Real estate crowdfunding, a "win-win" deal for the developer-investor couple

54.8 million euros is the amount collected in 2016 in real estate crowdfunding, which is +80% growth compared to 2015. The number of platforms (17) and the number of investors (+83% of investments) are multiplying. At 9.5% average annual return (IRR), this investment product now far exceeds the returns advertised on similar products, such as SCPI (4.7%), and offers short maturities. So why have more than 100 real estate promoters embarked on this adventure and how to invest properly?

PROMOTER: A GROWTH ACCELERATOR

When a developer launches an operation, he blocks several hundred thousand euros of equity before being able to apply for a bank loan and then be able to build. The tightening of the conditions of access to bank credit imposes the conservation of these equity funds in the company's capital throughout the life of the operation, despite the calls for funds paid by the future buyers during the construction.

Some developers may therefore miss several business opportunities, such as the purchase of new land, which could allow them to grow faster and generate comfortable margins. To overcome this problem, they have been calling on private investors for years to increase their equity capacity quickly and thus achieve greater leverage with the bank: the return associated with the contribution corresponds to the cost of the opportunity offered to the promoter.

Developers therefore have a strong incentive, within their structural capabilities, to agree to pay high interest rates as long as their shortfall is greater.

INVESTOR : HOW TO INVEST YOUR MONEY WITH REAL ESTATE CROWDFUNDING ?

Participatory finance platforms are regulated organizations, registered with theORIAS. In the absence of approval as a Participatory Investment Advisor, they are not authorized to operate. As the DGCCRF reminds us at the end of February 2017, this approval requires them to carry out and make available to you a complete analysis of the operations and associated risks as well as the legal elements justifying your investment. Do not hesitate to establish a telephone or physical contact with the investment advisors made available to you by certain platforms.

Real estate crowdfunding allows for a very broad diversification, with low investment tickets: don't miss out. Choose several trusted promoters and spread your investments according to the size of the operations, their nature (offices, housing, renovation, etc.) and their maturity.

Find out the details of the transaction. The interest rate should reflect the progress of the program, the level of marketing and the financial strength of the developer. Beware, real estate developers rarely present consolidated accounts on the platforms, despite the creation of several structures whose sole purpose is to get into debt. Here again, the platform must be able to provide you with this information to avoid surprises when a company that fails in a group impacts its overall financial health.

Real estate crowdfunding, a support for growth, a response to the need for new housing and an interesting investment product, provided that the investment is transparent.