In this review, I’ll talk about my experience with investing in the Spanish real estate crowdfunding platform Inveslar – The Urban Investors. What they mean by the name “urban” is unclear to me, perhaps it refers to the fact that they stick to major cities and towns in Spain.
I’ve already introduced Inveslar in my earlier post about the best Spanish property crowdfunding platforms, but in this post, I would like to focus on my real-life experience with the projects I’ve invested in on this platform.
Registration with Spanish Authorities
Inveslar provides regulatory coverage to investors and developers thanks to the integration with Socilen PFP, S.L., an authorized company registered with the CNMV as a Participatory Financing Platform with registration number 9.
The platform is open to all European and non-European investors, although you will have to obtain a NIE from the nearest Spanish embassy to be able to invest. It’s a minor inconvenience, but once you’ve got your NIE you will also be able to invest in other Spanish platforms too.
The properties available on Inveslar are all in Spain, with a specific focus on Barcelona and surrounding areas.
The website itself is available in several languages:
That covers all the big markets in Europe for investors. The original languages of the site are Spanish and Catalan, and the translations are not perfect but decent enough.
Terms of Investment
For all projects, the investor agreement states that the investor is lending money to the platform.
If you understand Spanish, this is the explanation directly from Inveslar, about how we are investing money on their platform, specificying that we are giving fixed interest loans to developers who in turn invest that money into their projects.
Los últimos proyectos corresponden todos a financiación de circulante. Son préstamos a tipo fijo que solicita un promotor para poder hacer frente a una reforma, permisos de obra, o lo que él considere. La rentabilidad del préstamo no va asociada a la rentabilidad del proyecto, sino que se trata de un préstamo a tipo fijo dónde los inversores cobran mensualmente los intereses, y la devolución del capital se lleva a cabo en la última cuota. Por este motivo no existe un proyecto participativo en sí, sino que se trata de una inversión en un préstamo a tipo fijo a promotor.”
In the early days, Inveslar used to create a separate company for each investment, and the investors would purchase shares in that company. However, they have stopped using that model, since the ley de sociedades de capital in Spain obliges all purchases and sales of shares to take place with a notary present, which makes it impossible to operate an online secondary market.
Secondary markets are very important to investors as they provided liquidity and the ability to sell investments at the click of a button, provided there are interested buyers.
Unfortunately, the Spanish law has not been updated to keep up with modern trends, which forces platforms like Inveslar to use the lending model.
Whenever I emailed Inveslar I always got a reply within 2 days, and sometimes comprehensive replies from the CEO himself, so I am very satisfied with that aspect of the experience.
Types of Investment Available
As an investor, when you visit the site and click on the Investments menu item, you will see the following options:
- Crowd projects
- Crowd marketplace
- Properties for sale
Inveslar has also recently announced that they will start putting up projects related to auctioned properties, which I am very interested in. The first auction projects should be available in the coming months.
Let’s take a look at them one-by-one.
These are the typical crowdfunding platform projects, where several investors pool their resources in order to secure a project.
The minimum investment is €100 and you can also eventually resell your shares in the marketplace. So let’s talk about that next.
This refers to the typical secondary market that many platforms offer nowadays. You can sell your shares to other investors on the platform.
While this feature promises a good degree of liquidity for investors, I tried selling a number of my investments and most of them got sold, even though I didn’t offer any discount. I had to wait a few months to sell off these investments, but I think the level of liquidity is very acceptable.
There are currently several properties in the crowd marketplace, and none of the properties in the marketplace are trading at a discount. This means that the investors consider that their investments are still very good, but they simply would like to shift their assets into cash for their own reasons.
Inveslar takes a commission of 0.9% of the shares sold, which the seller pays to the platform.
Properties for Sale
This is a more recent addition to the Inveslar platform. It’s meant to give investors easy access to properties that have already been vetted by Inveslar and are already returning a certain percentage every year.
Instead of using the crowd, the investor would purchase the property directly, so this section of the Inveslar website is ideal for those who already have significant funds to invest and don’t need to use the crowd in order to obtain properties.
While I think this is an interesting concept, it’s not interesting to me as I do not want to own properties directly and prefer the diversification benefits of investing via crowdfunding.
My Results with Inveslar
I invested in 8 projects on this platform over the past few years.
Buy-to-let: Raval IN, Sagrada Familia IN, Asturias IN
Buy-to-sell: Kubik IN, Sant Cugat IN, Rosamar IN, Maternitat IN
Development loans: Bisbal IN
Before we dive into the results, I want to mention that I decided to invest in the three different types of projects indicated above as part of my learning process.
Development loans are straightforward, with your major risk being that the developer/borrower not being able to repay on time. The interest rate and term are known when you invest.
Here’s what you should know about Buy-to-let VS Buy-to-sell:
Buying-to-let gives you regular monthly cash flow to your bank account, and it’s relatively low risk. Being low risk also means that you are going to get rich much slower, so if rapid growth is your target you should probably go for buy-to-sell projects.
With letting you are going to have to fork out periodic payments for maintenance and also possible tenant issues. Finally, you are also tying up your cash for a considerable amount of time.
With buy-to-sell properties, you don’t have the monthly income, but you can potentially make a lot of money very quickly if the project is successful. You don’t have any maintenance and tenant issues, so that’s one headache less.
You are however susceptible to delays in planning permits and contractor delays and problems. You also have a higher risk as the complications can throw your budget off course. Market changes can also mean that your property eventually doesn’t sell for the price you were hoping for or it takes much longer, which reduces your yearly return.
With that out of the way, let’s take a look at my investment results.
In the Buy-to-rent section, Raval IN, Asturias IN and Sagrada Familia IN are both rented out and producing monthly cashflow, so I’m happy with those projects.
Bisbal IN was a 6% 12-month loan that was repaid before the term was up, so again I’m happy with that investment.
In the Buy-to-sell section, results honestly haven’t been that great, so I’m not very satisfied. Rosamar IN experienced delays for permits and now is under construction. Sant Cugat IN has been for sale for many months with no serious buyer interest. Same situation for Kubik IN.
Este ático soleado de 55 m2 con ascensor cuenta con una terraza con fantásticas vistas panorámicas sobre la ciudad. Este producto de inversión ofrece una rentabilidad objetiva del 10,45% de la cual el alquiler representa un 6% bruto. Una vez más, nuestro conocimiento del mercado y análisis exhaustivo de oportunidades nos ha permitido encontrar éste activo por tan sólo 2.145€ /m2. ¡Un precio claramente por debajo de mercado!
Maternitat IN was bought in July 2017, refurbished and rented in August 2017, then sold in April 2019, with the money being received in August 2019. That means that the investment was concluded in 2 years instead of 3 years, as had originally been planned.
My overall return from capital appreciation was 5.15% before tax and 4.17% after tax. The overall return from rental was 4.4% and 3.4% after tax.
Te presentamos Sant Cugat IN. Se trata de un terreno donde podrás invertir en una excelente ubicación en los alrededores de la Sierra de Collserola. Se trata de una inversión de 98.800 euroscon una rentabilidad anual objetivo del 13,3%.
Este es un proyecto innovador para nosotros, ya que es la primera vez que realizamos una operación en un terreno sin edificar, donde posteriormente se elaborará un proyecto básico de inmueble, buscando la mejor oportunidad para ti.
I invested in the project Sant Cugat IN in December 2017 and it is still on the market, as soon as it gets sold I’ll receive my money back, plus hopefully the profits from the sale. The latest report from January 2020 says that it is generated a good deal of interest. It’s a sparse report but things seem to be on track.
Here I would like to mention the worst part of my Inveslar experience so far. While Inveslar issues reports about each property every few months, they are extremely sparse.
Here’s an example:
For the buy-to-sell properties, there seems to be little concern for the fact that investors have been waiting longer than the projected term for a sale and returns. All Inveslar tells us is that the properties are listed on the property portals and that they haven’t found a buyer yet.
As an investor, I would like to know why it is taking longer than anticipated to find a buyer, and what extra steps are being taken to make the property more attractive to buyers.
Would I Recommend Inveslar?
As of 2020, I would recommend Inveslar if you want to invest specifically in buy-to-let property in Spain.
The property flipping market in Barcelona is really slow at the moment and there is also quite a bit of political instability together with anti-capitalist sentiments from the regional government. Other regions of Spain are doing better on this front, however, I still prefer buy-to-let at the moment; I feel it’s a lower risk than buy-to-sell.
There have been some payment delays on the part of the tenants, but they were all temporary, only affecting cash flow and not overall returns.
I would, therefore, advise against investing in any properties that require refurbishment to be later put on sale. I’ve experienced long delays on those types of properties, and this problem is not only limited to Inveslar but also extends to other Spanish platforms.
Inveslar have expanded beyond Barcelona, and now have projects in Valencia too.