Interview with Víctor Vaca, CMO of PM2
"In PM2 we have a social approach and we want to democratize investments and reach as many people as possible. We want everyone to have the opportunity to become an investor."
PM2, the platform that allows you to invest per square meter in the best real estate developments in Mexico.
Pm2 is a real estate collective funding platform that allows you to access real estate investment in small fractions, or square meters. We spoke with his CMO, Victor Vaca, who will explain the operation of this real estate crowdfunding platform in Mexico.
How did PM2 come about?
PM2 arises very spontaneously. The partners that make up PM2 were experts in different areas: one was an expert in finance, another in construction and another in the sale of real estate. They realized that where they converged, it was that ownership or investment in real estate was always profitable. So what they did, literally, was bring together all those areas of expertise and create PM2.
In 2017 they started with the idea and from there they began with the process of creating and planning the project. And throughout that year they devoted themselves to designing the strategy and studying how they were going to adjust the business model to Mexico's conditions and regulations. And in 2018 the company started up with its first project: Holistika Tulum.
What is PM2's status with respect to the Fintech Law approved by the CNBV in 2018?
There is no exact date that the CNBV said these are all the regulations that need to be complied with. What they have been getting are new modifications and adding new regulations day by day. So what we are doing is updating ourselves and adapting to what the Fintech Law is asking for. Obviously we are talking about investments and we will always be in accordance with the law and we are in favor of regulation because it is the safest thing for investors.
It's a long process, with different formats and requirements as new updates have been published, so what we're doing is working with our lawyers to have all the documentation ready when they ask for it. It's extra work, but it's for the benefit of our clients and investors and that's what we're looking for: that they're reassured to invest with us in complete safety.
What would you say is your greatest value and what makes PM2 different from other real estate crowdfunding platforms?
The first thing is the experience gathered by the partners, who are successful people from different companies. And that experience gives the investor the peace of mind that comes from investing money with someone who knows what they are doing and who is an expert in their field and who is going to look for the best for everyone; it is an intangible value that PM2 offers.
The second thing is that literally PM2 comes to democratize investments and we want to have a social focus. In Mexico, the percentage of the population that can become an investor is very small because of the large amounts needed to enter the country. We believe that real estate investment is something that works and that works and we want to offer it to all Mexican families or any other part of the world. That they can not only save, but that they can also have a yield and that becomes a growing saving. And that's why we've lowered our minimum investment to just 100 pesos.
In addition, by lowering the entry barrier we also reduce the uncertainty that comes with investing in something new. We are a new option, technological and we offer better returns and thus allow people to try our platform with that reduced initial amount and that next time, once you see that we are reliable, you are encouraged to invest higher amounts in the next project.
And what average return are you offering these small investors?
We don't distinguish between small and large. We offer everyone the same return. That is to say, if you invest 100 pesos you get 21% in the time that the project lasts. And if you invest 500,000 pesos you get the same 21% return.
And in terms of average profitability, in this project and the previous one we are around 20 - 21% for the duration of the project.
And what commissions does PM2 charge to investors?
Parallel to the reduction of the minimum investment amount, we have also lowered our commissions to 0.5% of the invested amount. And that commission is already discounted from the returns we offer. In other words, the aforementioned 21% return is net.
What is PM2's business model?
In addition to the small commission that we charge to investors, with the investments collected the builders are funded and for that financing the builders are charged a commission. In addition, on our page investors can find all the information about the projects, their development, their construction and how the builders work. In the last project one of our investors ended up buying the department, and that is an extra that we also offer to developers. We also offer them exposure and visibility so that they can sell their promotions faster.
How is the investment process in PM2 and how do you structure the investments?
We believe that the issue of real estate equity crowdfunding is more risky for the investor because with this system he becomes, for better or worse, a partner of the real estate developer. And our approach, apart from the fact that the real estate market is very safe, is to make it even safer for the investor with a loan scheme.
Investors deposit their capital by means of a transfer to a PM2 concentrator account and we send it to the developer on behalf of the investor.
That is, PM2 does a loan to the developer on behalf of the investors. The apartment is in the name of the developer, but real estate is the guarantee of the loan and the developer cannot sell it without first satisfying the investors, who will receive as a return the capital gains that are generated after the sale of the property.
Do you accept foreign investors?
Yes, we have investors from Argentina, the United States and Europe. The only thing is that for legal reasons all our operations must be carried out in pesos and for that we have a type of account in which we offer them a very competitive exchange rate. And as with any other investor, depending on how the exchange rate is at that moment, the return of the investments and the corresponding tax issues is made.
How do you see real estate crowdfunding in Mexico?
It's growing at an accelerated pace and it still has to grow! In figures, according to the National Report on Financial Inclusion 2016, the crowdfunding had an average annual growth of 495% between 2011 and June 2015.
It's a matter of time before they get to know this system and get to know us as well, and with that, the network gets bigger and bigger. Investors are seeing that the traditional financial institutions charged them a stream of commissions and in the end instead of having a return they were left to duty. And little by little, they see that this new investment system, crowdfunding, works and generates better yields and is growing by word of mouth, which is what PM2 is achieving.
What future plans does PM2 have and what new real estate projects do you have underway?
Crowdfunding is still something very new in Mexico, the oldest platform is less than five years old and we are considering all options. We are in conversations with developers from other countries and seeing how we can couple the regulations, to offer a more varied range to our investors.
Our plans for the future are to continue growing as we are doing so far. We are the only one that has started so aggressively, with a funding of 4 million that was achieved in less than twelve months. The project we have now is five million and we want to continue growing at this rate.
We want investments to reach as many people as possible and for everyone to have the opportunity to become an investor. It is no longer about saving under the mattress, but the joke is to make our money grow and look for new alternatives that generate better yields, obviously safe like those offered by the real estate market.