I have a similar experience with a couple property management companies. But my feeling was that the pain is self cause. The overload that causes not properly manage customers request is just crazy. Topics that can be closed within days ends being weeks and months and a lot of emails.
Crowdhouse leaves the property management business
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Did anyone ever do a comparison between investing in direct real estate fund vs. crowdfunding like Foxstone / Crowdhouse etc?
To me it seems like Direct real estate funds have following advantages
- a more diversified portfolio because multiple underlying assets are involved
- Higher liquidity
- Tax advantages
- No landlord responsibilities
Co-ownership via Crowdfunding advantages
- higher leverage which improves Return on Equity. This can also be a problem because in terms of losses , the losses are also multiplied
- Annual Costs of investing -: not sure how annual fees of Crowdfunding compares with TER of Direct real estate funds. But I would expect this to be lower for crowdfunding
- No day to day activities (more or less outsourced)
Other elements
Operational costs of maintenance/renting/tenant management/services should ideally be better for Direct funds. But if crowdfunding expands, maybe they will come close to each other.
The buy-in costs for Crowdfunding should be compared to the buy-in spreads of the funds. However these are one-off costs
Both of these donât really give investors a real right on the property itself. However on paper the land register has a name of investor.
Liabilities
- When co-ownership Investment is made, one gets an asset but also a liability (mortgage) in their personal balance sheets. This in reality means the health of the balance sheet and ability to pay mortgage premiums might be linked to other investorsâs personal balance sheet. One has to trust the due diligence of platforms
- For RE Funds, the liability is for the fund. Of course if Fund collapses, then investor money is at risk.
Based on a quick back-of-the-envelope estimate, it seems comparable. I took two random examples and it seems Foxstone might actually be pricier than Mobimo.
- In a recent Foxstone offer, Foxstone fees seem to amount to about 498k for a 7 years long holding time*, and transactions fees (notary costs) to about 594k. They are seeking to collect 2675k from investors.
So on average over 7 years about 5.8% of the NAV goes to Foxstone and transaction fees. - If Iâm parsing Mobimo 2023 financial report correctly, they spent about 93M in such fees for an about 1904M market cap, so about 4.8%.
Caveat: The numbers donât cover exactly the same thing so they canât be directly compared. And also, Foxstone is more levereged, and maybe the ratio over AUM makes more sense. But as a first approximation they look similar.
* 7 years holding time is what Foxstone themselves suggest. This is shorter than what I would expect and might explain some of the difference in costs.
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