A short review on Crowdestor after 1 year
Crowdestor is one interesting p2p business lending platform where you can invest in real estate, energy, transport and startup projects from as little as 50 EUR with 15+% annual return rates.
This little real estate crowdfunding platform based in Estonia publishes on its website secured loans with interest rates that vary from 12% to 36%. Since they started, they managed to fund loans worth over 25 million EUR and they have more than 9500 investors registered on the platform. It’s been active for almost 2 years now, and so far they have a perfect track record, with no project defaulted.
- Launched: 2018
- Headquarters: Latvia
- Loan types: Development loans, Business loans
- Loan terms: 3-18 months (so far)
- Loans funded: 25 million EUR
- Investors: 9500
- Interest rates: 12-36%
- Fees: no fees
- Minimum investment: 50 EUR
- Currency: EUR
- Secondary market: no
- Auto-invest: no
- Buyback guarantee: partially, it recently added a buyback guarantee fund
- Accepts investor countries: EEA residents
How does Crowdestor work
Companies use Crowdestor in order to fund their operations, grow or start their business. The businesses that are looking for financing on Crowdestor are from various domains: real estate, transport, energy, food.
After Crowdestor reviews the borrower’s loan request, it publishes the loan on the website and investors can start investing in it.
Usually, the upcoming loans are displayed on the website a few days in advance, so investors have enough time to fund their account.
If the loan is not funded, the investor’s funds are returned in 48 hours. If the loan is funded, the borrower is happy and the investors start collecting monthly interest payments.
In case of borrower default, part of the loan is covered by the buyback guarantee fund. The rest will be recovered after the debt collection process is finalized.
Becoming a Crowdestor investor
You need to have a bank account in the EEA in order to open an account on Crowdestor. Once you register you can add money to your account by bank transfer.
I’ve been using Revolut to fund my account, and it usually takes around a day for my funds to appear on Crowdestor.
The minimum investment in a project is 50 EUR. The minimum amount to withdraw is 10 EUR. There are no fees on depositing or withdrawing funds.
The website’s user interface is very simple. It has a list of available projects, and each project has its separate page with the purpose of the loan, loan term, interest rate, collateral and other details.
Some of the projects contain also financial statements, other documents, SWOT analysis.
When you’ve made up your mind, you can select the amount you want to invest and that’s it.
There’s no auto-invest tool and no secondary market where you could sell your investment to other users.
The website recently went through a bit of a redesign, and now the user dashboard contains some useful portfolio statistics and upcoming payments.
The buyback guarantee fund
In order to protect the investors against borrowers default, Crowdestor decided to create a buyback guaranteed fund. This means that in case a loan defaults, the payments to the investors will be covered from the buyback fund.
Crowdestor expects to put a 1-2% commission from each new loan into this fund. As of July 2019, the fund has reached 100.000 EUR.
- Last update: December 2019
- Started Investing: December 19th, 2018
- Current value: 1011 EUR
- Profit: 83 EUR
- Annual return rate: 15.9%
I’ve slowly increased my funds on Crowdestor since last year, sometimes with only 50 EUR a month. All payments have come in time so far, and a few of the projects I’ve invested in have matured and my invested principal was paid back.
Crowdestor also has all sorts of excentric projects, like funding a movie or a mobile game, but I tend to stay away from those, even if the potential returns are higher than what I get from my current portfolio.
As with many other p2p lending platforms, investing in Crowdestor projects comes with many risks. Before you start investing in Crowdestor, you should take these into account.
There are no details anywhere on Crowdestor’s website regarding what happens in case Crowdestor defaults. Typically, an administrator would take over the operations and settle any outstanding investments, but this should also be made visible on the website.
On the plus side, Crowdestor values information security, and they recently added 2-factor authentication for investors accounts.
Crowdestor is a relatively new platform and while its current track record is impeccable, with zero defaults (and 19 repaid projects), we can’t be sure what it will happen when projects start defaulting.
Some loans might default and the actual returns for investors could be a lot lower than expected. Crowdestor does have a buyback guarantee fund, but the fund is very small and isn’t currently able to cover fully even 1 single loan.
The default reasons could be many: poor due diligence, changing market conditions, real-estate prices dropping, preventing the borrower from selling their developed property.
Crowdestor has no secondary market, so you can’t exit your investment before the loan matures. Don’t invest funds that you might need in the near future, but this goes with any other p2p lending platform.
Crowdestor is, by all means, a high-risk and high-returns p2p lending platform. Most of the projects available offer 15% – 20% interest rates, but investors need to be careful when investing in any of them. Some of them are higher risk than others, and Crowdestor’s project details don’t always contain enough information to do a proper risk assessment.
The website seems to be a bit unfinished. There are missing features like auto-invest and a marketplace for investors that want to get out of their investment before the loan term. There’s no timeline on the website on when these might be available.
The projects and returns rate are really great, so despite the look and feel of the platform, it can still be a good option for real estate investment.
The buyback guaranteed fund, while great, it will only cover only partially any loan defaults. None of the platform loans reached maturity yet. Given that distribution rules of the buyback fund are proportional to the outstanding loans, the fund would only cover around 2% out of each default, which is nothing.