Is Covid-19 (Finally) Driving Property Fundraising Online?

Is Covid-19 (Finally) Driving Property Fundraising Online?

Written by Mark Lloyd for Q Magazine by Qandor

We live in a highly digitised society; one in which investors can buy anything from Forex to stocks at the touch of a button, and yet the largest investment sector in the world has scarcely advanced, technologically speaking, in several decades. Now the effects of Covid-19, whilst driving businesses online, maybe the nudge that the property market needs to drag it kicking and screaming into the 21st century.

Despite the technological advances of our lifetime, real estate has been oddly immune to the digital revolution. The global property market was valued at $228 trillion by Savills in 2016, yet few tech companies have attempted to take on its complex landscape, in comparison to other sectors.

Database companies such as Zillow, who netted over 300 Million USD in 2019, and crowdfunding platforms, forming one of the fastest-growing investment sectors, have demonstrated the market’s ripeness for a digital makeover, yet property financing has scarcely evolved over the last 200 years.

Enter Covid-19

Whilst countless business sectors are being devastated by the Covid-19 pandemic as it sweeps the globe, leaving untold damage to the world’s economy in its wake, perhaps one industry is actually benefitting from the changes enforced on the global population. Geographical confinement and social distancing are forcing the global population online: Investors, employees, financiers and property owners are all being compelled to manage meetings, give instructions and make payments with the least possible human contact. Online payment platforms, video conference applications and remote management technologies are in use more than ever before, and the investment process is finally moving online too.

The End Of The Dinosaur Era

Raising funds for property development in the UK, although perhaps streamlined by technological aides such as video conferencing, still involves following the traditional channels such as raising seed capital, applying for developers’ mortgages, providing stacks of paperwork and spending many hours with compliance departments, valuers and contract lawyers.

With the emergence of crowdfunding as an acceptable and increasingly mainstream fundraising method, Max Property Group is applying the crowdfunding movement to property development, making fundraising a simpler, more accessible affair.

The property company with headquarters in Rotterdam has been developing an online fundraising platform since 2017. Max Crowdfund is the only property crowdfunding platform of its type in the Netherlands to have been granted approval by the financial services authority. It has harnessed the power of fast emerging blockchain technology to add transparency to property transactions, it has taken the concept of crowdfunding and applied it to its project development, and it has done so within the regulatory framework of the Dutch financial services authority.

About Max Crowdfund is being developed as a global property platform, to serve developers seeking funding for real estate projects, as well as investors looking for property asset-backed investment opportunities. The site brings them together for mutual benefit. All the projects listed on the platform are carefully vetted to ensure only the highest quality projects are funded. Similarly, investors must undertake rigorous AML and KYC procedures, in accordance with financial regulations. The result is a safe and transparent marketplace for developers and investors alike, to realise projects and make solid investment returns.

Case Study

In the Netherlands, rental properties are limited by a point system if their energy certificate is below a B rating. This limits landlords’ ability to achieve higher rental yields. Increasing a property’s energy rating involves refurbishments such as upgrading insulation or boiler efficiency, which requires funds. Mortgage banks in the Netherlands will not issue loans for upgrading a property’s energy efficiency whilst the rental yield remains unchanged, so landlords are achieving a below-par rental income on a property worth a great deal more, were it not for the energy certificate.

Using Max Crowdfund, a Dutch landlord can apply for a crowdfunded loan and perform the renovations required to increase the property’s energy rating. This in turn will bring the property into the Dutch rental market’s “free sector” allowing the landlord to charge a higher rental rate. With the higher rental yield, the landlord can then apply for a remortgage from the mainstream banks and repay the loan to Max Crowdfund users.

“Max Property Group has been trying to move real estate investing online for years, and now it seems as if a terrible disease has given the global collective mindset a push in the right direction”

How Max Crowdfund Can Help UK Developers

The regulatory approval granted to Max Crowdfund allows the platform to raise funds for companies registered in the Netherlands, UK and Germany. The company behind the platform, Max Property Group, has been operating property investment funds in these three countries for over half a decade.

Property Developers, or companies, in the UK are now able to create an account on Max Crowdfund and submit an application for the funding of an asset-backed project. The property asset backing the loan can be anywhere in the world. A compliance team will then vet the project before approving it and listing it on the Max Crowdfund platform, which currently has over 70,000 users worldwide.

Main Advantages Of Using Max Crowdfund

  • Speed: The compliance and quality control team will often conduct due diligence more quickly than traditional channels
  • Efficiency: Once a project is listed, fundraising is performed online, with transactions taking hours rather than weeks. There are no notaries, contracts, lawyers etc. to slow down the process.
  • Transparency: All transactions that take place on the platform are registered on a bespoke blockchain to ensure that they are irrevocably recorded.
  • Alternative: Max Crowdfund is a useful resource where traditional sources of funding cannot be utilised (such as in the case study)
  • Low fees: Thanks to automation, the fees charged by the Max Crowdfund platform to raise funds for a project are very low in relation to traditional fundraising methods.

Written by Mark Lloyd
Managing Director
Max Property Group