Are you looking to gain access to the European real estate market, but don’t have the required funds to purchase a property outright?
If so, it might be worth considering the merits of a crowdfunding platform like Nordstreet.
The platform allows you to invest funds into European property developers – most of which are based in Lithuania. In return, you’ll have the chance to earn passive income, with Nordstreet claiming it has paid an average annual return of 11.4% since its inception in 2018.
Fancy finding out whether or not Nordstreet is right for your long-term investment goals? In our Nordstreet Review – we cover everything you need to know – such as the types of investments you’ll be making, how much you can earn, and whether your money is safe.
Nordstreet at a Glance
- 1 Nordstreet at a Glance
- 2 What is Nordstreet?
- 3 Types of Investments at Nordstreet
- 4 Example of a Nordstreet Investment
- 5 How Much can I Make at Nordstreet?
- 6 Eligibility Requirements at Nordstreet
- 7 When do I get my Money Back?
- 8 Secondary Market: Can I Sell my Investment Early?
- 9 How Does the Investment Process Work?
- 10 What are the Risks of Investing at Nordstreet?
- 11 Nordstreet Review: The Verdict?
- 12 Nordstreet
- 13 Pros
- 14 Cons
|Nordstreet - Visit|
|Product Type||Real Estate Crowdfunding|
|Fees||No Fees for Investors, 3% for Borrowers|
|Property Types||Commercial & Residential Projects in Lithuania|
What is Nordstreet?
In a nutshell, Nordstreet is an online crowdfunding platform that specializes in property developer loans. Such loans allow developers to fund a new property build – such as apartments, an office block, or a shopping complex.
In order to facilitate these loans, Nordstreet operates a peer-to-peer business model. This means that the platform collects investments from its members, and then forwards the funds directly to the property developer in question.
Since the platform was launched in 2018, Nordstreet claims to have facilitated almost €6 million in loans, with more than €245k in passive income. This covers 3,781 individual investors across 63 projects.
The platform lists an average annualized return of 11.4%, which is significantly more than you will find in traditional asset classes such as stocks or bonds. However, the risks of losing money are much higher – especially if a property developer ran into financial difficulties.
In terms of the fundamentals, Nordstreet allows you to make an investment from just €100. This allows you to gain exposure to the European property development arena without needing access to large amounts of capital.
Once an investment has been made, the property developer in question will enter into a legally binding contract with Nordstreet, and you’ll receive monthly repayments until the loan is cleared in full. However, the platform does not offer a Buyback Guarantee of any sort, so if the developer falls behind on their loan repayments, your funds are at risk.
Types of Investments at Nordstreet
All of the investment opportunities listed at Nordstreet are loans issued to property developers. The platform notes that developers must apply directly to Nordstreet, with the team then engaging in an enhanced due diligence process. This is to ensure that the platform only takes on credible developers that have the financial means to repay what they borrow.
The due diligence process will not only look at the company itself, but also the project that the loan will be funding. This is with the view of assessing whether or not Nordstreet investors are protected in the event of a default, as all loans are secured by the land or property itself.
Nevertheless, the vast majority of real estate projects funded by Nordstreet are based in Lithuania – which is where the platform is headquartered. This in itself presents a notable risk, as your investments are susceptible to a downturn in the Lithuania economy. This is something that can hit property developers directly, so do bear this in mind.
When it comes to the loan structure itself, this will either come in the form of a development loan or refinancing. If it’s the former, this is a straightforward loan to fund a new development project. If the loan is based on refinancing, then this means that the developer is using the funds to pay off a previous loan. They might do this because the terms being offered by Nordstreet are more favourable.
Example of a Nordstreet Investment
In order to clear the mist, we’ve outlined a current funding opportunity listed at Nordstreet. This will allow you to understand how an investment at the platform typically works before opening an account.
€370k Residential Development Loan in Vilnius
As is the case with most of the funding opportunities at Nordstreet, this particular investment is to fund a property developer in Vilnius, Lithuania. The project – which seeks €370k from investors at Nordstreet, is to fund the land preparation and construction of a new property complex. The apartments themselves will be for an elderly community
- The development loan is based on a 41% LTV (Loan-to-Value) ratio, with the agreement protected by the underlying land.
- Investments start at just €100, and the term of the loan is 14 months.
- During this time you will receive fixed interest payments – proportionate to the size of your investment.
- The principal investment is paid at the end of the 14 months.
- The project yields 11.5% annually.
How Much can I Make at Nordstreet?
The specific yield will vary depending on the type of investment that you make. With that said, most loans at the platform pay an annual yield of 11.4%. This is based on the proviso that the developer always meets their monthly repayments.
Moreover, if the loan is for a period of less than 1 year, you will need to reinvest your gains to get the published annualized return.
Eligibility Requirements at Nordstreet
Nordstreet is available in all countries, which is perfect if you’re a non-EU resident and wish to access the European property development space. However, you will need to verify your identity before you can make an investment.
When do I get my Money Back?
It is important to note that most of the investments at Nordstreet are based on interest-only repayments. For those unaware, this means that you will only receive the interest payments each month, with the initial principal amount being paid at the end of the term.
This operates largely the same as a conventional bond agreement. However, you will be loaning money to property developers that could easily run into financial difficulties, so interest-only loans will always come with their risks.
Nevertheless, the funds will be paid into your Nordstreet account, which you can withdraw back to your bank account.
Secondary Market: Can I Sell my Investment Early?
Unlike other real estate crowdfunding platforms operating in the online space, Nordstreet does not offer a secondary market. As such, you will not be able to offload your investments early.
This means that the loans at Nordstreet are 100% illiquid, so you should only make an investment if you are sure you won’t need to access the cash early. Ultimately, this is just part and parcel of yielding double-digit gains.
How Does the Investment Process Work?
The investment process at Nordstreet remains constant on all of its funding opportunities.
It works as follows:
Step 1: Borrowers Apply
The first stage of the end-to-end investment process will see the end-borrower apply for funding with Nordstreet. The developer will need to state the amount that they wish to borrow, and for how long. Moreover, the borrower will need to provide details on the project it wishes to build.
Once the team at Nordstreet has reviewed the application in full, they will then perform enhanced due diligence. This will be on the property developer itself, as well as the project. After all, the loans financed by Nordstreet members are secured loans, with the underlying land or property acting as collateral in the event of non-payment.
Step 2: Project Appears on Nordstreet
If the borrower passes the Nordstreet due diligence process, the project will then appear on the platform for funding. This then allows you as a Nordstreet member to invest from as little as €100 into the project. However, before you do make an investment, you are advised to review the project listing.
This will give you a wealth of information linked to both the project and the developers. For example, you’ll be able to view the projected yield on your investment, and how long the developer has to repay the funds. Moreover, you’ll be able to view information on the security itself – which will either be the land, the property, or both.
Step 3: Make an Investment
If you like the look of a particular investment, you will then have the opportunity to fund it. As noted above, this needs to be a minimum of €100 per project. As soon as your investment has been made, you will then need to wait for the project to reach its funding target.
If the project doesn’t collect 100% of its target, then the funds will be returned to you and the project will be removed from Nordstreet. It normally has a month to do this, although this can vary from project-to-project.
Step 4: Receive Your Interest Payments
Once the loan has been funded in full, the developer will then enter into a legally binding agreement with Nordstreet. In the vast majority of cases, you will only receive the interest on your monthly repayments. At the end of the term, the developer will then be required to repay your principal amount – which is the amount that you originally invested in the project.
What are the Risks of Investing at Nordstreet?
As is the case with all investment platforms, you need to have a full and frank understanding of the underlying risks. This is especially true with an alternative investment channel like Nordstreet that offers double-digit returns.
Here’s what you need to know about the safety of your funds:
No BuyBack Guarantee at Nordstreet
First and foremost, it is important to note that there is no BuyBack Guarantee offered by Nordstreet. For those unaware, this is a guarantee offered by a number of crowdfunding websites active in the space. It promises to purchase a loan back from investors if the borrower defaults – which is usually 30 days without receiving payment. However, this doesn’t exist at Nordstreet.
With that being said, BuyBack Guarantees are usually for loan structures of a small size. In other words, crowdfunding platforms have the remit to do this because a default might only be for a few hundred Euros. In the case of Nordstreet, loans are usually in the region of 5 or 6 figures, so they wouldn’t have the financial means to offer a BuyBack Guarantee.
What Happens if a Developer Defaults
Irrespective of how much due diligence the team at Nordstreet performs, there is always the very real risk that a property developer defaults on their loan repayments. The platform explains what happens in such circumstances, which we’ve outlined below.
- If the developer is more than 40 days late for a repayment, Nordstreet will then step in to manage the loan.
- The team at Nordstreet will then commence its primary debt recovery process. This will see Nordstreer make attempts to collect the funds through standard channels – such as telephone calls, letters, emails, and site visits (if possible).
- After 7-8 failed attempts to encourage the borrower to make the payment, Nordstreet will then start its secondary recovery process.
- This will see the platform commence legal proceedings against the borrower. This will include the utilization of a debt recovery company in the respective country.
- The end consequence is that Nordstreet will attempt to recover the underlying security put up by the borrower – which is likely to be the land.
Although Nordstreet has a notable recovery process in place for non-paying borrowers, there is no guarantee that they will be able to recover the funds. Moreover, even if the debt gets to the point where seizure of the land or property is successful, there is no guarantee that this will be sufficient to cover the costs of the loan. As such, your money is never 100% safe at Nordstreet.
Nordstreet Review: The Verdict?
If you’ve read our Nordstreet review from start to finish, you should now be able to assess whether or not the platform is right for your long-term investing goals.
Crucially, the platform operates largely the same as any other real estate crowdfunding website. By investing a minimum of just €100, you have the opportunity to gain exposure to the European property development space.
In return, you’ll stand the chance of making an average annual yield of 11.4%, which is huge.
On the flip side, you also need to make some serious considerations regarding the risks of investing at Nordstreet. There is no Buyback Guarantee to cover the costs of a default, nor is there a secondary marketplace. As such, you won’t be able to offload an investment early. Ultimately, if a property developer were to run into financial problems, you could lose a large chunk of the amount you invested – so ensure that you diversify.