Real Estate: Should We Trust Crowdfunding?

The numbers for the pool made via crowdfunding – often called crowdfunding – have exploded in France for a few years (see chart). Savers prefer this type of investment of financing economic players via online platforms. Most projects that use public online savings are related to real estate construction software. Savers lend money — in the form of bond subscriptions — to promoters. These bonds come at very attractive rates, around 7-10% per annum for periods from 18 months to 5 years. At the end of these bond loans, investors are supposed to get back the down payment with interest…or no! In fact, the investment is not accompanied by any guarantee and therefore, in the worst case, may lead to a total capital loss. Although this catastrophic scenario is rare in the real estate sector, this risk cannot be ruled out.

The same is true of the second large family of participatory investing: financing small and medium-sized businesses, through loans or investments in their equity capital. Since these companies are often modern, the odds of default are much higher here. Hence the clever idea of ​​crowdfunding distributors to match their offer with a capital guarantee. But, of course, this safety net is paid for. invoice ? The return is about half of that normally targeted.

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Kiwaï launched, in March 2020, a concept that was a huge success. The platform offers the general public the opportunity to invest in environmental transformation by financing “100% green, 100% Norman and 100% guaranteed” projects. This involves giving someone a loan – up to a maximum of €2,000 per lender – over an average period of 4 years, with an annual interest rate of between 2% and 4%. That’s the average net return after taxes and a flat one-time rate of 30%, going from 1.4% to 2.8%. Over the next four years, the euro life insurance fund will probably do no better.

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a guarantee ? Bank guarantee provided by Caisse d’épargne de Normandie, shareholder of Kiwa. “In the event of a borrowing company defaulting, the investor is compensated within 90 days, up to the principal lent and the unpaid interest owed to it,” says Christophe Diskus, President of Kiwaï. The success of the formula is that these public offerings are completed within a few hours of being published online. In the face of this enthusiasm, Kiwaï launched in November 2021, a platform offering financing offers for green businesses across the country, with a guarantee provided by various regional savings banks.

Promoter Financing

On the real estate crowdfunding front, is currently the only platform that regularly opens subscriptions for products that benefit from a capital guarantee. They offer a return of around 4%, versus an average of 8% for unsecured ones. Depending on the investments, the method of protection offered to the subscriber varies. The first relates to underwriting a bond for a real estate developer, having secured a financial guarantee from S2C, Finple’s partner insurance company. “In the event of a default on the part of the promoter, the insurance company takes over and Finple compensates its client. We will reimburse him for the amount he has invested. In other words, the only risk the investor is exposed to when signing up is investing his money at the zero rate,” explains Thomas DeRosen, Founder finple. Possibility 2: Sometimes a credit-based guarantee is proposed on corporate real estate financing offers. A credit broker – often a law firm, then takes a temporary mortgage guarantee on property owned by the land company. In the event that the amounts borrowed by the latter are not repaid, his mortgaged buildings are sold through a credit intermediary to compensate the affected investors.

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“The agent takes a guarantee on the real estate assets of the highest value, for the order of 50%, to the amount of sums lent by the investors,” Thomas Desrone identifies. Savers are compensated for the capital invested in addition to unpaid interest. Thus, a credit guarantee is more protective than a guarantee which relates to capital only. But the repayment periods are longer in the context of trust than in the insured capital, i.e. from 6 to 8 months for the first as against 45 days for the second.


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