Why is real estate crowdfunding attracting more and more investors?

If real estate is a key investment for the French, not everyone is destined to become a landlord. The solution? Turning to “stone paper”, investing their money in sector financing products… In addition to various classic equity funds and investment companies (SCPI), more and more investors are turning to crowdfunding.

Since the regulation of the market in France in 2014, crowdfunding has experienced exponential growth, breaking all records in 2021. According to the published barometer, 958 million euros were collected that year through about forty web platforms, which is a 90% increase compared to 2020. from Fundimmo.com, one of the top five players in the industry.

Housing financing

In line with the crowdfunding trend, real estate crowdfunding allows people to invest their savings directly into the projects of professionals, in this case, the projects of developers and sellers. And unlike a fund that distributes your money left and right, here you decide which operations you want to support.

With real estate crowdfunding, you decide which operations you want to support
With real estate crowdfunding, only you decide which operations you want to support – iStock / City Presse

In practice, it will essentially be a question of financing the construction of housing, which is still and always lacking in France, knowing that they represent 81.7% of projects in 2021 according to the Fundimmo barometer. This is followed by offices (9.8%), shops (9.7%), hotels (3.8%) and various equipment and repairs (2.2%). In terms of location, Ile-de-France, the PACA region and Auvergne-Rhône-Alpes account for 74% of the collections.

Attractive financing

If crowdfunding is so popular, it is because it offers several advantages. Above all, it democratizes real estate investing, putting it within reach of the average investor, where it was previously often reserved for very large investors. As Benoît Bazzochi, president of Fundimmo, explains to us, “as a rule, you can invest in a project from 1,000 euros, which remains affordable and allows you to multiply projects to spread the risks.”

Crowdfunding allows you to immobilize funds in the short term in exchange for a high reward
Crowdfunding allows short-term immobilization of funds in exchange for a high reward – iStock / City Presse

Moreover, crowdfunding allows you to hold funds for a short period of time in exchange for a high reward. “Operations last from 12 to 36 months, the profitability ranges from 8 to 10%,” the specialist clarifies. According to the industry barometer, the average investment period reached 21.2 months with an annual rate of return of 9.21% in 2021. Be careful, however, given the delays in construction and sales of goods, which can delay refunds (6.61% in 2021) and thereby further immobilize your money.

Strict diversification

Despite the strong arguments for crowdfunding, you shouldn’t set the wrong goal. “It is a tool for diversifying assets with a set of higher returns and risks,” according to Benoit Bazzochi. Therefore: “You should already have classic and safe savings” before you start. Indeed, crowdfunding does not offer any capital guarantees, which means that it is necessary to accept, and especially to be able to assume, possible financial losses, and this, even if the standard repayment rate of the sector was limited to 0.09% in 2021.

Real estate crowdfunding promises high returns to individuals willing to back developers.
Real estate crowdfunding promises high returns to individuals willing to back developers. – iStock/City Press

So to put the odds in your favor, we apply the adage that we don’t put all our eggs in one basket! It is clear that you invest only a part of your savings in crowdfunding and prefer to make small bets on many projects, rather than investing a lot of capital in one real estate program. Ideally, it is also better to diversify the intermediary platforms.