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, 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 mostly focuses on business crowdfunding, but also provides a few real-estate projects.
Crowdestor features a very large array of real-estate and business crowdfunding projects.
Kuetzal provides opportunities to invest in business loans; returns vary greatly from one project to another.
Monethera provides diversified opportunities to invest in business loans.
TFGcrowd provides both business and real-estate investment opportunities, located throughout Europe.
Wisefund features extremely speculative business loans, with interest rates reaching 20%.
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.
Several platforms add 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.
- More recent platforms Wisefund and Monethera both add several new projects each month; in addition, their users base is still small, making it easy to invest even large sums.
- Finally, Grupeer has a rather large loans volume, but their interest rates may vary rather quickly.
On the other hand, several platforms have a reduced loans volume; it’s the case for Flender, which may be impacted negatively by the uncertainty about the Brexit. CrowdEstate also features less loans that it used to, and Envestio‘s transition to large projects means that the number of projects was greatly reduced.
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% !
Investors looking for speculative loans have plenty of choice : Envestio, Monethera and Wisefund will give them plenty of opportunities to invest in projects yielding 16% or more. TFGcrowd‘s and Crowdestor‘s loans offer slightly lower returns, although Crowdestor‘s large amount of investment opportunities means there will be something for everyone, including more conservative investors.
Finally, with interest rates generally ranging from 11% to 13%, Grupeer‘s loan are usually a perfect match for a balanced portfolio.
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 feature very diversified opportunities; Wisefund, Monethera and TFGcrowd also allow to invest in many different kinds of businesses.
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.
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. TFGcrowd uses a similar approach, with a warranty fund introduced in September 2019. I really appreciate this mechanism, as we know precisely how much money is available in case of a default.
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. Both Monethera and Wisefund also offer a buyback guarantee, however the mechanism isn’t detailed, making it less secure than for platform that have a warranty fund.
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 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 October 2019, Flender‘s default rate is 0.7%, which is very reasonable – but much higher than the 0.2% in May 2019 ! -.
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%. It’s also the same for Wisefund, with a fee reaching 20% for several projects.
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.
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. Monethera‘s website initially looked very similar to Envestio’s, but has evolved a lot and now has its own personality; it’s also very pleasant to use. Wisefund and TFGcrowd also have websites which are simple to use, but they lack several 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
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 !
BulkEstate is great for those who want to invest in relatively conservative real-estate projects, while still getting good returns.
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 !
It’s too bad that the loans supply at Envestio has decreased so much, as there used to be many projects there. Now that they transitions to much larger projects, there are very few of them.
As TFGcrowd, Monethera and Wisefund are more recent platforms, investors shouldn’t rush to invest there; however, their rather large loans supply and diversify makes it hard to resist to the temptation to increase my portfolio there. I especially appreciate Monethera for its well-designed website, great projects description and overall dynamism.
In addition, in spite of a somehow rather reduced loans volume, speculative investors will probably great investment opportunities at Kuetzal.
Lastly, CrowdEstate‘s business loans also offer great returns, with the added safety of a long track record.