As of December 2019, Privalore has chosen to cease its crowdfunding operations due to the Comisión Nacional del Mercado de Valores (CNMV) ruling that it will only allow platforms which promote indirect investments, and Privalore is considered a direct investment platform. Privalore believes, and I agree with them on this, that participative platforms (such as Housers) do not provide as much value to the investor as a direct investment platform. With an indirect investment platform, the platform’s main incentive is to provide and advertise as many projects as possible to its investor base, with the possibility that quality will be compromised, and the fact that the platform itself does not invest together with the investor.
To cut a long story short, Privalore is no more, and it’s a real pity as it was my favorite Spanish platform. It was good while it lasted, and while I do still have some investments that are stuck in the pipeline as the Spanish market has slowed down, I would rate my overall experience with Privalore as very positive. If anything, this whole experience hsa shown me that Spain absolutely does not have the best forward thinking authorities and things can change very quickly. I will probably hold on the brakes on further investment in Spain after this experience and my diminishing confidence in Housers.
Since 2017 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.
Let’s jump straight into my investments with Privalore so far:
This property is found in Barcelona and the whole operation was conducted over almost 7 months.
Let’s take a look at some data.
The property was acquired for €340.000, although it was valued at €426.452. That means that Privalore bought the property at around 20% discount outright.
It’s a south-facing corner apartment with a good-sized terrace (they’re greatly valued in Spain).
What’s interesting here is to know what are the major influences on a property’s valuation. They’re location, followed by age, usable floor space and state of conservation.
- Start of operations: 26/07/2018
- Sale of property: 20/02/2018
- Total cost: €510.998
- Sales price: €560.000
- Estimated return: 12%
- Annualized return: 11,4%
- Client visits: 29
From the net returns of this property, Privalore also deducted 1% of the total sum being returned to me (total of original amount invested and profits) for ITPAJD and 19% of the profits for IRPF/IS.
It took 2 months to refurbish and 5 months to sell. It was bought by a Russian lady.
This property is found in Barcelona and the whole operation was conducted over 15 months.
The property was acquired for €295.000, although it was valued at €310.265. That means that Privalore bought the property at around 5% discount outright.
- Start of operations: 22/03/2017
- Sale of property: 19/06/2018
- Total cost: €446.497
- Sales price: €465.000
- Estimated return: 14%
- Annualized return: 5,6%
- Client visits: 59
The apartment was bought by a young local couple.
It took 2 months to refurbish and 5 months to sell. It took a much longer time to sell this property than expected, mostly due to political instability in Catalunya that resulted in international investment slowing down to a crawl.
This wasn’t an impressive return, but it’s acceptable given the damage done to Catalunya’s reputation by the separatist movement. It’s hard to promote high-end properties to foreign investors when they watch riots and reports of deep political unrest on TV/YouTube back in their countries.
Dos de Maig 279
This property is found in Barcelona and the whole operation was conducted over 10 months.
The property was acquired for €190.000, although it was valued at €226.289. That means that Privalore bought the property at around 16% discount outright.
- Start of operations: 09/10/2017
- Sale of property: 14/08/2018
- Total cost: €297.323
- Sales price: €315.000
- Estimated return: 10.9%
- Annualized return: 7,1%
- Client visits: 64
The refurbishment took 4 months to complete, after which the property was on the market for 6 months before a sale was concluded.
The property was bought by an investment company. Since it was bought by a company, the ITP tax to pay was higher than when selling to a private person. In fact, the costs in terms of tax paid for ITP, in this case, were €7.000.
In this project investors just broke even due to the property taking way longer than expected to be refurbished and eventually sold. A combination of factors led to this delay; namely the Catalan independence movement which scared off a lot of international buyers (typical target audience for these apartments), unforeseen facade works that resulted in equipment being set up in the apartment’s patio and also some damages, so refurbishment had to wait until all that was done and the damages sorted out.
- Start of operations: 29/11/2017
- Sale of property: July 2019
- Sales price: €300.000
- Annualized return: 0,83%
In the end, on a €5,000 investment in this property, I made just €7 after taxes, but I’m still glad I got the money back after. The conditions in Catalunya have been such that international investment has slowed down drastically with many such investments turning illiquid for many months. Hopefully the tide will turn and things will take a turn for the better when the separatists realise that their dream will never materialise and they lose faith in their corrupt politicians.
Gran Via 523
Unfortunately I ended up losing money on this one, but at least it was sold. The target price for this property was €826,000 within an 8-month timeframe. However it was finally sold for €770,000 after 32 months of waiting and hoping for a buyer.
This just goes to show that real estate is not a sure bet at all, and changes in the market can come about very quickly and they are impossible to predict. This was no speculative bet on a new construction or an out of the way location with some potential. We’re talking about a straightforward refurbishment project in a landlocked and super popular city – Barcelona.
While I was unlucky with this project, the benefit of investing with such platforms is that you can easily diversify across several cities and projects. If I was investing alone or with a small group of friends, this could easily have been my only real estate exposure and my losses would have been much higher. In this case, the gains I made from the other investments on this and other platforms easily offset the loss on this one particular property.
While I was pleased with my investments with Privalore and was planning on continuing to invest with this company, I had to stop doing so due to the new direction taken by the platform and the negative economic situation in Spain, especially in the real estate market. Most of the negative effects were brought about by the absolute clown show that Spanish politics has been over the past years, adding to that the separatist troubles in Catalunya. The final nail in the coffin was COVID in 2020.
Privalore itself as a company has always proved to be very professional, so I’ll keep the videos below showing the steps that Privalore takes to make sure the buildings they refurbish are healthy and sustainable (in Spanish only):