I haven't written a lot about real estate platforms. While my favorite is definitely Estateguru (check out my Estateguru review too), Crowdestate comes a VERY close second (despite its ugly logo).
If you like me are put off by the aesthetics of the company, do read this. The details are actually really good!
Crowdestate background
Crowdestate was founded already in 2014 by Loit Linnupรตld, a seasoned finance executive who's held high positions at banks such as the country head of banking products, Nordea Estonia.
Crowdestate is incredibly profitable, having made 493k€ profit in 2018, up from 182k€ in 2017 (source: annual statement). Crowdestate's operating profit margin is a whopping 36%, when Estateguru has 11%.
Crowdestate is incredibly profitable, having made 493k€ profit in 2018, up from 182k€ in 2017 (source: annual statement). Crowdestate's operating profit margin is a whopping 36%, when Estateguru has 11%.
4 steps to start investing on Crowdestate
Step 1: create an account
Head over to crowdestate.eu and create an account by clicking sign up. It's nice that you can use Google or Facebook to sign up - avoid remembering passwords.
Crowdestate will ask you to use an authenticator app, for added security.
Step 2: verify your account
Before you continue further, it's important to verify your account. Completing this "Know Your Customer" process ensures you will be allowed to withdraw money from your account.
Step 3: add funds
You can add funds by finding the green Add funds button from the top part of the screen.
You'll be shown the SEPA bank wire instructions to follow.
Step 4: pick a project to invest in
Look for the open projects, find one you like and invest.
Simple!
Crowdestate features
Primary market
The primary market is where the new projects will appear. When getting to know a project, it's important to ensure the risk-to-return makes sense.
- Is the investment a loan- or equity based
- What's the loan-to-value
- What's the interest rate
- Is the mortgage first rank or something less
- Duration of the loan and repayment schedule
- Vet the borrower very carefully
- Check the appraisal report, a third-party evaluation of the project
There's a lot of information on the project page. Crowdestate even provides their own risk rating, which does make sense to look at for ideas.
However, don't let this distract you from making your own due diligence. Check who is raising the money, does the project make sense and who has evaluated it.
Unfortunately, many times the appraisal reports are not in English, which makes doing due diligence a bit more tedious. A greatly educational tool is the Full capital stack visualization, which helps people quickly understand the priority of debt.
Unfortunately, many times the appraisal reports are not in English, which makes doing due diligence a bit more tedious. A greatly educational tool is the Full capital stack visualization, which helps people quickly understand the priority of debt.
Secondary market
I was super impressed by the Crowdestate secondary market liquidity. I made a test and sold an investment 2 months prior to its maturity with a small discount. Instead of 11% IRR, I got 8.5%.
By selling a bullet loan a bit before its maturity you get to avoid the biggest test of the loan: paying back the principal. Crowdestate has been very good at vetting their projects, so I'm sure that I would've gotten the remaining 2.5% as well by staying in, but I wanted to try.
Crowdestate auto-invest
Auto-invest is pretty simple on Crowdestate. Here's what the settings mean:
- Name: You need to give your auto invest profile a name.
- Opportunity type defines the kind of loan you want to invest in. Mortgage here AFAIK means actually financing someone's mortgage. Real estate means a development project, that might in fact be collateralized by a mortgage.
- Multiple funding rounds allows the auto-invest to invest in multiple rounds of the same development.
- Investment amount specifies the euro amount to invest in a single loan
- Expected rate of return defines the interest rates you want to invest with
- Length of investment defines the duration of the loan
- Risk class range lets you choose your risk class rate by Crowdestate's risk rating
There are even more advanced filters you can use. For example, my auto-invest settings would probably only be about Real estate, only focus on Residential, Office and Retail, leaving out Leisure, Healthcare and Industrial (since those would in any case be less frequent).
I'd filter only for secured debt and leave out speculative investment type. Also from the countries available, I'd leave out Italy and Romania, leaving only Estonia and Latvia.
That way, the auto invest can actually be specific enough. But to be honest, I probably wouldn't personally use the auto invest.
Crowdestate interest rates
The interest rates on Crowdestate are actually very interesting.
The platform states a return rate of 17%, which apparently is the total aggregate, as the total return of all exited loans is 20%.
My own experience about interest has been significantly lower though. I've seen interest rates closer to around 11%, also with my own investments. This could be explained by there having been riskier, equity based opportunities more in the past.
But 11% is actually really nice. Want to see what 11% compounded looks like over years?
As always, past performance isn't a guarantee of the future, but 11% does compound impossibly nicely.
Crowdestate risks
The biggest risk in my opinion is credit risk: if the project you have invested in fails, you could lose money. At least your money might be tied in a liquidation for a long time.
In 2018, two projects slipped off schedule. But since they have collateral, it looks like investors won't lose money on them.
Liquidity risk is not quite as significant as you might first think. Sure, your investment is tied to typically a bullet loan, but the secondary market is actually pretty good. An investment I had invested for 11% for 10 months, with 2 months remaining, I sold for over 8% IRR.
This was an important test for me, since it means you really can get out of a loan early. I was super impressed. But market situation might change, of course.
I don't consider platform risk to be significant, as Crowdestate is highly profitable. Also, being such a long player in the field already with a credible team, the risk of fraud to me seems small. Still, best to be careful.
Full disclosure
I've invested a four-figure amount on Crowdestate. Interest rate would have been a solid 11% as IRR, if I hadn't tried out the secondary market liquidity.
What I absolutely love about Crowdestate is how financially stable the company is. Having made half a million in profit in 2018 puts the company at a much better financial foundation than many of its rivals. With a stellar operating profit margin of 36%, Crowdestate as a platform seems to be in for the long game.
A much too underadvertised thing is the liquidity of the secondary market. At least in my test I was easily able to sell a loan without a big discount. This reduces risk significantly.
Due to the solid foundation of the company and greatly detailed projects, I'm giving Crowdestate also full five stars ⭐⭐⭐⭐⭐. I'd hope for English appraisal reports, but that's a small detail compared to the transparency and success of the platform.
If you're considering Crowdestate as an addition to your portfolio, please use my affiliate link to sign up, which will grant me a small commissions to help run this blog. It's completely free for you of course.
A much too underadvertised thing is the liquidity of the secondary market. At least in my test I was easily able to sell a loan without a big discount. This reduces risk significantly.
Due to the solid foundation of the company and greatly detailed projects, I'm giving Crowdestate also full five stars ⭐⭐⭐⭐⭐. I'd hope for English appraisal reports, but that's a small detail compared to the transparency and success of the platform.
If you're considering Crowdestate as an addition to your portfolio, please use my affiliate link to sign up, which will grant me a small commissions to help run this blog. It's completely free for you of course.
