Spanish real estate was experiencing explosive growth before the COVID-19 crisis and was quite a good investment if you had cash parked at the bank.
I had written the piece below before the current crisis and I’ll keep it here until we know for sure how the market reacts in the longer term. Just keep in mind that things back then were much rosier than they are now (May 2020).
The easiest way to invest in Spanish real estate, starting from only €50, is to use the Housers platform. It is the largest online real-estate crowdfunding platform in Southern Europe and allows you to invest in property from any part of the world.
When investing with Housers, your investment is backed by a tangible asset (“brick and mortar”), and hence it is considered a much safer investment than, say, cryptocurrencies. That’s not to say that you shouldn’t invest in cryptocurrencies, but real estate investment is definitely a lower risk investment.
When investing at Housers, you will earn monthly rent and also benefit from capital gains. Properties in southern Europe are currently rapidly rising in value.
You can easily diversify your portfolio. Compare investing in tens or hundreds of properties all over Europe to buying one apartment in your home country. You’re spreading your risk much better if you use Housers.
A great advantage is that all this is hassle-free. Everything relating to the property is taken care of. You won’t receive any calls from tenants asking to fix their broken pipes or have to fight to collect your rent.
The Spanish and Italian markets are recovering very rapidly and are projected to continue rising in the next few years at least. The rental yields in both markets are among the highest in Europe.
When investing in property, you also need to pay more attention to cities rather than countries as a whole. That’s why Housers focuses on high-growth and successful cities such as Madrid, Barcelona and Milan.
Housers itself as a platform has achieved tremendous success. There are more than 115,000 registered users and more than 95 million euros have flowed into the platform to fund properties. The average reported annual yield is 4%.
Exploring one of my projects
To illustrate how Housers works, let me take you through one of the projects I invested in. Note that this is one of the earlier and successful projects, most other projects I had have yet to supply a return and unfortunately this positive project is the exception not the norm.
We’ll be considering the project named Pez; a buy-to-sell opportunity in Madrid. In this case, the legal form of the investment was a loan to the developer.
Here’s how the project timeline went:
- I invested on 22/06/17, the day the funding period started.
- The project was fully financed on 11/07/17.
- The property was acquired on 02/10/17.
- Refurbishment works started on 20/10/17 and completed 20/02/18.
- The project was finally sold on 05/07/18.
- Project fully finalized on 25/07/18 and money sent to investors.
The visual information provided for the project was actually quite scant. As investors, we only got a few standard photos of the area where the apartment is located, the floor plans and two renders of how the refurbished apartment would look like.
We did, however, get some PDFs about the project which gave us more insight into the strategy:
Based on that information I decided to invest in the project, although I would have liked some more photos and plans for the project.
A bit more than a year later, the project was sold.
Once the project was sold, there was some more information available about the internals of the project.
- Average investment per investor: 213.65€
- Number of investors: 412
Pez was a buy-to-sell opportunity with an expected return of 6,59% in 12 months, that ended with an annualized IRR of 4,42%. The yield is the same 4,42% since the project took 12 months from start to finish.
Net Yield from the Sale: Represents the dividends that the investor will receive derived from the sale. (12 months)
IRR: Internal rate of annualized return of the investor. It’s the interest rate or yield offered by this investment. It serves to evaluate the profitability of the project and compare it with other types of investment in the market.
A few days after the project was sold, I received capital and interest in my Housers account, closing off a successful investment.
From the interest paid by the developer, a 10% Housers commission was deducted along with 19% for IRPF (Spanish tax). The net interest was then sent to my account.
How Things Work
Housers is currently operating in three markets:
Housers operate an opaque fees structure that is hard to understand. In fact, I have not found a single good explanation of the fees they charge. They started off in the early days saying that they would only earn commissions when the project was successful, taking a chunk out of investors’ profit, but things changed along the way.
I have to be honest and say that after spending 20 minutes trying to figure out the latest fee structures I gave up, but it’s definitely not the best fee structure for investors.
I was also bemused to see how their CMO totally avoided answering a direct question about commissions in a recent interview in Spanish::
Here is more information about Housers fees taken directly from their website:
– Application of fees to investors:
For making the necessary model contracts for participation in the projects available to the parties: a percentage to be determined on the value of the financing project in accordance with the documentary needs of the project in question shall be applied at the time of making the above documentation available. The commission will be charged only once for each project and not for each document or contract made available to the developer.
• For communication to investors of information provided by the developer regarding the progress of the project: a percentage to be determined on the value of the financing project shall be applied in accordance with the documentary needs of the project in question.
• For services of judicial and extrajudicial claiming of the credit rights (forced or unforced): at the time the judicial or extrajudicial claim is presented, the investor must pay a percentage to be determined on the value of the unpaid claims in order to cover related expenses.
• For the service of formalising loan and share subscription contracts, based on agreement expressed through the platform, acting on behalf of investors: In this case a percentage to be determined will be applied on the value invested or lent by each investor when the financing objective has been reached and the loan contract or share subscription is formalised. The accrual and collection of the same is deferred to when investors begin to receive a return derived from and proportional to their investment (both ordinary interests generated by the loan and interest for delay due to breach of contract).
Many projects are designed to attract investors with special promotions like extra interest or cashback. Once the project is funded, typically the interest repayments start going out regularly and later stop abruptly. Once this happens, you will be asked to vote on whether you want to engage a debt recovery company or give the borrower more time to repay. All the projects I was involved in ended the voting with investors giving more time to the borrower and hoping for the best.
Curiously, Housers customer service gets back to life in these events, and are very proactive in calling you to urge you to cast your vote. I’m not sure why they are so motivated to get people to vote, perhaps there is some legal reason behind it, but it definitely feels fishy given they fail to respond to investors’ emails.
Keep in mind that if you live outside these three countries you will incur withholding taxes that are applied by the countries in question. I have not found a way to offset those taxes so it’s a further reduction in returns.
Housers grew very rapidly, and after starting with Spain soon expanded into Portugal and Italy.
They even briefly delved into art projects, although that was a one-off and probably not something they will do again as it requires a totally different set of skills to evaluate, not that Housers do much evaluation on their projects anyway.
You can invest in the following project types:
- Buy-to-let (5 years+ investments with monthly payouts)
- Buy-to-sell (12-24 months window to refurbish and sell)
- Development loans
Investors seem to still be very keen on putting in their money, as all projects are quickly fully funded, but I’m starting to suspect it’s a case of dumb money at this point, as the projects themselves have become more and more speculative over time.
I’ve seen many projects in the south of Spain, mostly around the Malaga and Marbella regions, which by the looks of it seem to have been in some kind of bubble, as more and more development loans kept showing up for grandiose projects, which we now know were never completed due to various reasons/mismanagement cases/excuses.
Housers seem to be branching off into two new lines, Green and Corporate. Green is for sustainable and environmentally friendly projects while Corporate stands for development loans to open new businesses.
The Housers secondary market seems to be dead at the moment.
I’m not a fan of the current interface. The User Area uses a side menu with icons that really don’t mean much to me, so I end up having to click through all the items in order to finally find what I want.
It should be easier to see what amount investors have invested in each project, but it’s not easy to find out that information unless you click through the individual project’s page, which can be very tedious if you have many investments.
In 2018, the current CEO Juan Antonio Balcázar replaced Tono Brusola, who was one of the co-founders. I’m not sure what led to Mr Brusola stepping down, but things have definitely gone downhill after he left. Perhaps he saw bigger opportunities in the Fintech space as he is now leading Fundsfy, a savings platform. He is a well-known serial entrepreneur in Spain and things were going great at Housers while he was in charge.
I know very little about Mr Balcázar, although a scroll down his Twitter feed doesn’t really provide me with much reassurance. This is just one of many factors I consider, and in this case I was not impressed.
In the first two years, Housers had very good customer support both over email and via phone. During 2020, support has gone down the drain. Nobody answers emails anymore and phone support, while friendly, basically promises that things will be done and then never get back to you.
One thing that has absolutely diminished my trust in the platform is the use of a tactic in support whereby any finance-related questions are deflected with words along the following lines:
“We’ll pass on your query to the finance department and wait for them to get back to us”.
I’ve seen this tactic one other time, coincidentally (or maybe not) on another Spanish platform, and all it means is that they are never going to get back to you.
This is no way to treat customers. If you have a customer service line open then they should be able to answer any questions within normal limits. Questions related to the status of certain projects or the finances in our accounts should definitely fall under their remit.
Public Reputation and Social Media
If you take a look at the Housers rating page on Trustpilot you will find many other investors expressing their concerns and disappointment at the way Housers have been handling things.
The same happens on Twitter. In all cases Housers promptly reply asking the investor to contact them privately so that they can look into their case. This is quite ridiculous given that the investor would have typically contacted them several times before and received no reply. It is pretty obvious that they are just trying to politely silence all negative opinions.
On the Spanish investing forums you will find a lot of feedback about this platform. Some investors even went to their offices to demand explanations for certain things and never got anywhere.
I’ve also read reports from architects saying that the project plans and actual photos of the project did not match at all, but I have been unable to confirm that myself.
Most of the money I invested in this platform is still tied up as several development loans have failed to be repaid in time due to various reasons. The developers have not shown any remorse for the delays caused to investors, and as things stand it is quite uncertain whether we will ever get our money back.
I have had some projects exit successfully, but most of my money is still stuck in there, so at the moment, things are looking very grim. The biggest issues seem to be the development loans, with a significant percentage of them being restructured with uncertain outcomes.
Things have been looking very suspicious lately with Housers, with many investors outright calling the platform a scam. It certainly is looking like Housers is becoming so.
Consider the project Puerto de la Torre IV.
The project was meant to close the financing phase on 28/05/20. Last time I checked it was well below 90% of funds needed to close the phase.
At 0:10 on 29/05/20, the project was showing in the list of Non-Financed projects, as expected.
At 09:00 on the same day, the project appeared in the Financed projects list. It appears that someone from Housers manually moved the project.
Housers thus appear to be breaking the law article 68.2 de la Ley 5/2015 de Fomento de la financiación empresarial. The law requires at least 90% financing of such projects, which was clearly not achieved in this case.
I have contacted Housers for an explanation but have not received any reply. This is pretty typical these days from Housers, so I don’t have my hopes up.
I was really excited about Housers in the early years of the platform, but I cannot honestly recommend it anymore, even though for my own money-preservation reasons I would like it to succeed long-term.
Housers seem to only care about the fact that they get their commission of 8-10 % on the capital raised, and whether the loans ever get repaid is the investors’ problem, they have no skin in the game and hence don’t care. They have the incentive to just keep adding projects to the platform without doing any fact-checking, and this doesn’t augur well for the future.
Housers have also been sanctioned in September 2019 by the CNMV in Spain.
In order to get back on track, Housers need to get their customer service team back in place, do better due diligence on new projects, and offer better communication about existing projects, especially those with an uncertain future due to severe delays.
At this point, after having spoken with many other investors in the same situation, and given their terrible customer service, continuous promotion of flaky projects, and ridiculous replies to people who reach out to them publicly on social media or on Trustpilot, I have to conclude that this platform is pretty close to being labeled a scam.
The lessons I draw for myself from this debacle is that I should be more skeptical about online platforms and give them a few years to have a track record in place before investing heavily. In the case of Housers, I invested too much and too soon into projects that I didn’t have the means to properly evaluate.
As I’ve mentioned before, over the past five years I’ve taken some extra risks in my investments as I was investing in many different asset classes at the same time without being an expert in any of those classes. However, I am a firm believer in the idea that you learn things much better and in a deeper way when you have real skin in the game. Yes, these lessons might be expensive, but as a young investor with hopefully several decades ahead these losses can be recouped and the valuable lessons learned now will serve to guide my way towards a better investment strategy in the coming years.
If you’re still feeling positive about Housers, invest at your own risk, and I would strongly suggest staying away from development loans as those have been the source of the biggest problems so far.
Spanish property (and other countries too) is most certainly heading for tough times after the COVID-19 crisis, so I would bide my time before making real estate investments in this country unless there is a better sense of direction from the market. The government and overall political situation in Spain is a circus of incompetence of all sorts at the moment as well, and that’s yet another reason not to continue investing our hard-earned money.
If you still want to explore real estate opportunities in Spain, the best platform at the moment is StockCrowdIN.
Have you invested with Housers?
Do you have any questions about Housers or property crowdfunding? Let me know in the comments section and I’ll do my best to answer from my experience.
The biggest real estate crowdfunding platform in Europe. It used to be an exciting platform but I no longer recommend it due to non-existent support and too much focus on marketing and empty promises. Many loans for their development projects are delayed or in default and they don’t seem to do any due diligence on new projects.
- Several projects concluded in the past.
- Things have gone downhill during the past 1.5 years.
- Unresponsive customer support.
- No due diligence on projects.
- No auto-invest
- No secondary market
- Fee structure only incentivizes platform to publish more projects irrespective of quality.
- Withholding taxes on Italian projects.