Crowdlending, which consists of investors lending funds to a development company for the purpose of carrying out a real estate development project, is a business model that offers many benefits to both investors and developers.
Crowdlending: How it works ?
Benefits to Investors
Investors have the opportunity to participate indirectly from CHF 10’000 in real estate development projects rigorously selected by Foxstone and which are not accessible to the general public.
They can diversify their real estate portfolios with an instrument that pays a fixed interest rate and whose duration, which varies from 12 to 36 months, is adapted to a short-term investment.
Benefits for developers
Real estate development projects are very capital intensive. In the majority of construction projects, a bank is involved and participates in the form of a mortgage loan. The developer, on the other hand, has to tie up substantial equity, often until the handover of the keys, which means that he misses out on new development opportunities as his capital is tied up in existing projects. As a result, the developer must frequently turn to acquaintances or circles of investors to raise additional capital. In return, the developer gives away shares in the project, diluting future profits.
With Foxstone’s solution, developers can focus on the development of existing and new projects and leverage a community of over 11,000 investors to quickly close their financing without having to dilute the profits of their operations.
They can focus on operating and marketing their operations and not waste valuable time reporting to partners on the progress of their projects.
Investments in real estate development projects in the form of equity loans can also contribute to the creation of new housing and jobs in Switzerland to meet the needs of the local population.
Participatory lending therefore has many advantages for all stakeholders. We will see in a future article how it is complementary to the participative investment also proposed by Foxstone.