What are the risks of investing?

What are the risks of investing?

As most investors know, investing always involves risks. At Max Crowdfund we strive to be as transparent as possible, which is why we think it is important that our clients are also aware of the risks of investing in real estate.

The main risk that investors run is that a borrower of the project in which you participated cannot meet its payment obligations. This can lead to a loss of capital in such a case, which is why we advise all our investors to diversify their investments and to have no more than 10% of their available capital in their Max Crowdfund portfolio. To limit the risk for investors, we as a company take a number of precautions:

  1. We provide a wide range of investment opportunities so that our investors can spread their risk. At Max Crowdfund it is possible to participate in real estate projects from as little as €100. The offer is large and spread over several borrowers and several countries. Several new loans are being published every week, to make sure our users can choose to diversify their portfolios.

  2. Max Crowdfund checks the borrower both privately and professionally to ensure that only the best projects are hired. Part of this research is looking at the track record/experience of the relevant project developer and the financial position.

  3. When applying for a loan, collateral is always requested. Collateral in the form of real estate is always valued by valuation reports from recognized and independent appraisers.

  4. For a loan, no more than 80% of the execution value will be lend out. The execution value is often lower than the appraised market values ​​and by lending no more than 80%, there is a margin in case execution becomes necessary.

Of course, despite the fact that we as a company take these precautions, there is still a chance the borrower can no longer meet its payment obligations. In this case the Security Trustee is forced to execute the underlying securities. In an ideal situation, these securities cover the full loan amount and any legal costs, so that all investors can be fully repaid. In a bad situation, it can lead to a loss of capital. This can happen, for example, if the market value of the underlying property has dropped during the duration of the loan, which results in insufficient execution revenue. It is important to take this into account when you would like to invest on the platform.

Cancelling a loan
When a loan is published on Max Crowdfund, this does not guarantee this loan will eventually be activated and will be interest-bearing. There are a number of factors that determine whether the final loan will be paid out to the notary of the borrower, for example:

  1. The initial success of the loan depends entirely on the enthusiasm of the investors. Although Max Property Group also participates in a large number of projects with its own capital, there are no institutional investors available to account for the majority of the revenue. The joint efforts of the investors ultimately determine whether the target amount of the loan is achieved.

  2. When the target amount has been achieved, the formalities must be completed. This includes establishing the securities and any additional securities, but also obtaining a notarial agreement to transfer the final amount. Only in case everything is correct, the amount will be transferred to the notary, and from that moment on, the loan will bear interest for the investors who have participated.

    If a loan does not go through, all participants receive their investment back free of charge and they can use it again to invest in another project.

    To invest on Max Crowdfund it is necessary to first create a personal account. After creating your account, all investment opportunities are visible and you can invest from as little as €100 in real estate projects that appeal to you.