To better understand the differences between investing in FIBRAS and real estate crowdfunding, we have to briefly analyze each concept, since otherwise, we will not know which investment would be worth more according to our capital, investor profile, financial objectives, other important aspects.
We will start with the FIBRAS, which are also known in international markets as REITs (Real Estate Investment Trust) and refer to investment instruments in charge of renting and managing a portfolio of real estate such as: office buildings, hotels, shopping centers, mixed developments, etc.
In general, what the FIBRAS offer to their investors is that they allow them to have access to a portfolio of assets that collect rents. Although this portfolio implies having large capital contributions, perhaps thousands or even millions of pesos or dollars.
On the other hand, although it is a relatively new concept, real estate crowdfunding seeks to democratize real estate .
How to democratize?
Yes, it’s simple, real estate crowdfunding is constantly looking for projects that can be financed by a group of people and in this way real estate is not only in the hands of large investors.
If you are considering investing in any of these 2 options, you should know that both the FIBRAS and the real estate crowdfunding , specialize in real estate, however, there are very important differences that must be taken into account.
Among the most basic we could highlight the following:
- People who participate in real estate crowdfunding may have little or no experience in real estate investments; on the other hand, to invest in FIBRAS , ample knowledge of the real estate market is needed since they are an instrument for profiles with high risk tolerance, in addition, investments in FIBRAS are made through brokerage firms , including in countries such as the United States , you must have a sophisticated investor rating.
- The real estate crowdfunding gives you the opportunity to invest at any stage that a real estate development, be it construction, remodeling or even urban recycling are. The assets of a FIBRA are generally stable assets, which simply charge rents. This means that FIBRAS generally pay lower returns than those paid by a developing project.
- People who decide to invest in real estate crowdfunding can do it directly in an online platform from $ 5,000 pesos; later investors can obtain returns for having contributed a percentage for the development of a property. Investing in FIBRAS can be a slower process, which involves a few days for paperwork and requirements from the investor.
- The yields of the FIBRAS vary according to their market price. Although, for a couple of years they have hovered between 4-6% on average; on the other hand, the returns of real estate crowdfunding projects tend to be greater than those offered by a FIBRA , since they range from 12 to 15% per year.
- The portfolio of assets of a FIBRA is chosen by its own administration. Real estate crowdfunding allows you to plan and monitor your own portfolio, selecting through a web platform the real estate projects in which you want to participate.
- The fibers generally invest in assets considerable size, as mixed complexes (mixed office, residential, commercial centers, etc.). The crowdfunding provides an opportunity to invest in small projects that can be easily accessed.
- Another important difference that can be highlighted is the liquidity that both channels offer, since the investments in crowdfunding are medium and long term, which indicates that they have no liquidity before maturity. However, the shares of the FIBRAS (called CBFIs) have immediate liquidity.
- When investing in real estate crowdfunding, the principal amount of your investment does not change (except in case of default), this is due to the fact that each time the developers repay their financing, the principal amount is the same as the one you invested at the beginning, in addition to the performance generated.
In the case of Expansive (a Mexican company dedicated to real estate crowdfunding), faced with an eventual default by the developers, investments are protected with the execution of the mortgage guarantee originally requested from the financing applicants, which must be valued at twice the capital they request.
What do you think now about both forms of real estate investment?