Crowdestate Review

May 19th, 2020
10 minutes read
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Commercial and residential real estate crowdfunding with a vibrant secondary market

Crowdestate

Crowdestate is a real estate crowdfunding marketplace for direct peer-to-peer lending founded in Estonia in 2014. The platform offers high-quality and pre-vetted loan investment opportunities within the area of real estate lending and business lending. Crowdestate is working together with experienced real estate developers and offers an extensive secondary market for buying and selling investments as well as an AutoInvest feature that will automatically invest in desired projects on behalf of users.

CompanyCrowdestate OÜ
BusinessReal Estate Lending
Founded2014
FounderLoit Linnupõld
OriginEstonia
OwnershipPrivate
CountriesEstonia, Latvia, Finland, Italy, Latvia, Romania
Reports2018 (PDF), 2017 (PDF), 2016 (PDF), 2015 (PDF), 2014 (PDF)

Crowdestate Pros & Cons

Pros

  • High historical annual return rate of 17,19%
  • A lot of investment opportunities
  • Direct investment structure
  • Secondary Market available for early exit
  • Loans are backed by collateral
  • Multiple investment accounts per user

Cons

  • All alternative investments with potential for high returns come with high risk
  • Minimum investment amount of 100€
  • No buyback guarantee

Characteristics of Investment

  • Interest Rates: 10% – 21%
  • Loan Durations: 1 – 36 months
  • Currency: Euro
  • Collateral: Real Estate
  • Minimum Investment: 100 Euro
  • Investment Structure: Direct

Loans on Crowdestate

On Crowdestate’s real estate P2P crowdfunding platform, lending options are presented in a simple and informative overview in which interested investors can find the most essential information such as the expected return, the loan term and the investment goal.

Three loan types offered on Crowdestate are the following:

  1. Real estate lending
  2. Business lending
  3. Mortgage lending

Due to Crowdestate’s rigorous due diligence process, investors are guaranteed to only encounter high-quality loans in the marketplace.

Image of the Crowdestate marketplace

Buyback Guarantee on Crowdestate

Buyback guarantee is an insurance that becomes effective in case of loan default. However, buyback guarantee is mostly seen on platforms with loan originators since the transparency in these cases is at a very low level and, therefore, investors would need some sort of security in order to be interested (read more about loan originators and the indirect investment structure in the following section). 

Since Crowdestate does not use loan originators and has a direct investment structure, it is not unusual that none of the loans available on Crowdestate’s platform come with a buyback guarantee. As a consequence, investors must be prepared to experience defaults once in a while and instead rely on the secured collateral.

One of the disadvantages with the fact that Crowdestate does not offer buyback guarantee is that investors are highly recommended to diversify their investments across 100+ loans which will cost at least €10.000 since the minimum investment is €100.

Direct Investment

In P2P investing, you will encounter two different types of investment structures, which are:

  1. The direct investment structure
  2. The indirect investment structure

The direct investment structure means that investors are buying a claim against the borrower directly, whilst the indirect investment structure means that investors are obtaining exposure to loans by investing in loans that are issued by a platform company to the loan originator.

In this regard, Crowdestate is a traditional lending based crowdfunding platform using SPV’s to separate investment properties from its own activities and all loans are structured in a direct investment structure. The direct investment structure is often simpler and more transparent than the indirect investment structure, thus making it easier to evaluate the risks involved in carrying out a given investment since you are lending directly to the company or, in the likely case of this platform, a property owner and not through a middleman like a loan originator.

Platform Features

Manual Investing

It is very simple and easy to manually invest in loans on Crowdestate, primarily due to the fact that loans are presented in a clear, manageable and comparable list (as the screenshot below illustrates) that allows to get a good grasp of what kind of real estate projects are currently on the lookout for lenders.

Image of the manual lending option on Crowdestate

The loans are usually above €100,000 and up to €1,500,000 which satisfies most investors.The same goes for the amount of loans published which is relatively high. As a result, investors can relatively quickly diversify their investments into many different real estate or business projects or even mortgage loans.

Automatic investing

Crowdestate offers automatic investing through their feature called AutoInvest. This feature allows users to set up one or more AutoInvest profiles based on which the platform will automatically carry on investment activities on behalf of the user. The biggest advantage of the AutoInvest tool is the fact that it allows users to the time it takes to make investments orders manually.

In order to set up your own personalised AutoInvest portfolio, you have to define a range of specific parameters according to which automatic investments are made. Some of the parameters are as follows:

  • The minimum and maximum amount you want to invest, e.g. minimum 100€ and maximum 700€. The AutoInvest feature will make investments within the established price range.
  • The expected interest rate. Let’s say you only want to invest in loans that have a minimum interest rate of 10%.
  • The investment term, also referred to as the duration of the loan. Here you can choose only to invest in loans with a duration of e.g. 12 months.
  • The type of investments, being either real estate loans, business loans or mortgage loans.
  • The countries in which you want to carry out investments. In this section, you can choose between Estonia, Latvia, Italia, and Romania, among others.
Image of the Crowdestate automatic investment options

Secondary Market

If a user wants to exit an investment before the maturity of the loan, he/she can do so by selling the investment to other investors on the secondary market. The secondary market is, thus, a marketplace for selling and buying investments. 

You can access the secondary market from the top menu. When you enter the marketplace, you are allowed if not encouraged to filter the overview of available loans based on (check out the screenshot below as well): 

  • Remaining time (ranging from 0 to 36 months)
  • Price (ranging from 0€ to 44.400€)
  • Expected rate of return (ranging from 0% to 100%)
  • Countries of origin (e.g. Estonia, Latvia, Finland, Italy, Latvia, Romania)
  • Opportunities (e.g. all opportunities, specific opportunities, already invested project, AutoInvest projects)
Overview of the Secondary Market on Crowdestate

When you are done filtering the list with available investments in the secondary market, hence narrowing down the search to investments that are of specific interest to you, you get an overview of investment opportunities and specifics for each of the opportunities, such as:

  • Remaining time
  • Remaining principal
  • Initial price
  • Repayment without deducted income tax
  • Expected rate of return

If you are interested in knowing more about a specific loan, simply click on the green button with the text “Buy”, and you will see more details as illustrated in the screenshot below.

Image of the Crowdestate investor details on projects

Nice to Know for Investors

Registration Process on Crowdestate

In order to be allowed to make investments on Crowdestate, you must register as a user on the platform, which you do by providing them with the most necessary information about yourself.

Once you have registered, you can start opening investment accounts. You have the possibility of opening accounts for your personal holdings or for your investment company).

Timeline of the Crowdestate registration process

Deposit & Withdrawal Process

If you do not have sufficient funds on your Crowdestate investment account, you cannot start investing. Therefore, you need to make sure that funds have been added to your account, which can be done through wire transfer.

When you want to withdraw funds from your account, head to the ‘Overview’ page in the investment account from which you desire to withdraw money and click on the green button with the text ‘Transfer funds’.

Funding Methods

  • Bank Transfer
  • Revolut
  • Transfer Wise
  • Currency Fair

Reporting on Crowdestate

Crowdestate compiles investment reports regularly on each funded investment. These investment reports or portfolios are shared with investors after making an investment. You will be able to see the investment portfolio in your personal Crowdestate account. In this investment portfolio, you will find – among other things – the loan agreement in which both parties are included.

Crowdestate Tax

Crowdestate’s funding model is usually structured in the form of a loan from a member of the platform to a Legal Entity. With this financing model, the Legal Entity will return the principal amount given to them as a loan, and Crowdestate users will have the possibility to earn interest revenue from the loan. (…) As taxation is dependent on each individual investor’s tax residency, we advise you to check the local regulations or consult your tax advisor before declaring (or not declaring) income from Crowdestate’s investment opportunities.

Crowdestate FAQ: “How is my investment income taxed?”

Support

Crowdestate only offer customer support for the following three countries:

  • Estonia
  • Italy
  • Georgia

And customer support is only available over the telephone in Estonia. For the other countries, the only customer support provided is by email.

Crowdestate Competitors

Who can invest on Crowdestate?

In order to streamline our KYC procedures and/or to avoid extensive reporting requirements, we don’t offer our services to the residents of the following countries: Afghanistan, American Samoa, Bosnia and Herzegovina, Guam, Guyana, Iraq, Laos RDV, Syria, Uganda, Vanuatu, Iran, Democratic People’s Republic of Korea (DPRK), The Bahamas, Botswana, Ethiopia, Ghana, Pakistan, Samoa, Serbia, Sri Lanka, Trinidad and Tobago, Tunisia, Yemen, Belarus, Burundi, Central African Republic, China, Democratic Republic of Congo, Egypt, Eritrea, Guinea, Guinea-Bissau, Haiti, Lebanon, Libya, Maldives, Mali, Moldova, Montenegro, Myanmar (Burma), Russia, Somalia, South Sudan, Sudan, Ukraine, Venezuela, Zimbabwe, US Virgin Islands and USA.

Crowdestate FAQ: “Can I become a member?”

Is Crowdestate Regulated?

Crowdestate is not regulated by the Estonian Financial Supervisory Authority as they state that it is not a requirement to run their business model.

Crowdestate Statistics

Founded2014
Total investments€91.1 million
Total investor earnings€9.3 million
Amount of investors10,527
Amount of projects240
Average investment per investor€10,325
Average number of investments per investor20.39
Latest financial report2018 (PDF)
Methodology

At P2PMarketData we are dedicated to providing unbiased reviews of peer-to-peer lending, real estate crowdfunding and crypto lending platforms. Among other, in our mission to bring more transparency to the market we closely monitor and track over 70 platforms funding volumes.

When reviewing an alternative investment platform, we consider a variety of factors such as:

  • Number of investors
  • Minimum investment requirement
  • Historical annual returns
  • Diversification opportunities
  • Reinvestment opportunities
  • Educational and informational offerings
  • Platform fees
  • Total capital invested
  • Features (such as secondary market and automatic investing)
  • General transparency (the difficulty of finding who the owners are, how they make money on the platform (fees), terms & conditions and more)
  • Management team

We also look into the company’s online reputation (for example customer reviews, news, complaints, average monthly searches and social media).