An overwhelming choice
Many real-estate and business crowdfunding platforms are reviewed on Alternative Investments. Most of them received good or great ratings; it may be hard to get an overall picture of their similarities and differences. This article aims at comparing them in a more specific way.
Why invest in real-estate and business crowdfunding platforms ?
An obvious reason is that returns for these projects are usually higher than with individual loans. Also, investing in such projects allows to diversify your portfolio.
Drawbacks of these investments
These investment opportunities don’t always come with a buyback guarantee[?]. This is obviously a price to pay for the higher returns. Also, they’re usually less transparent than most P2P marketplaces, which usually provide details about the loan originators. Indeed, very few P2B platforms disclose details about the borrowers (financial statements, management team…). However, I expect this situation to change, as investors are now pushing for more transparency.
Also, with the notable exception of CrowdEstate and EstateGuru, these platforms lack a secondary market. The lack of an early exit may not be a concern with short-term business loans; however, being stuck for two years on a real-estate investment can be annoying.
Real-estate and business crowdfunding platforms overview
As both Envestio and Kuetzal turned out to be scams, I obviously removed them from this comparison. I also decided to remove three platforms currently in my blacklist : Monethera, Wisefund and TFGcrowd as they got a lot of bad press after Kuetzal’s and Envestio’s downfall. There’s always time to add them back at a later time if they prove to be more transparent.
We’ll thus compare the following platforms :
BulkEstate is a company focusing on bulk real-estate deals; however, they also provide real-estate crowdlending projects.
CrowdEstate is a large platform for both real-estate and business crowdfunding loans.
Crowdestor features a very large array of real-estate and business crowdfunding projects.
Debitum Network offers a small volume of business loans; this platforms focuses on investments safety, thanks to a rigorous due diligence process and independent loan originators ratings.
EstateGuru is a direct competitor to CrowdEstate.
Flender allows to lend money to Irish small and medium businesses.
Grupeer features a large volume of business and real-estate loans, which come with a buyback guarantee.
Detailed platforms comparison
I will compare the platforms using different criteria.
We’ll first examine the loans themselves : loans volume, interest rate, projects diversity, cash-flow regularity. The availability of a buyback guarantee will be another criterion.
Then, we’ll evaluate the platform’s track record : how many projects were already successfully exited ? Are there late reimbursements, or even worse, defaulted projects ?
Finally, we’ll have a look at the features provided by the platform’s website : secondary market, auto-invest feature and platform usability.
Several platforms add large loans very regularly, with a total volume that meets or exceeds investors’ demand :
- EstateGuru feature many large projects; there are sometimes several new opportunities daily !
- In addition to a few very large loans (around one million euros), Crowdestor features a very large amount of smaller loans.
- The loans supply at CrowdEstate has improved, and it’s much easier than before to invest, even manually.
- Finally, Grupeer has a rather large loans volume, but their interest rates may vary rather quickly throughout the year.
On the other hand, the loan volume of Flender has decreased a lot, which can probably be explained by the uncertainty regarding the outcome of the Brexit. Debitum Network also offers only a small volume of loans – in part because they’re rather strict about which loan originators they work with -.
EstateGuru is probably the most conservative platform, with interests rates around 11%; CrowdEstate’s real-estate loans usually yield slightly more.
Flender is a special case : most loans offer interest rates below 12%, but they also have speculative loans yielding as much as 15.9% !
The main choice for investors looking for speculative loans is Crowdestor, where interest rates sometimes reach 20%. This platform will also appeal to more conservative investors, as the large amount of investment opportunities on the platform means there will be something for everyone.
With interest rates generally ranging from 11% to 13%, Grupeer‘s loan are usually a perfect match for a balanced portfolio.
Finally, interest rates at Debitum Network are among the lowest for business loans; they’re usually below 11% annually.
It’s actually rather hard to pick up a winner, especially when considering the risk associated with greater returns. The great news is that every investor will probably find at least one platform that suits him !
BulkEstate is the only platform that only focuses on real-estate investments; similarly, Flender only lends to businesses. All other feature both real-estate and business loans. Crowdestor features very diversified opportunities.
Grupeer is quite the opposite, as most projects are basically the same.
Loans on most platforms pay interests monthly. However, there are several exceptions.
CrowdEstate‘s real-estate projects and all of BulkEstate‘s projects usually reimburse the principal and interests only once the project is completed. For EstateGuru‘s projects, the reimbursement frequency varies from one loan to another. It may be monthly, or happen at the end of the project’s duration, at the same time as the interests. Finally, Crowdestor started listing more and more projects which only reimburse interests after a given delay (usually 6 months), while Grupeer also recently introduced bullet loans.
Shame on me ! This essential aspect was missing on previous aspects of this comparison.
EstateGuru and CrowdEstate don’t provide a buyback guarantee. Readers may have a look at my article on default risk to get a better understanding of the outcome of past defaults. It’s also the case for Flender.
Crowdestor chose a slightly different mechanism and created a warranty fund. It’s initially funded by the company, and grows using a fee taken on each project. I really appreciate this mechanism, as we know precisely how much money is available in case of a default.
Finally, Grupeer‘s buyback guarantee is provided by the originator, in a similar way to individual loans. The delay varies from one originator to another, but it usually triggers after 60 days.
This is an essential criterion when evaluating a platform. Indeed, most of us will be hesitant to invest large amounts without a solid track record !
CrowdEstate and EstateGuru has been there for a long time, and are the clear winners when considering this criterion. They list as many as one hundred and twenty exited investment opportunities for CrowdEstate, and slightly less than two hundred for EstateGuru ! Moreover, as highlighted in our article regarding borrower’s default, EstateGuru’s recovery process at is very performing.
Grupeer didn’t have any default yet, and all loans were reimbursed in time.
The number of fully reimbursed loans at BulkEstate has grown significantly since the last time I updated this article; there are now nearly forty of them !
As of late January 2020, Flender‘s default rate is 0.8%, which is very reasonable – but much higher than the 0.2% in May 2019 ! -.
As Crowdestor is a relatively recent platforms, a bit more than twenty loans were fully repaid.
Only CrowdEstate provides a secondary market[?] as such. It’s both a curse and a blessing, however, as it leads to a lot of speculation; many investments are on sale on the secondary market for a price higher than what was originally paid !
EstateGuru introduced a secondary market in October 2019; the loans amount is currently rather low. There’s a 2% fee paid by the seller.
I don’t really consider auto-invest[?] a necessity when investing through real-estate and business crowdfunding platforms; indeed, as the projects are often less standard than individual loans, manual investing is often a wiser choice.
Grupeer‘s loans are overall rather standard compared to their competitors; the opportunity to invest automatically is thus welcome. It’s also the case for Flender.
CrowdEstate features an auto-invest; due to the platform’s success and speculation on the secondary market, using it to invest is recommended. However, recent changes in the way bookings are processed make manual investment a possibility.
Investors at EstateGuru also have access to this feature, although it will be restricted for most of them; indeed, it’s necessary to invest at least €250 per project in order to have access to all filters. As a result, investing manually is often a better choice.
CrowdEstate‘s platform is by far the most user-friendly; projects are extremely detailed and reporting is rather complete. Crowdestor‘s website was upgraded in late 2019, and now features an improved dashboard and better reporting. Similarly, the upgraded website at EstateGuru has improved usability a lot.
Another platform that benefited of a large upgrade is Debitum Network. I used to hate their first website (and actually didn’t review it because of this aspect), but now it’s pleasant to use.
In spite of a few issues with navigation, using Flender is very enjoyable and straightforward.
Grupeer‘s website is easy to use, but the reporting is poor and some very useful features are missing; for example, it’s impossible to sort loans according to the interest rate!
Finally, BulkEstate‘s platform still has room for improvement; however, in all fairness, it has improved a lot since the initial version !
Choosing the right real-estate and business crowdfunding platforms
Your choice should be based mostly on your risk tolerance.
Conservative investors will love EstateGuru; the platform’s main strengths are the large loans volume and the excellent recovery process.
Debitum Network is also a good choice, although the loans volume is rather small, which makes it harder to get a diversified portfolio.
For investors who want higher returns but don’t want to risk investing through platforms with little track-record or in speculative investments, CrowdEstate‘s real-estate loans are an obvious choice.
In addition, Grupeer‘s loans have the advantage of coming with a buyback guarantee; the large loans volume is also a strong selling point.
Flender provides an excellent opportunity for geographical diversification, by lending to Irish businesses. The large range of available interest rates will satisfy all investors, including those searching for speculative investment opportunities !
BulkEstate is great for those who want to invest in relatively conservative real-estate projects, while still getting good returns.
Finally, Crowdestor also offers a few projects yielding around 12%, which may be suitable for investors who don’t want to invest in more speculative loans.
Crowdestor is my #1 choice for these investments. There’s a very large loans volume, and investments are very diversified. The only missing thing is an auto-invest feature !
Lastly, CrowdEstate‘s business loans also offer great returns, with the added safety of a long track record.