New building near Lake Phoenix: “Swarm investors” are being sought.
17 Jan 2021
Real estate crowdfunding is becoming an increasingly popular form of investment. A property developer is using this crowd-investing method near Lake Phoenix – and promises a good return. Is that serious?
It is a chic building complex that is being built at Weingartenstraße 7-13 in Hörde, very close to Lake Phoenix. The name of the project underscores the coveted location: “Port Royal – Living on the Phoenix Lake” it says.
An apartment building with 12 residential units and one or two office units is being built as a “royal haven”. A garage with 16 parking spaces will also be built behind the residential building with a low-energy standard (KfW 55). “We have already sold eleven of the twelve apartments,” says Dimitrij Vaisband, Managing Director of the Dortmund project development company GLD. It was founded by businessman Alexander Goldin in 2014.
Although the shell of the building is already finished, the further construction of the property has not yet been fully financed, because investors are currently being sought via a platform for crowd investment who will make their money available. If you enter “crowdinvesting real estate” in a Google search on the Internet, umpteen advertisements for “attractive investment properties” pop up immediately. The form of investment is obviously finding many friends right now.
Crowd investment: interest rates of up to ten percent are promised
That’s no wonder, because the crowd investing platforms promise interest rates of up to ten percent. And in times of custody fees and low interest rates, many investors are looking for alternatives to savings accounts or fixed-term deposits.
For the apartment building on Weingartenstrasse, it is the platform “dagobertinvest” from Austria that collects the money. “You get back your investment including interest from the sales proceeds of the twelve apartments,” the promise is made.
The twelve apartments on Weingartenstrasse should be ready for occupancy by the end of this year. © Joerg Bauerfeld
When the project near Lake Phoenix is completed, the investors should get their capital paid back – plus interest of 7.5 percent. However, everything has to go well for this. “I would definitely not invest in very many offers,” says financial expert Stefan Loipfinger on Sparkasse Dortmund’s website.
GLD GmbH is building on Weingartenstraße in Dortmund for the first time and is also looking for equity investors for this project for the first time via crowd investment. “Our company has some experience in residential construction, we have implemented a number of projects – among others – in Kassel. We are sure that we will bring our equity providers a reasonable return, but we have noticed that amateur property developers also use this form of financing. That’s why it’s important to check the references,” says Dimitrij Vaisband.
The developer saves his equity for the next project
The residential complex in Hörde is 78 percent financed by a bank, the property developer GLD contributes five percent and 17 percent are to come from crowd investment. “Our idea is to save the equity for another residential construction project at a neighboring location. With an additional development, houses could be built above Weingartenstrasse. We have already requested this from the city,” says Vaisband.
He hopes to raise 750,000 euros by February 1st from investors who only give their money for the existing property. 431,700 euros in swarm capital from 406 investors have already been received (as of January 12, 20 days before the end of the subscription period). With as little as 250 euros, you can participate in crowdfunding for the “Port Royal” real estate project in Hörde.
Crowd capital is a subordinated loan that carries a risk similar to equity. So if anything goes wrong, investors have to queue at the back of the often long line of creditors. “Small investors”, according to financial expert Stefan Loipfinger on the Sparkasse Dortmund website, “are only compensated after all other creditors in the event of insolvency. Most of the time they get nothing.”
Haus & Grund: “The risk-return ratio has to be right.”
“Crowd investments are not suitable for long-term real estate investments,” says Dennis Soldmann, Managing Director at Haus & Grund Dortmund, “because repayment is usually made within twelve to 24 months. Ultimately, a crowd investment in real estate is not a classic real estate investment, but rather an equity interim financing for the project developer.”
Dennis Soldmann, Managing Director of Haus & Grund, comes to the conclusion: “Renting is still comparatively cheap in Dortmund.” © Haus & Grund/Schaper
According to Dennis Soldmann, it is important to be aware of this. If the project developer went bankrupt, their own claims would be served after all other creditors. “You should therefore deal very intensively with the experiences of the project developer, the project itself and the other framework conditions and only invest amounts that do not hurt in the event of a loss. The risk/return ratio has to be right,” says Soldmann.
“In order to be able to offer high-quality, sophisticated and high-yield real estate for personal use or investment, great importance is attached to the selection of locations,” says the homepage of “dagobertinvest”, the platform from Vienna, which is responsible for GLD’s swarm capital for the new building on Weingartenstrasse.
Always on the lookout for beautiful living space, it is said that GLD GmbH always succeeds in “acquiring unique plots of land and implementing extraordinary projects”.
Dagobertinvest: “Over 99 percent get their money back”
Andreas Zederbauer, the managing director of “dagobertinvest” is counting on the success of the new building in Hörde. He has been running the platform since 2015. “Due to inflation and negative interest rates, crowd investing in real estate has become a trendy alternative. It’s a form of investment with no fees or costs,” he says.
Andreas Zederbauer from the “dagobertinvest” platform in Vienna collects the money from equity investors for the new building on Weingartenstrasse. “We launch a new project every week,” he says. © Dagobertinvest
“We do half of our business in Germany. In over 90 percent of the cases, the maximum amount that can be achieved through crowd investment is reached. The sums that are invested range from 250 to 25,000 euros. On average, 1,300 euros are invested,” says Andreas Zederbauer.
He states that every project for which his company collects money is checked beforehand for its “economic viability”. “So far, more than 99 percent of investors have gotten their money back from us. Otherwise it would also be a bad business model,” says Andreas Zederbauer. But there is always a risk, he emphasizes, and advises investors to spread their money over several real estate projects.
Expert recommends: “Examine the financial structure carefully”
Financial expert Stefan Loipfinger recommends every investor to always check the entire financing structure themselves. “What is the proportion of bank loans, crowd capital and real equity? If there is less than ten percent equity behind the money from the swarm financiers, there is basically no longer any buffer in the event of a crisis,” says financial expert Stefan Loipfinger.
“The extent to which crowd investing is the right investment,” says Haus & Grund Managing Director Dennis Soldmann in general, “of course always depends on the individual case and can make sense in terms of diversifying your own portfolio. You should talk to your investment advisor closely about this.”
The apartments on Weingartenstrasse should be ready for occupancy at the end of October this year. “We are roughly on schedule, there are no delays due to material shortages or delivery problems. However, the enormous price increase for building materials cost us a margin because we sold the apartments early on,” says GLD Managing Director Dimitrij Vaisband. Around 4000 euros per square meter were required – for an 80 square meter apartment around 320,000 euros.