Crowdfunding as a solution for financing real estate transactions has been growing rapidly for several years. Today, there are more than a thousand developers and property dealers who have used at least one crowdfunding platform to support their growth. But why do they make this choice? What are their interests?

What is a promoter?

Before getting into the heart of the matter, let's focus on the basics in order to identify the role of each player.

A real estate developer is a company that ensures and finances the construction of a building. It is also known as the project owner.

What are its missions?

The real estate developer is at the origin of the promotion operation and is in charge of many missions:

  • project design;
  • administrative matters, such as obtaining permits, usually with the help of engineering firms and architects;
  • the search for financing and the acquisition of the land;
  • the realization of the works by calling upon specialized subcontractors and contractors;
  • and finally the marketing of the project, the strategy for which may differ depending on the type of asset concerned. The most commonly used marketing solution is the sale of VEFA The most commonly used marketing solution is the VEFA sale: Sale in the Future State of Completion. It allows the developer to be paid as the work progresses according to a schedule previously established and presented to the buyers.

How does the developer get paid?

When designing his project, the developer establishes his financing plan and the balance sheet of his operation. He then plans how he will manage to generate a margin on his operation when it is sold. He can also include management fees in his financing plan.

Discover our explanatory video on what a real estate developer is

What is a real estate agent?

A real estate broker is a real estate professional who buys existing real estate assets to resell them at a higher price. It can be different types of real estate assets: buildings, houses, land, warehouses, shops, or even offices.

The property dealer is responsible for hidden defects in the goods he sells. He must also take out insurance: Damage to work and Civil Liability.

What types of operations does it perform?

We speak about operation of property dealer in several cases, it can be about the purchase then the resale of an operation after renovation. It can also be the purchase of a property, its division and its sale by cutting. It also concerns the rehabilitation of an asset leading to its change of use, for example offices transformed into housing.

Discover our explanatory video on what is a real estate agent

In concrete terms, what is the difference between a developer and a property trader?

To summarize, what clearly differentiates the two operators is the creation of surfaces. The developer will build from scratch a property and thus create surfaces, while the property trader will rather revalue existing surfaces.

Developers, real estate agents, why opt for real estate crowdfunding?

There are several advantages for a real estate developer to use real estate crowdfunding to finance their operation.

1. To meet an equity requirement

In a market where the acquisition price of land and real estate assets has increased tenfold in recent years, the need for equity capital of operators is growing. Participative financing allows the operator to borrow a sum of money through the issuance of a bonded debt.

Bonded debt allows :

  • to perform more operations
  • to maximize the margin
  • and achieve economies of scale on fixed costs

2. Preserve the margin

One of the financing alternatives for the promoter would be to have a passive shareholder or co-developer who would bring funds into the operation and with whom he would have to share his margin. Thanks to crowdfunding, he can thus reduce his equity contribution on each operation and thus optimize his cash flow and his margin.

3. Quick access to funding

By using real estate crowdfunding platforms like Raizers, operators can secure funding in 20 days.

Once the file is received, it takes 10 days to analyze it and, if necessary, to validate the intervention and establish the conditions of the loan during the investment committee.

And still 10 days to put the operation online on the platform, collect and then disburse the funds.

4. A flexible borrowing model

The bond loan is flexible and adapts to the borrower's needs. Its repayment can be made in several ways depending on the situation:

  • Pay down the principal as you sell: This allows the borrower to phase out financially as soon as payments are received.
  • Repayment of the capital at the end of the operation with annual or final interest payments

In summary, crowdfunding is an effective financing alternative for real estate operators. It adapts to their needs, allowing them to limit their financial commitment and provide flexibility in repayment. Finally, the speed of execution of a crowdfunding operation and the maintenance of the operator's margin allow the latter to carry out more operations and optimize costs.

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