Real estate crowdfunding is a phenomenon recently introduced in Switzerland, stemming from the evolution of traditional crowdfunding models. It already offers many opportunities for financing real estate projects, especially for individual investors who now have an alternative to keeping their savings under the mattress!
Crowdfunding is booming and the success of dedicated platforms continues unabated in Switzerland. The numbers speak for themselves: in 2017, no less than 375 million francs were raised through this channel, three times more than the previous year, reports the online newspaper Allnews.com. A large part of these funds is used to finance business development in the form of loans. Companies find it a good way to expand their resources or to test the originality and viability of their new products. In Japan, Sony used its own crowdfunding platform, First Flight, to launch its Wena smart watch.
Resulting from the evolution of participative finance, another practice is gaining momentum: real estate crowdfunding. In this field, there are two distinct practices that share only the term “real estate”: crowdlending and crowdinvesting.
- The first is dedicated to real estate development and allows financing the equity needs of developers for their construction projects. The financing lasts on average 24 months and is repaid once construction is completed, upon sale of the units. It is complementary and not competitive with construction loans granted by lending institutions.
- The second involves offering individuals the opportunity to invest their savings in co-ownership – registration in the land registry – of a real estate asset, over a period of 5 to 15 years. This patrimonial investment offers returns similar to or higher than those of investment funds. The advantages include choice of allocation, transparency, and the tangible aspect of the investment. In addition to their ownership title, investors receive profits and interest related to this property, proportionally to their legal share. While in Switzerland the players present in this crowdfunding segment are still few, it grew from CHF 7.1 million to CHF 39.2 million (+453%) between 2015 and 2016.
Crowdfunding for real estate development on one side, acquisition of real estate assets on the other... You get the idea, these two types of crowdfunding have different cultures, logics, and actors. Nevertheless, the volume of transactions through alternative real estate investments – both in the form of loans and equity stakes – demonstrates that these two categories contribute to the sector’s development.
Did Someone Say Revolution?
The revolutionary aspect of real estate crowdfunding lies in the fact that it offers very attractive returns and an accessible entry ticket. Thus, it democratizes this type of profitable investment that was always reserved for institutional and wealthier investors. The icing on the cake: the risk is controlled and minimized for the investor, as the amounts loaned can be modest and defaults observed on operations are marginal.
How to Invest?
While real estate crowdfunding offers many advantages and little danger, zero risk does not exist and one cannot become an investor overnight. Therefore, to minimize risks, several measures can be taken. First, carefully select opportunities. It is necessary to scrutinize the information provided in the summary note of each project to be sure of their viability. Next, you can choose to diversify your investments. Diversifying your portfolio allows you to bet smaller amounts on several handpicked projects. This again helps reduce risks. Finally, if you do not want to deal with all these questions, you can simply choose to get support in your process.
Why Imvesters?
Thanks to a committee of real estate industry experts, we pay particular attention to property selection based on three main criteria: supply and demand in the area, potential return, and investment security. We also select existing buildings with a stable rental status. For even more peace of mind, we have independent and certified real estate experts, such as the firm Wüest Partner, leaders in their fields, prepare appraisal reports, and we can count on the support of the bank Raiffeisen.
With an entry ticket of CHF 20,000 and estimated returns of around 6%+, our crowdinvesting platform aims to democratize real estate investment. Join the revolution!
