An overwhelming choice
Several real-estate and business crowdfunding platforms are reviewed on Alternative Investments. CrowdEstate, BulkEstate, EstateGuru, Envestio, Crowdestor and Kuetzal 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 by 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 :
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.
Detailed platforms comparison
I will compare the platforms using the 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, the platform’s track record will evaluate how many projects were already successfully exited.
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.
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, and as they’re a relatively new platform, they usually don’t get entirely filled. The same goes for Kuetzal, as the financed amounts are large and the platform isn’t well-known yet.
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.
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%; 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. 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.
Crowdestor’s, Kuetzal’s and Envestio’s loans usually pay interests monthly, as well as CrowdEstate’s business loans. This is an advantage over most of CrowdEstate’s real-estate projects and all of BulkEstate’s projects, which usually reimburse the capital 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.
Envestio provides a buyback guarantee for secured-debt projects; 90% of the capital 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.
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 !
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.
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 Crowdestor, BulkEstate and EstateGuru 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.
CrowdEstate feature an auto-invest; dues 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 will also have access to this feature, although it will be restricted for most of them. As a result, manual investing 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.
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, 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.