Invest in Real Estate Crowdfunding in Spain: How and why
Investment in brick has been democratized in Spain thanks to Real Estate Crowdfunding Platforms, a model of collective financing that allows any citizen to deposit their money into a market that, that until very recently, used to be reserved for professional investors. The technological revolution and the new investor culture that arose from the collaborative economy have facilitated the arrival and later the development of a system that is perfectly adapted to the needs of small investors. In a few words, Real Estate Crowdfunding in Spain has become a reality.
With the global crisis that started in 2008, the real estate sector suffered a hard blow, which it began to recover from in 2014. According to the last report published by the BBVA related to the real estate situation in Spain (available only in Spanish), this market has not only recovered but has found itself in a full phase of development: “The good tone of this in the first half of the year confirms the growth expectations for 2017. The sale of homes consolidates its growth, 15.5% year-on-year in the first semester of 2017, in the heat of the good performance of the economy and the low costs of financing.”
Real Estate Crowdfunding platforms in Spain have seen an opportunity in this revival of the sector, since despite the crisis and the distrust that arises among consumers, real estate investments continue being profitable, especially now that they have been democratized. In the words of Juancho Arregui, CEO and founder of Brickfy: “Before, investments in the real estate market were only within reach of people who had 100,000 or 200,000 euros. Now, people with 50 euros can invest in brick and have some of their lifetime savings there.”
The Evolution of Real Estate Crowdfunding in Spain
Despite that Real Estate Crowdfunding is a system that has been functioning for years in countries like the United States and the United Kingdom, its arrival in Spain has been delayed. Until barely 3 years ago there were no companies in this country dedicated to this type of collective financing. Housers, launched in July of 2015, was the first real estate investment portal to enter the Spanish market. It has almost 70,000 registered users and accumulated capital for the development of their projects of more than 32 million euros. In June 2017, Housers received the approval of the CNMV, National Securities Market Commission, as a regulated Participatory Financing Platform, being the first in the sector to achieve this authorization.
Nowadays they have been joined by other firms such as Inveslar, Bricks and People, Civislend, and Urbanitae. The majority operate in large capitals, like Madrid or Barcelona, but Juancho Arregui believes that “there is space for these platforms in smaller cities.” In the case of Brickfy, the prospects of growth go even further. “In the short term we want to be present all of Europe and in the medium term in the United States and Asia. Our vision is to be the reference portal for alternative investment in the world, including real estate crowdfunding, of course”, affirms its founder.
Brickfy is the first platform of platforms and its objective is to facilitate and streamline investment in different platforms, since it allows investing in projects of different platforms from a single website.
How are Real Estate Crowdfunding projects regulated in Spain?
Real Estate Crowdfunding platforms in Spain are regulated by Law 5/2015 on Business Financing. According to this regulation, the participants are classified as either accredited or non-accredited. The first have no investment limit, but the second, specifically individual investors, can only contribute a maximum of 3,000 euros per project and 10,000 per year through platforms.
The supervision of those laws is under the control of the CNMV (Comisión Nacional del Mercado de Valores or National Securities Market Commission). Housers obtained approval as PFP (Participative Financing Platform, according to the nomenclature established by the CNMV for this type of platforms) from the CNMV in 2017. This recognition opens the way to other investment platforms that are pending authorization. With the goal of regulating their situation and offering a full warranty to investors, associations like the AEFI (Spanish Fintech and Insurtech Association) are struggling so that all companies in the sector in Spain are consolidated to operating under a fair legal framework.
Why invest in Real Estate Crowdfunding in Spain?
The main reasons for growth in Real Estate Crowdfunding in Spain and the rest of the world
Until very recently, real estate investments were reserved for professional investors and those with large amounts of capital. But the situation has changed since the arrival of platforms for collective financing or Crowdfunding in Spain. Thanks to this any citizen can invest part of their savings in this sector with the objective of obtaining a profitability proportional to the contributed capital.
To Álvaro Luna, co-founder of Housers, it is clear: “The history tells us that real estate investments are profitable,” and this is true despite the crisis that the sector suffered a few years ago. From this moment arose different companies that, taking advantage of the technological advancements, allowed the democratization of the access to real estate investments all around the world, including in Spain.
What advantages do investments in Real Estate Crowdfunding have?
✔️An alternative to traditional bank financing. Crowdfunding allows real estate projects to be brought to any type of investor, something that until very recently was exclusive to the bank. The market has been democratized. The owners of small amounts of capital can obtain good profitabilities without the disbursement of large amounts of money and additionally, they can do it through a system of management and with information that until very recently was reserved for large financing entities.
✔️You can participate with very little money. Real estate investments are open to all the world, including people with a small economic capacity. In some Real Estate Crowdfunding platforms, you need only to deposit a minimum of 50 euros.
✔️ The investor can enter or leave the project when they want. Perhaps a project that has already entered the financing phase interests you. Crowdfunding platforms allow you to enter at any moment of the cycle. Also, you can stop participating when it no longer interests you or you need the invested capital to be available.
✔️It is not necessary to have knowledge of financing or the real estate sector. The Crowdfunding platforms display their projects in a very simple form and with all the necessary details so that the investor knows all the information that they should before depositing their money. Transparency is one of the strengths of Real Estate Crowdfunding. The interested investors can know, through the platforms, the types of real estate that are offered, if they are going to be a renovation or a new construction, the cities and areas where they are found, etc. Additionally, the professionals that work in these platforms have widespread experience in the sector. They analyze and study each one of the projects before publishing them on the portal.
✔️Risk diversification. It is recommended to invest in different projects within the same period of time in order to diversify the risk. In the case that some operation is not profitable, the investor will not lose all his money. The projects are independent of each other, so that it is possible to diversify the investment portfolio.
How does one carry out an investment in Real Estate Crowdfunding in Spain step by step?
• The first step part is one that the platform’s own managers perform. They select, and later display on their portal, a series of projects that they consider to have the least possible constructive, commercial, and financial risk. There are many factors that will be vital in the selection: the purpose of the property, the area where it is located, its age, etc.
• The investors choose those projects in which they want to participate. One of the main advantages that this type of portal offers is that the person who has deposited their money in a work can track that investment from anywhere, at any time. The details are important: the budget, the price of the renovations if they occur, taxes, expected profitability after the sale or rent, etc.
• Sale and returns. Once the fixed budget has been reached for a project, the renovations or construction of the property begins. The following step is to sell the property or to lease it before the fixed time period is up. Once the sale has been completed, the investors recover their money and a part of the profits obtained during the life of the project.
Types of investors in a Real Estate Crowdfunding project
According to Spanish Law 5/2015 on Business Financing, there are two profiles of investors:
• Accredited: They are the professional investors. The law does not impose a limit on them when it comes to investing, but it does on the projects in which they are going to participate: those projects will not be able to exceed 5 million euros. In order to earn the professional accreditation, they can register as natural or legal persons. In the first case, their minimum annual income must be 50,000 euros or they must have assets of 100,000 euros. If they are legal persons, their assets should have a minimum value of one million euros, turnover must be about 2 million euros, and they must have their own resources of at least 300,000 euros.
• Non-Accredited: They are the investors that are not professional, and they do have limits when it comes to investing. In their case, they cannot invest more than 3,000 euros per project, and the annual amount must not exceed 10,000 euros. The budget of the projects they invest in must not exceed 2 million euros.
Do you know more advantages of investing through Real Estate Crowdfunding? Do you believe that this is a future projection model in Spain? Would you be interested in contributing by this form of investment and do you want to receive information about new projects? Register on our platform and discover all the projects we offer.
If you still have doubts, at Brickfy we will respond to all your questions. Get in contact with us and we will attend to you without any type of commitment.