Posted On : November 27, 2022
There are a number of parameters you should consider, while selecting a real estate crowdfunding platform. Overview of the main criteria is provided below. Nevertheless there are multiple other factors, which should be taken into consideration as certain investors have certain preferences.
Firstly and most importantly you would like to make sure, that the platform you are investing is regulated by a certain regulator. Regulation of real estate crowdfunding platforms was not aligned on the EU level up until implementation of Regulation (EU) 2020/1503 of the European Parliament and of the Council of 7 October 2020 on European crowdfunding service providers for business, and amending Regulation (EU) 2017/1129 and Directive (EU) 2019/1937. This Regulation issued single requirements for the EU countries, how real estate and other crowdfunding platforms should be regulated.
Before that, each country applied different regulations and licenses, therefore up until now all the platforms operating in EU are operating under different regulatory regimes. The above mentioned Regulation has a transition period, which allows for countries to adopt it in the local legislation as well as for the real estate crowdfunding platforms to get a license under new regulation.
Before choosing a real estate crowdfunding platform, always check what licenses specific platforms are holding and what is the scope of those licenses. Most of the platforms disclose their licenses, but not all of the licenses are covering their crowdfunding activities (e.g. there are platforms operating under payment institution license, but this does not cover crowdfunding activities).
Another key criteria to check criteria investing – track record. This is not an easy one to check and validate as platforms are providing information on their websites, which can be changed and is hard to check the log. Nevertheless some real estate crowdfunding platforms provide audited financial statements with key statistics and financial information. On a side some platforms provide statistical information how they have progressed over time in terms of capital raised, registered users, failed projects and etc.
Before choosing a real estate crowdfunding platform, make sure to check at least the following two critera:
1. Financial information of the platform if available
2. Statistical information on how the platform is performing
It is also highly recommended to consult with friends or other community members on the feedback of the real estate crowdfunding platform.
One of the goals of crowdbulls.com is to track the platform performance, which give more information and confidence to choose the best real estate crowdfunding platform.
In this paragraph we are only covering the main fees for main services, which platforms are applying for investors. There are many fee variations across different real estate crowdfunding platforms.
Fees can be classified into few categories:
These can be deposit, withdrawal or interest payment fees. Make sure you check them before choosing a real estate crowdfunding platform. Some of them are applying flat fees per transaction some of them are applying percentage from a transaction. This could also come into play depending on the project you are investing. Some could have a bullet payment (single payment at the end of the project), some of them could have periodic (monthly payments).
Bank/credit card deposit/withdrawal payments
These usually does not depend on the real estate crowdfunding platform, but depends on your bank or chosen payment method. Check them with the providers you are using before choosing real estate crowdfunding platform.
These are quite important fees if you are not a regular investor. All of the real estate crowdfunding platforms are incurring internal costs for overnight deposits. So the money which is not invested and kept in customers account are costing certain fees. Therefore most of the platforms introduced fees in order to encourage money movement. If you joined the platform before just for one project, make sure you wire money out, once the project is closed.
Make sure you check these out before choosing real estate crowdfunding platform.
Personal income fees (state)
These are the fees which are charged by real estate crowdfunding platforms, but this is something you have to consider before choosing a real estate crowdfunding platform. Depending on the country you live in, interest revenue will be considered as taxable income and taxed based on the local legislation. This is not platform specific, but fall under fees section.
These days users are used to certain user experience standards, therefore it is quite costly for some of the to maintain the top level. Nevertheless pay attention at this while choosing a real estate crowdfunding platform.
The first user experience, which could be noted – onboarding process. Most of the platforms are using third party suppliers to do onboarding process, but they have different integration levels and is some it could take a few days, before the user is approved and could start investing.
Secondly project descriptions and ease of use, while navigating between the projects. This is not a deal breaking process, but certainly saves time, while selecting a project as the investment process itself is quite time consuming.
Secondary market is an important feature to taking into consideration which choosing a real estate crowdfunding platform. This is a function, which allows to place you investment on sale during project implementation phase. It is a nice feature which allows to reduce you investment risk. And also allows for certain investors to build additional investment strategies based on the secondary market offerings.
Even though some real estate crowdfunding platforms provide multilanguage support, translations for most of them are poor. Try to use English version as we believe this reflects the content the best. There are certain platforms designed for a specific country e.g. Germany only, France only. We do not recommend investing there as investment is all about familiarizing with the project and assessing the risk. Whereas when projects are described in a local language, there might be many areas for interpretation.
Various investment platforms apply different thresholds for minimum investment amount. If you don’t want to go all in, look for platforms which accept relatively low investment threshold, e.g. 50 EUR or 100 EUR. This is more important for beginner investors while choosing a real estate crowdfunding platform.
Another aspect to look into from which countries investors are eligible to invest into real estate crowdfunding platform. Unless the platform is country specific, most of the platforms are allowing users from all over EU to invest. Some are accepting investors from countries outside EU, however this should be checked in every real estate crowdfunding platform.
Check if you are eligible while choosing real estate crowdfunding platform before starting a registration, else it could be a time consuming process, which will not result in a permission to invest.
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