Real estate crowdfunding is the English term used to describe participatory real estate financing. As the name suggests, it is a form of financing that involves pooling funds to finance various types of real estate projects (new constructions, building renovations, purchase of existing income properties, etc).
For investors, it is also an opportunity to invest in a real estate project alongside other investors to grow their savings.
If you want to grow your savings and are interested in this sector, discover in detail what real estate crowdfunding is all about.
What is real estate crowdfunding?
This new type of investment, which is attracting more and more people, allows private investors to contribute to investments in real estate assets via online platforms.
Indeed, for a long time, real estate investment has been difficult for everyone to access. It was mainly reserved for institutional investors and the wealthiest individuals.
Today, the need to democratize this investment, often considered profitable but with controlled risk, is becoming possible. This is precisely the purpose of these new participatory real estate financing platforms.
How does it work?
Initially, private or institutional owners, real estate developers submit real estate projects or income properties to crowdfunding platforms. Internally, a committee of real estate industry experts analyzes them based generally on three main criteria:
- Supply and demand at the property's location,
- the potential return,
- the security of the investment.
If the criteria are met, the projects are then offered on dedicated real estate crowdfunding websites.
Just like crowdfunding sites that finance startups, for example, you simply need to register and choose from the offered real estate projects the one that interests you.
Then, you just participate accordingly.
Published on dedicated online platforms such as Imvesters, these crowdfunding projects give individuals the opportunity to invest in real estate, become co-owners, and own a part of an income property.
There are two types of participatory financing:
Crowdlending:
This is crowdfunding dedicated to financing real estate development. It allows financing the equity needs of developers for their construction projects. The financing typically lasts 24 months and is repaid upon completion of construction and sale of the units.
Crowdinvesting:
This involves offering individuals the chance to invest their savings as co-owners (registered in the land registry) in a real estate asset. This patrimonial investment offers returns higher than other asset classes with low risk. The advantages are numerous: choice of allocation, transparency, and the tangible nature of the investment.
In addition to their ownership title, investors receive, proportionally to their legal share, the profits and income generated by the property. A potential capital gain is paid out upon resale of the property.
Investors thus become owners and hold a share of the real estate asset.
Each platform operates differently. For example, they set the minimum investment amount required, data presentation, income distribution, and property selection.
Who is real estate crowdfunding for?
Unlike investing in the Swiss real estate market, which is particularly closed and reserved for a certain category, real estate crowdfunding is accessible to any investor wishing to diversify their investments or simply try a short-term investment.
It is a true real estate democratization.
As mentioned earlier, the real estate crowdfunding process takes place online. An action that is quick and easy to do.
You also have the option to track the progress of projects from your personal account.
What returns can you expect?
Today, it is difficult to place your money and obtain attractive net returns.
Real estate crowdfunding is the solution that allows you to generate a return proportional to your investment every month and benefit from a potential capital gain in case of resale.
Depending on the type, location, and condition of the property, as an investor, you can receive returns between 5% and 8% per year, distributed monthly on platforms like Imvesters, for example by investing a minimum of CHF 20,000.
Key takeaways
Real estate crowdfunding appears as an innovative, immediate financing alternative and an interesting source of profitability for you as an investor.
It will allow you to grow your savings through investments proportional to your participation!
