October 17, 2022 · 9 Minutes
Best Real Estate Crowdfunding Platforms in the UK
The real estate sector is rapidly expanding and becoming an increasingly essential part of investors’ portfolios, but due to the high capital requirement, this asset class was limited to wealthy and institutional investors. However, real estate crowdfunding platforms have made investing in this high-return industry accessible to any investor regardless of the capital available. Although real estate crowdfunding has become very popular among European investors, particularly British investors, it is still in its early stages when compared to other investment options, with many platforms operating across the continent and thousands of projects funded.
In this article, we’ll go over the most important factors to consider when looking for the best real estate crowdfunding platforms and present a list of some of the best real estate crowdfunding platforms for investors living in the UK.
What is real estate crowdfunding?
Real estate crowdfunding is a technique used by developers to obtain cash and finance their projects from “the crowd,” whether for remodeling, construction, or simply rental management. Real estate crowdfunding platforms connect developers with potential investors, who may want to get exposure to real estate with a small amount of money and earn a good interest in return. Unlike direct property ownership, investors do not have to worry about property management or paperwork. They just invest, and the interest they earn is determined mostly by the project’s type.
About Real Estate Crowdfunding in the UK
According to Statista, the real estate market constitutes a major part of the UK economy and generated over £68.6 billion in turnover in 2021. When it comes to crowdfunding, the FCA regulates equity and loan-based crowdfunding platforms, and releases new rules and updates regularly. According to the UK and Ireland Property Crowdfunding Report by Brikkapp, there are 29 active real estate crowdfunding platforms in the UK, and the total volume of all funded projects was more than £1.9 trillion. However, due to the FCA regulation updates, several platforms have been pushed to exit the market in recent years.
On the other hand, since many platforms provide only investment opportunities in the UK, British investors used other foreign platforms to participate in real estate investment projects in other European countries.
When looking for the platform that best suits your needs, several factors should be examined. To create a portfolio with diversified real estate exposure, you might want to look for a platform that offers investment opportunities from multiple countries. Alternatively, if you plan to take your gains on a regular basis, you should look at the fee structure (particularly withdrawal fees). Furthermore, you may wish to pick a platform with a secondary market if you want to liquidate your holding easily. Finally, if you are a more risk-averse investor, you may want to look into the platform’s history and the default rate of its previous projects.
Best Real Estate Crowdfunding Platforms in the UK
Based on our assessment, here’s some information about the best real estate crowdfunding platforms available for British investors, whether you are looking for local or international investment opportunities:
Crowdestate is one of the most well-known real estate investing platforms in Europe. The platform provides excellent diversification opportunities as its projects include various property types (residential, retail, office, and healthcare buildings) and are spread across Europe (Estonia, Finland, Latvia, Poland, Slovakia, Romania, Italy, and Portugal). Crowdestate was founded in 2014, and its projects include rental, development, and renovation, in addition to business financing. Even though they currently do not have investment opportunities in the UK, almost 400 British investors used the platform to invest in real estate across Europe.
Founded in 2014, Crowdpreperty facilitates short-term loans to SME property professionals. The loans are backed by a first charge security against the property. As such, in the event of default and once the property is sold, CrowdProperty investors are the first to be paid back.
Property Partner is one of the largest real estate crowdfunding platforms in the UK. The platform offers more than 100 income-generating properties spread across four property types: residential properties, purpose-built student accommodation, commercial properties, and development loan bonds. It was founded in 2014.
Founded in 2017, Sourced Capital provides investors the opportunity to invest in a diversified portfolio of UK-based properties. The platform is based on a peer-to-peer lending model and offers investment projects in commercial and residential properties. The average term of projects ranges between 6 and 18 months.
Based in Estonia, EstateGuru is a real estate crowdfunding platform that focuses primarily on short-term property-backed loans (the average loan term is 14 months). The real estate projects cover several European countries, such as Estonia, Lithuania, Germany, Latvia, Finland, Spain, Portugal, and Sweden. It was founded in 2014. In March 2022, Estate Guru announced the opening of a new office in Manchester to start facilitating loans and investments in the UK.
CapitalRise is a crowdfunding platform offering real estate investment opportunities by connecting investors with developers. For each investment, CapitalRise creates a new dedicated subsidiary property company to provide the loan to the borrower by bond issuance.
Features of real estate crowdfunding platforms
When considering real estate crowdfunding platforms, it is important to consider the platform’s main features, such as the minimum account balance, fees charged, secondary market availability, and auto-investing.
- Fees: Unlike brokers in the UK, which charge a fee or spread on each transaction, real estate crowdfunding platforms do not charge fees on lenders (people like you), they rather charge it on borrowers. Still, some platforms might put commissions on withdrawals, or impose a success fee whenever the return on investment is above a certain rate.
- Secondary market: Many platforms offer secondary markets where investors can sell their investments and exit their positions at any time. Some platforms charge a fee on transactions executed on the secondary market, so it is worth checking those fees before proceeding with the transaction.
- Auto-invest: Some platforms offer an auto-invest feature allowing investors to automatically invest available funds based on predetermined criteria.
Comparing features of the best real estate crowdfunding platforms in the UK
|Platform||Account Minimum||Fees||Secondary Market||Auto-invest|
|Crowdestate||€100||No fees on deposit or withdrawal||Yes (subject to 2% fees)||Yes|
|Property Partner||£1,000||AUM fee is 0.7% + VAT p.a., and a maximum of 2% transaction fee||Yes||Yes|
|Sourced Capital||£1,000||No fees||No||Yes|
|EstateGuru||€50||€1 per withdrawal, inactivity fee of 2.5€/monthly||Yes (subject to 2% fees)||Yes|
|CapitalRise||£1,000||No fees||Yes (subject to 1.5% fees)||No|
Usually, each real estate crowdfunding platform publishes key metrics regarding the projects funded throughout the years. We recommend checking this statistics page as it indicates the platform’s efficiency in offering successful and profitable projects to investors. Although not all real estate crowdfunding platforms have a statistics page, we presented in the table below some of the key metrics that we could find, such as the number of investors, the number of projects funded, historical return, and the cumulative amount raised.
Comparing some metrics of the best real estate crowdfunding platforms available for British investors
|Platform||Number of investors||Number of projects||Historical return||Cumulative amount raised|
|CrowdProperty||Not disclosed||580+||8.10%||£262 M+|
|Property Partner||9K+||Not disclosed||Not disclosed||Not disclosed|
|Sourced Capital||Not disclosed||Not disclosed||Up to 12%||£34 M+|
|CapitalRise||Not disclosed||Not disclosed||9.5% (as of 2020)||£150 M+|
Why is Crowdestate one of the best real estate crowdfunding platforms for British investors?
Based on the above comparison tables, I believe Crowdestate is among the best real estate crowdfunding platforms for British investors looking for European real estate exposure. Here are a few reasons why I believe it has an advantage over other platforms and why I think you should consider it when looking for a suitable real estate crowdfunding platform:
- A rigorous due diligence process: Crowdestate chooses only the best investment opportunities for investors after conducting an extensive background check on projects’ information, business plans, and financial models.
- A low minimum balance required: With only €100, an investor can start investing from almost anywhere in the world.
- Secondary market available and active: 33.11% of investors are active in the marketplace. As such, whenever an investor needs to exit the market, he might be able to find a potential buyer faster.
- Diversified projects: The projects offered on the platform are well diversified geographically and across different types (residential, commercial, and business financing).
- Low fee structure: Unlike several real estate crowdfunding platforms, Crowdestate does not charge any commission on withdrawals. However, it charges a 2% commission on transactions conducted on the marketplace and a success fee (typically 20%) over the 8.00% hurdle rate per year.
- Auto-invest: Crowdestate allows investors to automatically invest the funds available in their account according to specific parameters such as investment amount, expected interest rate, investment term, type of investment and country.
Real estate crowdfunding is a relatively new investment vehicle in Europe, but it is very popular in the UK. It is a simple strategy to increase exposure to the real estate sector at a cheap cost (in some cases, without any cost). Furthermore, investors can begin investing with a small sum of money. In recent years, due to increased regulations by the FCA, several platforms have ceased operations. Still, many other European platforms offer British investors the opportunity to get exposure to real estate by offering attractive projects across the continent. On the downside, while some platforms provide secondary markets, real estate crowdfunding is less liquid than other investment options such as forex or stocks—both of which are available through well-known brokers, such as eToro or the US-based Robinhood, Webull and TD Ameritrade.
This article presents a few platforms we consider among the best real estate crowdfunding platforms available in the UK. We encourage you to check their websites, read about the projects, and check the investment process before deciding where to invest.