31 October 2019

Why sell your property through a real estate crowdfunding platform?

By Nicolas Terrier

Sell your building by crowdfunding

In a real estate market where interest rates are historically low, both buyers and sellers are looking for innovative models to make their investment profitable.

Real estate crowdfunding is an alternative that is appealing to a growing number of Swiss people because they can now invest directly in an investment property with more affordable amounts than those needed to acquire a property as a single property or a condominium and with a diluted risk on several tenants.

But selling property in crowdfunding raises many questions:

  • should we meet with all the investors?
  • take care of the steps with the intervening parties such as the bank or the notary?

From the selection to the sale of the property, the process of marketing a property on a crowdfunding platform should be analyzed more closely and the advantages for the seller should be taken into account.

A transparent process

The seller proposes his property with the necessary documents for a succinct analysis and receives a letter of intent within 48 hours accompanied by an exclusivity contract for the marketing of the property.

During the exclusivity period, an in-depth analysis is carried out by certified experts to evaluate the property. If an agreement is reached, the property is open to investment on the platform. The time of the sale can vary from a few days to a few weeks depending on the amount to be raised, the yield, the location and the size of the building.

Once all the funds have been raised, the notary is the last step to finalize the transaction. The funds are transferred to the seller and the property titles to the new co-owners who will have their names registered in the Land Registry.

Selection criteria defined in advance

The selection criteria are decisive for a transaction to be initiated. Location plays a key role; the property must be close to major conurbations or major transport routes to avoid the risk of vacancies.

The property must be a residential or mixed-use building with a maximum of 30% retail space if it is located in the city centre. It must be fully or predominantly leased at rents corresponding to market demand.

The property must ideally be in good condition, with no major works to be undertaken over the next five years. If this is not the case, the work will be estimated on the basis of estimates made by an expert.

The expected minimum gross yield may vary depending on the location of the building but should not be less than 4%.

Easy steps for the seller

New technologies bring speed and simplicity throughout the process. «The sale was quick and efficient. The property was financed in five days on the platform » witness’s the former owner of a building sold in Avenches (VD). « Everything was taken care of by Foxstone until the signature at the notary’s office. I was able to follow the entire sale in real-time directly online. You can see the gauge progressing as the investments are made; it’s very transparent. The technology brought together 11 investors that I didn’t need to meet, my only contact throughout the sale was the Foxstone team.»

This new model also offers more flexibility for the seller who can keep an interest in the building. These platforms offer more competitiveness since they do not take a commission from the seller, who continues to receive rental income from the building until the title of ownership is transferred.

Sell your building through crowdfunding

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