Shortly after we introduced another platform, let us present the latest FinTech investment we’re testing: Crowdestate with a focus on real estate. While we already have at least one such investment in our portfolio (described here), this platform really delivers something different. Crowdestate has an apparently efficient secondary market that provides liquidity to investors throughout the project cycle.
Usually the problem with financing real estate is that the borrower needs the funds for longer periods of time and wouldn’t normally be able to start repaying until the project is over. Our previous experience shows that often projects are carried out often longer than one year periods, so it basically demands patient investing. Once you introduce an efficient secondary market, however, investors can exit and enter more flexibly regardless of how long the original loans lasts.
Crowdestate’s main advantages
- Real estate projects are the main focus of this platform, but they also offer alternative types, in corporate financing and mortgages;
- Geographic diversification for our portfolio is definitely a highlight, there are projects in their local Estonian market but also many in Italy, Latvia and beyond;
- Secondary market seems to work well in a first test. Oddly enough, I should confess my first browse through their secondary market was seeking “bargains”. At that point, I thought investments sold below their original price would make a good deal for a new investor looking for higher returns. Thinking carefully though – and luckily not having found any such discounts – I realize that for the original investor (and consequently for the platform) it would be a really bad sign if they were selling their loans for less than originally invested. Instead, all investors are getting some remuneration, and the agreed price just defines how much each is receiving;
- Loan interest rates are considerably high, most of them well over 10% p.a., and tenors vary more than in other platforms. Some of their loans are as short as six months, which might make a good testing exercise for new investors, whereas others – especially the real estate ones – are of course longer.
Where the platform could do better
- As in other platforms such as Kapilendo, deals are sold out shortly after becoming available, I still didn’t manage to get into any new deals before they reach their full desired allocation, but luckily the secondary market is there to avoid longer unallocated funds;
- In terms of communication, my experience could have been better. Their standard emails landed in my spam box, and since there was no advance warning to new investments it meant I saw the new opportunities late;
- Similarly to Bondora, Crowdestate also took a relatively long time to notice I had sent them funds, so if you are investing with them for the first time, be patient;
- Lack of auto-invest functionality is a pity, as far as I can tell investors always need to manually choose what they invest in, which takes time and requires you to know your preferences. This is surely not a problem for us, but we think it might be meaningful to beginner investors.
- Initial investment amount of 500 Euros, most of it allocated to secondary market deals; - Interest rate are averaging 14,16% p.a. but could probably be higher if I was looking to maximize returns rather than look to diversify among different investments.
As January comes to an end, we realize how quickly times flies by. We hope this motivates us all to seek ever more productivity. It is a goal to test different things in this space in addition to the usual FinTech investment reviews, so come back for more soon!