Hi fellow Mustachians,
I was searching for your experiences with Reinvest24 platform, which is mainly focusing on real-estate backed loans / rental projects / development loans, but so far I cannot find anything yet on the Mustachian forum here.
I started to build up my real-estate part of my portfolio, and the platform offers a pretty convenient and easy way to invest already with smaller amount a diversified portfolio in different countries with different projects. Most of the projects phases have a duration between 7 to 18 months, and the whole project can have several phases at all.
I can highly advise you to invest on the “Primary Market” projects (these are in a funding phase), because you always pay there the original unit price with no additional transaction costs. You can aim extra gain on your investment (extra interest), if you invest more. This is always precisely described in the project’s detail. (Example: getting an extra 2% interest, after investing 3000 claim units or more in the project).
So far was my start pretty straight-forward with Reinvest24. They have a support, which answers pretty quickly on my questions. Additionally they opened up a Telegram channel too, which you can reach via their regular newsletter for investors.
I’m happy to share my experiences, and I’m open up for a discussion here, and also curious, where else you started to invest online with real-estate projects.
If you are interested in the platform, I can send you my referral code in PM, to get 10€ extra credit after a successful registration.
Not sure referral codes are tolerated here (especially implicit)…
If I understand well the idea is you lend money to a property developer (most likely a limited liability entity) that you don’t know personally in another country with different laws and business practices (e.g. Spain or Moldova). If everything goes well the developer should pay you 15% interest. Your loan is in theory backed by property that you likely know little about but seeing as mortgage rates are <5% presumably you are not first in line creditor
Copied from their FAQ:
How does the legal structure look through the SVP?
Usually 2 companies are involved in the legal structure of our rental and development projects - Reinvest24 OÜ, which holds the funds of all users until they chose the project to invest into and a Special Purpose Vehicles (SPV), the companies used to acquire property and manage the whole process. Once the project is funded SPV receives the money to perform the acquisition of the property or implementation of the project. A project claim units will be divided between all the investors according to the amount of their investment. If You want to look deeper into the details and have a better understanding how Reinvest24 platform works and how it helps to minimise risks, as well as keep your investments safe, visit the platform FAQ, and watch their webinar on Youtube.
Yes, the SPV is always incorporated in the same country where the purchased property is located.
Honestly this sound really bad. It would not touch it.
Their goal is to sell as much property as they can, while charging fees (platform, manage, develop).
You post the capital and hold all the downside risk.
Also it will be really hard to sell your shares once, or if the markets turn since it will be hard to sell 1% of a property to someone.
I had a strange experiment with Foxstone in Switzerland few month ago. I was interesting to place 25k as one part on a real-estate renovation project which was showing approx 6% of interests. After showing my interest, I was elected to invest but first I had to make a conf-call with the notary for personal verification, money origin declaration and some other administrative stuff. The next step was to get the IBAN to transfer my funds. After 1 month, as nothing has changed, I made some phone calls with always the same answer “your contact will cal you back”. I decided to fully lay off. The guys made a call 2 days later… and tried to convince me to continue in the process (except if I’m ok to pay some fees to move my part to another investor). Finally, he told me that I have nothing to pay and that a new investor has been found.
They still are on the market (Foxstone) and stil have offer of the same form.
Typical point of view of the property developer in some crowd funding investments:
- You set up a limited liability entity
- The bank lends you (say) 80% of the project cost at ~5% interest in return for a first in line mortgage on the property asset
- Via a crowd sourcing intermediary you borrow the remaining 20% from high net worth individuals on the internet by promising 15% p.a., they get a 2nd in line mortgage (which is in practise worthless)
- Overall cost of capital 7% and if you are lucky barely a cent of your own money invested
- You and your staff get salaries from the company and other perks like a company car
- If the development works you get rich
- If it doesn’t work you wind up your company, the bank gets most of its money back, the people on the internet get nothing, you start another real estate company with a new name. Rinse and repeat.
[Disclaimer: this is an interpretation of how the process can work with these kind of schemes in general and what to look out for. I am not talking specifically about Reinvest24 or any of the developers they work with. I have not reviewed their business model in detail and it may be different. Do your own research]
I just looked up the director of a UK property development company I was involved in via a “crowdfunding” investment ~10 years ago:
-he has had over 40 company director positions. All companies are liquidated or in administration. (Information is a public record and accessible online in UK, not sure if similar applies to Spain or Moldova)
-a news article came up that his wife’s 150,000 GBP engagement ring was stolen from their large, luxury house
-he was made bankrupt a few years ago
=>gives some clues where the money went for the property development that was never started (luckily I got my money back by involving a lawyer early in the process)
The purpose of using a Special Purpose Vehicle (SPV, they misstype it sometimes as “SVP”) is that it can go bankrupt / insolvent without affecting the parent company, supporting what @Barto mentioned. Additionally, no sensible way to go legally after anyone, FX risks (everything in Euro? good luck if Euro drops -10% vs. CHF), etc. etc.
maybe they are legit, but it would be way to risky for me.
Oh, with such setup it is not even necessary to scam. That means even if it is a completely legal company, and I am sure they are, it doesn’t make any difference risk-wise.