Over the past two years, I’ve been trying out the Privalore platform in Spain for investing in Spanish property. Two properties that I’ve invested in have already been sold, so it’s a good time to take a look at the performance of these properties and my evaluation of Privalore.

I like Privalore because they invest their own money in every property and execute quality refurbishments. The value created is very obvious and tangible, and therefore the resale price depends much less on speculation and more on the value added by Privalore’s refurbishments.

Privalore makes sure that all the materials used are friendly to the flat’s inhabitants. You can read more about this topic on FriendlyMaterials.com, which is a site of a company based in Spain that focuses on non-toxic building materials. It’s not necessarily the company that Privalore uses, but gives you an idea why it’s important to use non-toxic materials in these kinds of refurbishments.

I’ve discussed Privalore and other Spanish real estate crowdfunding websites in a separate post, but I’ll remind you once again about the commissions that Privalore takes from each project sale.

They take two types of commissions.

The first one is a project management commission:

• around 4% of the selling price for management of the project (management commission)
• 50% of profits until 15% return is achieved for the investor, 70% on the remaining profits (success commission)

The second is an investment commission:

• prefinancing commission (variable rate)
• percentage of profits based on the amount they invest in each project

These are some of the wellness elements that Privalore includes in each refurbishment:

• Low laminated parquet in VOC’s.
• Circadian lighting system.
• Smart thermostat with air conditioning ducts.
• Antimicrobial paint and odors on the ceiling, kitchens, and bathrooms.
• Conservation of original elements: walls with reclaimed exposed brick and mosaic floors.
• Ecological decorative paintings.
• Antimicrobial countertop in kitchen.
• High-efficiency air filter.
• Reform with a neutral carbon footprint.

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There are three basic ways of buying a stake in a real estate crowdfunded property: secured loans, unsecured loans, and equity investment.

The risks of real estate crowdfunding projects can vary by a great deal. There are secured or unsecured loans and even equity investments on the market. So, here is a short recap of what each of these means for the investor:

• Secured loan – a collateral is offered to secure the loan. The collateral can be real estate or some other asset, stock of goods or something else suitable. With this type of loan investor is the first in line to receive their payout, and in case of any problems the collateral can be sold to minimize losses. However, the existence of collateral means that the risk (and therefore the yield) is lower and one should definitely investigate the asset that is offered as collateral.
• Unsecured loan – while mortgage holders are usually first in line to receive payments, an unsecured loan means exactly that. It is not secured by collateral. This means that the interest rate offered should be higher than for a loan that is secured. When the project is unsuccessful, there are no assets to sell to recover any funds (i.e small loans). In this case one should pay a lot of attention to whom they are investing their funds in and how well the platform is equipped to handle problematic customers.
• Equity investment – with this type of investment one should note the structure of liabilities – the company will pay debts to employees and creditors first and only then investors may receive their payments from the remaining assets of the company. In case of failure, there is a real possibility that the earnings of the investor are reduced to a 0. When the project succeeds however, employees and creditors usually receive a fixed interest rate while the equity investor earns more. So, in this case one should make sure that they assess the probability of failure. Is the project understandable? Are the numbers presented in the project realistic?

As a rule of thumb, it is good for an investor to remember – the lower the risk of the project, the lower the expected yield. And if you are considering investing in real estate that offers a 20%+ yield per annum, be sure to be very critical about the contents of the project before investing. Most likely it is not a secured project meaning a significantly higher risk level for the investor.

So, be sure not to look at just the yield but rather the investment! It is important to always know where you are investing in, who you are trusting your money with and to be realistic in terms of expectations.

I will shortly be needing a parking space/garage as I plan to buy a car in the near future. I therefore started looking at some prices for buying spaces and renting them out.

The going rate where I live is 18,000€ for a parking space in a communal roofed garage. I expect the value to appreciate steadily over time, although not at the same rate as an apartment in the same area.

I could also rent a parking space right in front of our apartment for 120€ per month.

The question is, therefore, whether it’s best for me to buy the space or rent it. Whenever it makes sense, I like to rent instead of buy. I think that buying stuff ultimately adds worry and financial burdens to one’s life, so you need to be careful with what you buy. This article perfectly illustrates the concept I’m talking about.

Since I’m not sure whether I’m going to be living in this area next year and I like to be free to move from one area to another in a city, or even to other cities in Spain or just moving to another country, freedom is very important to me and buying property is a restriction on that freedom. Moreover, the area where I live might not be the best place to invest in, so having the freedom to invest anywhere in the world is much better than forcing yourself to “invest” in property right where you live.

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Every entrepreneur and property developer is looking for best measures to save money and earn a solid profit, so why would someone who strives for best quality at a lowest cost take credit obligations with an interest rate of 11% per annum?

The answer is not unequivocal as there are several advantages to be taken into account when evaluating financing possibilities on P2P lending platforms and real estate crowdfunding sites:

Speed

When using traditional financing methods, real estate developers often fail to get the desired results within the required timeframe – banks make decisions slowly, the period from application submission to receiving funding may be up to 4-6 months, while P2P lending platforms can provide an indicative offer within 24 hours of submission and money on the borrower’s account within 2 weeks. Developers are happy to use this opportunity as a “bridge” – you can start working on your project while the bank is still evaluating it!

Loan Period

When considering the possibility of using a P2P lending platform for financing your project, it should be taken into account that this is a short-term solution for the sales period of the property, during the development phase of the project or a bridge loan. Major benefit can however be seen in the fact that EstateGuru enables early repayments with no penalties, so should the borrower sell one of the apartments or establish long-term financing, they can repay the loan earlier if convenient. This means that if the funds were used for 6 months and 6 days, then the interest payment will be calculated for exactly 6 months and 6 days.

No monthly payments 

P2P lending platforms normally enable flexible repayment schedules, for an example the possibility to pay both interest and principal at the end of the period – you won’t find this kind of opportunity in traditional financial institutions. This significantly boosts work on a new project by enabling the borrower to fully focus on the project, with no additional liabilities each month. Developer can use money to actually finance the project, not to pay interest!

Additional marketing

What is the cost of a new development project’s sales campaign in the media and how effectively can you reach people who are interested in real estate? Many of these platforms have thousands of registered investors from different countries interested in property and development – additional marketing to potential buyers guaranteed!

Communication and knowledge

A partner who understands your business and sees a project just like you – sounds incredible? Less bureaucracy, more business.