Alternative real estate investment: the new workhorse of the sector

Alternative real estate investment: the new workhorse of the sector

Inflation is unstoppable and the prospects for a drop, as predicted by analysts and economic institutions, are not being fulfilled, but rather its decline is not very pronounced and is slowing down.

As long as this situation continues, the central banks will continue to increase interest rates. The ECB’s first increase in 11 years, and the largest in the last 22, came a few weeks ago, and it is expected that it will not be the last. The United States has revised it up three times, England five since the end of 2021 and China three so far this year.

Additionally, the war between Russia and Ukraine intensifies the situation described above. The war between the two countries has contributed to the increase in prices and an upward inflationary trend because they are two exporting powers of raw materials.

As for Spain, our country is in the crosshairs of national and international investors, both privately and institutionally. Which means that the real estate sector continues to establish itself as a refuge value for all types of capital. However, within real estate, in the residential segment, there are barriers that must be overcome. The area of ​​new construction development presents a great imbalance between supply and demand. This has led developers to search for solutions with which to build new projects that balance the balance.

Crowdfunding, the new key to real estate

Crowdfunding is a participatory financing formula, that is, it is based on collective financing through equity. This option consists of the contribution of capital from different investors, for a business project with an estimated return as consideration. An alternative solution to make projects viable beyond traditional funding sources.

In our case, we support real estate developers in the execution of their projects by structuring a robust business plan, a strategic financial vision, which maximizes the profitability of the sponsor’s resources through a prior risk analysis. Our work is focused on attracting investment capital, accompanying the managers, incorporating an investor base in each project, which gives the promoter a position with less exposure. It is a transversal model for all segments of the sector: residential and alternative residential, retail, offices, logistics, etc.

The reason is that, today, the small and medium promoters are helpless in the traditional banking model. In our figure you find a partner, who contributes to solving the continuity of your productive activity, providing liquidity and viability, which would not be possible otherwise. With our support, you diversify your concentration risk and expand your entry capacity to more projects.

The pattern of traditional bank financing, as we have known it until now, has completely changed. Now the use of new alternative solutions is more than evident.

Europe is the benchmark. In other countries of the continent, this formula is a recurring option, reaching levels of approximately 20%. Moreover, there are signs that in the near future it will be present in almost all mid cap operations.

At Fellow Funders, and aligned with the trend of our community partners, we contribute to promoting real estate development, supported by solid financial foundations and from a professional approach, applying cutting-edge financial tools that provide robustness to the market.

Samuel Edwards
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