to pay an annual membership fee of any sort. Moreover, there are no fees associated with funding your account. In even better news, Crowdfunding does not deduct any fees from the yields listed on its investment opportunities.
As such, an opportunity that yields 11% will pay 11% as long as the end-borrower meets their obligations in full.
Crowdestate makes its money by taking a cut of what it charges developers to borrow funds from its platform. It does so by taking 20% of everything over 8%. This commission is only taken if the borrower pays the loan back in full.
Moreover, this does not impact the yield that you are offered at the time of the investment, so in effect, Crowdestate is a fee-free platform for investors.
When do I get my Money Back?
First and foremost, each investment opportunity comes with a fixed term that typically averages 1-4 years. Once the opportunity meets its 100% funding goal, the money will then be transferred to the end-borrower. The financing agreement will then operate like any other loan type, insofar that the borrower will be required to make fixed payments each and every month.
Once a payment has been received by Crowdestate, it will then distribute the payment to those that hold an investment in that particular structure. The specific amount will be proportionate to the size of your investment.
Each monthly payment will include interest, so all being well, you will receive your total investment back plus the stated annualized return at the end of the term. This also allows you to reinvest your monthly payments and thus – enjoy the fruits of compound interest.
Can I Exit an Investment Early?
One of the most important factors that you need to consider when investing at a crowdfunding platform like Crowdestate is that of liquidity. In a nutshell, the platform does not allow you to exit your investment early, meaning that you will need to wait until the financing agreement matures before receiving your money back in full.
This could be an issue if you need to raise capital quickly. If you think that there is a chance that you might need to offload your Crowdestate investments early, you might be better suited for more liquid asset classes like stocks and shares.
With that being said, Crowdestate does offer a secondary market. This gives you the opportunity to sell your outstanding investments to other members of the site. Take note, there is no guarantee that you will find a buyer, so never make the mistake of thinking that you’ll always be able to offload your holdings with ease.
Nevertheless, there is good reason to believe that the secondary marketplace is liquid enough to find buyers for two key reasons.
- Firstly, as Crowdestate is very selective with the number of investment opportunities that it lists on its platforms, the vast majority of listings will not only reach its full funding target, but they typically do so very quickly. This means that unless you act fast on a new listing, you will likely miss out. As a result, investors at Crowdestate are often required to use the secondary marketplace in order to get a look in.
- Secondly, having explored the secondary marketplace in great depth, the vast majority of listings are being sold at a slight premium. Although this premium is rarely more than a percent higher than the current investment value, this indicates that investors are not forced to sell their holdings at a discount.
Once again, although the above factors will not guarantee that you’ll always find a buyer, you do stand a reasonable chance of doing so.
What are the Risks of Investing with Crowdestate?
If you’re a seasoned real estate crowdfunding investor, then you’ll know first hand that yields of 11%-17% does not come without its risks. In fact, the risks are substantially higher than what you would expect to see in the traditional stocks and shares space.
The overarching risk that you need to be made aware of is that of a default. In other words, if the end-borrower runs into financial difficulties and they are not able to acquire additional funding, they might not be able to meet their loan obligations.
This could have a highly detrimental effect on your ability to recoup your original investment, let alone the agreed interest.
On the flip side, all loans at Crowdestate are secured, meaning that developers are required to put up collateral before funding is provided. However, this doesn’t reduce the risks of an all-out loss. For example, if the developer puts the underlying land plot up as security, there is no guarantee that this will cover the entire loan amount at auction.
Moreover, the recovery process is fraught with fees, so this will once again reduce the amount that you will be entitled to if a seizure is successful.
No Buyback Guarantee
Crucially, unlike other crowdfunding platforms active in the online space, Crowdestate does not offer a buyback guarantee. This would otherwise place a huge safeguard on your investments, not least because the loan originator will cover individual defaults. However, the reason that this isn’t available at Crowdestate is likely due to the sheer size of the loans facilitated.
You also need to consider the risks of Crowdestate itself going out of business. The good news is that your investments are kept separate from the company’s balance sheet.
In other words, as your investments are held on a specific nominee account, they are legally separated from Crowdestate. This is because each and every investment is legally held as an SPV (Special Purpose Vehicle).
How do I get Started at Crowdestate?
Like the sound of what Crowdestate offers for your long-term investing goals? Checkout the quickfire step-by-step outlined below to get started today.
Step 1: Open an Account
You will first need to head over to the Crowdestate homepage and click on the ‘SIGN UP’ button, which you’ll find at the top right-hand side of the page.
You will then need to provide some personal information. This will include your full name, home address, nationality, date of birth, and tax status.
Step 2: Browse Available Investments
You should then spend some time browsing through the many investment opportunities available at Crowdestate. Don’t forget, most opportunities will achieve its full funding target fairly quickly. With that said, don’t rush into an investment until you are 100% confident that it’s right for you.
Step 3: Deposit Funds
Once you have found an investment that you like the look of, you will then need to fund your Crowdestate account. The minimum investment amount is €100, so you’ll need to deposit at least this. Furthermore, investments are made in increments of €100 thereon, so do bear this in mind.
Deposits need to be made via a bank transfer, which can either be through SEPA (EU account holders) or SWIFT (UK and non-EU members). You’ll find the specific bank details within your Crowdestate account. Most importantly ─ you need to include your unique Crowdestate reference number when making the transfer.
Step 4: Purchase Your Chosen Investment
When your bank account transfer has been credited, you can then proceed to make an investment. The listing will remain active at Crowdestate until it reaches its full funding target. Once it does, the funds will then be distributed to the developer in question.
You can then sit back and wait for your repayments to be credited into your account, as and when the borrower does so.
Crowdestate Review: The Bottom Line?
In summary, Crowdestate is rightly regarded as a leading real estate crowdfunding platform.
While the risks of investing at Crowdestate should not be understated, we really like how selective the team is with the opportunities it lists. Crucially, just 5% of loan applicants actually make it onto the platform. As such, investment opportunities typically sell out fairly quickly.
We also like the the highly liquid secondary marketplace that is available at Crowdestate. This is great if you have a need to offload investments quickly.
All in all, with an average annual yield of 17.26% since its inception in 2014, Crowdestate is well worth considering for your long-term investing goals