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A short review on Crowdestor after 2 years

Do you want to invest in real estate, energy, transport, and startup projects from as little as 50 EUR with 15% annual return rates? Crowdestor is the answer. This little real estate crowdfunding platform based in Estonia publishes on its website secured loans with interest rates that vary from 12% to 36%.

Published:  Tuesday, 29 December 2020
Author:  Daniel
Launched:
2018
Headquarters:
Latvia
Investors:
18,000
Investors from:
EEA
Investments Funded:
45 million €
Investment Types:
Business Loans, Property-Backed Loans
Investment Countries:
Latvia
Investment Terms:
3-18 months
Interest rates:
12%-36%
Minimum Investment:
50€
Currencies:
EUR
Early Exit:
no

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 accounts.

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 the 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.

Platform experience

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.

crowdestor loan 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.

crowdestor dashboard

The provision fund

In order to protect the investors against borrowers default, Crowdestor decided to create a provision fund. This means that if a loan defaults, the payments to the investors will be covered from this fund.

Crowdestor expects to put a 1-2% commission from each new loan into this fund. As of December 2020, the fund has reached 360,000 EUR.

Crowdestor risks

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.

Platform risks

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.

Performance risks

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 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 provision 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.

Liquidity risks

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.

Conclusions

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 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 provision fund, while great, will only cover only partially any loan defaults. None of the platform loans reached maturity yet. Given that distribution rules of the provision fund are proportional to the outstanding loans, the fund would only cover at most 20% out of each default, which is nothing.

Learn more about Crowdestor and their investment opportunities on their website.

Visit Crowdestor

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