I haven’t written anything about my real estate crowdfunding portfolio since July. Enough changes happened in between, so I’m ready to provide new updates.
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BitOfProperty is a blockchain-based real estate crowdfunding platform that lets you invest in international rental properties starting with 50 EUR.
BitOfProperty looks for properties on the market and when they find one that satisfies their criteria, they list it on the platform. I like the many details presented on each property: location, local market status, renovations, costs, expected returns, how these returns will be generated.
Investors can invest in these newly sourced properties, with a minimum of 50 EUR per share. After the crowdfunded campaign is ended, the property is acquired. If it already has tenants, the investors will start receiving monthly rental dividends.
Each property has a limited amount of time in order to reach funding. If the necessary funding amount is not reached, the investors receive their money back in their wallet and can either withdraw them or invest in other properties.
Investors can also buy shares in existing properties from other investors and receive rental payments right away.
Each property is held in a separate SPV (Special Purpose Vehicle), which is a special type of company (separated from BitOfProperty) that will keep the investment secure even if BitOfProperty goes bankrupt.
The BitOfProperty team will handle all communication with the tenants and all other administrative tasks related to the rental property. In order to do this, they take a 10% fee out of the gross rental income.
The investment period is usually around 3 to 5 years, after which BitOfProperty will try to sell it on the market. After the property is sold, the investors receive a proportional share from the sale proceeds, including capital gains (if any).
You can either register as an individual investor or as a company.
BitOfProperty accepts investors from all over the world, except for US residents or companies. The registration and KYC process are pretty fast, it took me only a few hours to get my account verified.
Then you can fund your account through a bank transfer. I’ve used Revolut to transfer some funds, and they arrived on the platform the same day.
The company’s headquarters are in Singapore, and they have a subsidiary in Estonia. While they state the platform looks for international rental properties, all the 5 properties available on the platform are only from Tallinn, Estonia. They only launched their website in 2017, so they still have time to expand.
According to their Linkedin profile, they currently have 8 employees, 2 in Singapore and 6 in Estonia. The entire team is very young and with little experience in managing a company. This isn’t necessarily a bad thing, but having more senior management team members would certainly boost confidence in the company.
The key people of the company:
You pay a 10% management fee, which is taken as a cut from the rental income. When the property is sold, there’s also a 15% success fee taken by BitOfProperty from the investment capital gain.
You can either invest in properties in funding phase or buy property shares from properties already acquired.
Buying shares is simple. You just enter the amount of money you want to invest and submit your request.
When you want to buy shares on the secondary market, the process gets a bit tedious. The website tries to simulate a stock exchange process, but a really old one.
You get told what the minimum price of the shares in a property is, but you have no idea how many shares are available at that price. You fill in a form stating how many shares you want to buy, at what price, if you’d be happy only with a partial order fill or not, and then you submit the request. When a matching sell order is found, you receive an email asking you to confirm the transaction.
The problem is you don’t see anywhere on the website that you submitted a buy order and what is the status of it. It’s also weird that you do the buying/selling through email instead of doing it on the platform.
Investing in BitOfProperty comes with many risks. Most of them are not specific to BitOfProperty but are inherent to real estate crowdfunding in general.
Before investing in BitOfProperty, you should take these into account.
There’s always a risk of default and in the unfortunate case BitOfProperty goes bankrupt, investors shouldn’t be affected too much.
All investors funds are kept in accounts separated from BitOfProperty assets, so they’ll be safe even in the case of default.
Even more, each property is kept in an SPV, a company separated from BitOfProperty assets and liabilities. In case of default, a different manager will be appointed to continue the management of the investments.
The actual return of investment might be lower than the expected one, due to various reasons.
The real estate market in the location of your investments might crash and selling the property won’t return the expected capital gains.
The current investments are in EUR currency, which might be different than your own currency. If the EUR currency loses value compared to your own currency, you’ll lose money.
As with any rental property, the property manager might struggle to find tenants, or they might find a bad tenant that doesn’t pay rent or leaves the property in a bad shape. These things will lower the returns on the property.
Unplanned repair costs or renovations would also lower the rental returns on the property.
Many of these risks can be mitigated by diversifying your investments, spreading the risks over multiple properties. Since all the currently available investments on BitOfProperty are in Tallinn, you’ll also need to invest your funds in other platforms, to cover for the risk of a market crash in Estonia.
BitOfProperty is a good option to consider if you want to invest in Estonian rental properties. It’s a good alternative to Reinvest24, another real estate crowdfunding platform investing in Tallinn rental properties.
The platform is relatively new and has only a handful of properties in its portfolio. While this is not really a problem, the number of investors is still small and properties take a long time to get funded, and your funds sit there without generating any earnings. The only property I’ve invested in got cancelled after a few months since it failed to attract enough investors to fund it. So, unless BitOfProperty manages to attract more investors, it’s hard to invest here.
When they launched their platform in 2017, the BitOfProperty team advertised a lot its use of blockchain technology in financing and trading their properties. When actually using the platform, I don’t see where the innovation is and where this blockchain tech adds value.
BitOfProperty will also need to expand their operations outside of Tallinn and Estonia, in order to become a really interesting investment option.
I don’t like the fact that the existing properties don’t display the actual vs estimated returns. It would definitely boost my confidence in their ability to choose good properties if I could see current returns.
For now, I’ve only made a token investment in one of the properties. I’m interested in how long it takes to fund a property on the platform, how the property is managed, what are the actual returns and how is the communication between the platform and investors going.
I’ll come back to this review in a few months and update it with more relevant info. Until then, check out my reviews on Brickstarter, Reinvest24, British Pearl or Yielders. These are platforms that have enough investors to generate a decent return.