An overwhelming choice
Many real-estate and business crowdfunding platforms are reviewed on Alternative Investments. CrowdEstate, Grupeer, BulkEstate, EstateGuru, Envestio, Crowdestor, Kuetzal and Flender all 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
Apart from a few exceptions, these investment opportunities don’t come with a buyback guarantee[?]. This is obviously a price to pay for the higher returns.
Also, with the notable exception of CrowdEstate, these platforms lack a secondary market. Kuetzal and Envestio offer to buy back your shares, but the associated fees are usually very high. 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
We’ll compare the following platforms :
CrowdEstate is a large platform for both real-estate and business crowdfunding loans.
EstateGuru is a direct competitor to CrowdEstate.
BulkEstate is a company focusing on bulk real-estate deals; however, they also provide real-estate crowdlending projects.
Envestio is a recent platform. They mostly focus on business crowdfunding, but also provide a few real-estate projects.
Crowdestor is a another recent platform; they provide both real-estate and business crowdfunding projects.
Kuetzal is yet another newcomer, featuring loans that are very similar to Crowdestor’s.
Grupeer features a large volume of business and real-estate loans, which come with a buyback guarantee.
Flender allows to lend money to Irish small and medium businesses.
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.
CrowdEstate and EstateGuru feature many large projects; however, CrowdEstate also have a huge investors base. This means that most projects will fill up very quickly. In spite of a cash drag in late 2018, Grupeer’s loans volume is now very large so it’s easy to invest there.
BulkEstate’s projects fill up more or less quickly, depending on their returns; the least interesting ones usually take several days to reach the investment target.
Envestio’s projects often involve large amounts of money; however, the high interest rates means that loans get filled up quickly. The same holds true for Crowdestor. As none of these two platforms provides an auto-invest feature, investors have to be quick to grab new loans !
In spite of the small loans amount, investing via Flender is easier thanks to the auto-invest feature.
As it is a relatively new platform, loans on Kuetzal stay on the marketplace a long time.
Finally, Crowdestor’s offer seem to perfectly match their investors’ demand.
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% !
Envestio seems to offer the most speculative opportunities. However, Crowdestor had a project returning a crazy 36% annual interest rate (!), and several projects at Kuetzal offer interest rates above 18%. Overall, these three platforms offer rather comparable returns.
BulkEstate stands somewhere in-between, with returns between 13% and 16%; so does Grupeer, with interest rates generally ranging from 11% to 13%. CrowdEstate’s business loans usually yield 16%.
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. Envestio and Crowdestor feature very diversified opportunities, while Kuetzal, CrowdEstate and EstateGuru are slightly more restricted.
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.
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.
Envestio provides a buyback guarantee for secured-debt projects; 90% of the principal is secured. This distinction between the different projects kinds is confusing; however, all recent projects seem to be covered by the buyback guarantee. I strongly encourage readers interested in this topic to read Envestio’s blog post on buyback guarantee.
Kuetzal also offers a buyback guarantee on selected projects. The platform is supposed to reimburse the investors at most 2 months after a default.
Grupeer’s buyback guarantee varies from one originator to another, but it usually triggers after 60 days.
Finally, 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. This fund was created in late February 2019, so all details aren’t available yet.
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 thirty exited investment opportunities for CrowdEstate, and slightly less than two hundred for EstateGuru !
While Grupeer is a newer company, they had a very large amount of loans reimbursed in time; until now, there’s been no default or even late payments.
BulkEstate is slightly more recent, and only has eleven repaid investments and twenty-five active ones. This platform should have newly exited projects each month from now on, leading to an improved track record.
As of May 2019, Flender’s default rate is 0.2%, which is very reasonable.
Envestio, Crowdestor and Kuetzal are relatively recent platforms. Out of Crowdestor’s seventeen projects, three were already repaid. Regarding Envestio, it’s a bit tricky to count how many projects there are, as many of them are divided into tiers. There are roughly 30 projects overall, of which less that ten were already repaid.
Finally, Kuetzal lists less than ten active projects, and doesn’t have any exited project yet.
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 !
Envestio provides what they call buyback; it means that the platforms guarantees that it will buy back your investment. The fee varies from project to project; it’s typically 5%. Kuetzal also offers this opportunity on selected loans, but the associated cost is even higher : 10%.
Finally, investors at Grupeer, Crowdestor, BulkEstate, EstateGuru and Flender are stuck with their investments until the project’s completion.
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.
Envestio implemented auto-invest in summer 2019; this new feature was probably welcomed by most investors, as investing manually was getting very hard due to the low loans volume.
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. Envestio’s website is rather neat too, while Kuetzal’s and Crowdestor’s are slightly less appealing and lack some reporting features.
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!
While EstateGuru’s website works well and is properly translated, I find the design unappealing and sometimes confusing. It’s much less readable than CrowdEstate’s website.
Similarly, 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
While CrowdEstate, Envestio and EstateGuru are clearly ahead of their competitors in the comparisons above, your choice should be based mostly on your risk tolerance.
EstateGuru seems to be the platform providing the most conservative projects. Their loans volume is impressive; there are sometimes several opportunities daily !
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 !
Finally, BulkEstate is great for those who want to invest in relatively conservative real-estate projects, while still getting good returns.
I am greatly impressed by Envestio; the large projects offered on the platform allow to invest large sums in many domains.
At the same time, Crowdestor and Kuetzal are both excellent choices; while their interfaces clearly needs some improvement and the projects could be more detailed, I find their investment opportunities very interesting.
CrowdEstate‘s business loans also offer great returns, with the added safety of a long track record.