Denzity is proud to announce a partnership with Realinflo, a database platform that is creating the ‘Bloomberg’ for the real estate industry. We would like to introduce Realinflo (www.realinflo.com) to you as the newest member of Denzity’s community.
Traditionally, real estate information has been difficult and time-consuming to obtain. Realinflo solves this problem by providing access to granular transaction data and insights directly from the market. This is combined with their comprehensive land and building database to give a view of normally opaque real estate markets. Realinflo’s vision is to drive improvements in data standards and to become the leading data analytics platform, which is demonstrated by being the first Royal Institution of Chartered Surveyors (RICS) Tech-affiliated firm in the Asia-Pacific region. Currently, Realinflo tracks data on 68 cities in 25 countries across Asia, the Middle East and Africa.
Realinflo’s difference is in the details, for example for any particular building data points are available such as current leases, occupancy rates, historical sales transactions, development details, parameters and planning history. With a complete picture of the market, it is also possible to visualize how real estate markets have changed over time, future supply coming online and to run predictive analytics to make data-driven real estate decisions.
Gary Walter MRICS, CEO and Co-Founder of Realinflo
Gary a Chartered Valuation Surveyor and has over 11 years’ experience in the real estate industry, with Swire Properties in Hong Kong and Colliers International where he worked extensively across markets in Asia. Frustrated by the lack of reliable data across the region, he founded Realinflo with the aim to raise standards and transparency in the region. Gary has also worked with Virgin Atlantic Airways and has a keen interest in non-profit and social impact work in Africa, having undertaken projects in Kenya, Rwanda, and Tanzania. In 2016 Gary was awarded the excellent Young Achiever of the Year in the Hong Kong RICS Awards and is a regular speaker at PropTech events.
Gary views that Realinflo’s partnership with Denzity partnership is a natural collaboration in growing Denzity’s ecosystem in the real estate industry. Gary shares Denzity’s mission to match everyday investors with the best possible investment opportunities around the world. By having access to a diverse range of verified listings backed by comprehensive datasets, investors will be able to make informed decisions on which real estate investment best suits their risk-reward profile.
Since the Why we do, what we do and the Exclusive beta testing program articles have been posted, we have been receiving a lot of positive comments. On behalf of our team, we appreciate your feedback! We will continue to provide you with tips on real estate investing so that you can reach your investment and saving goal 🙂
There is one question that repeatedly comes up from the comments we get…
Real Estate Crowdfunding versus REIT, what’s the difference?
Real Estate Investment Trusts (“REITs”) are corporations that acquire and manage a portfolio of real estate investments with the mandate to return 90% of their profits back to investors.
While REITs and RECF projects have pros and cons for investors, we want to clear this up once and for all.
In taking a closer look, we can separate them by these following eight traits:
RECF: selling your REIT investment means you are divesting your equity interest in all of the Real Estate (“RE”) investments held by the REIT. Whereas with RECF projects, you can decide exactly which project to sell. Therefore, REITs are all or nothing when it comes to liquidity, while a portfolio of RECF projects provides you with greater flexibility.
REITs: buying and selling REITs are conducted on a stock exchange which provides investors with a strong form of liquidity and price visibility, which can be positively or negatively affected by stock market trends and behavior (referred to as beta). Since the RECF industry is relatively new and experiencing rapid development, there is currently no centralized secondary market for RECF investments.
RECF: investors can decide exactly which individual RECF projects to invest – this provides them greater choice in building a more tailored RE investment portfolio. Whereas for investors in a REIT, they must purchase a fragmented ownership in all RE projects held by the REIT. Furthermore, Investors decide whether to be an equity or debt investor in an individual RECF project, whereas they are confined to being an equity investor in a REIT.
REITs: investors benefit from a REIT manager who manages a larger Assets Under Management (“AUM”), who is able to provide a more competitive (lower) fee structure, as compared with a RECF platform.
 Portfolio allocation
RECF: given the above point about fragmented ownership, investors can build a more personalized RE investment portfolio through RECF investment that best matches their risk vs. reward profile. Furthermore, should the investor’s risk vs. reward profile change over time, it will be easier to reallocate into individual RECF projects.
REITs: investors are confined to the REIT’s existing portfolio allocation in RE and is confined to accepting the stipulated risk vs. reward profile. This leaves REIT investors somewhat in the dark when it comes to assessing the underlying risk of their REIT investment.
RECF: investors can control the investment horizon of individual RECF investments and build a more tailored portfolio duration to reach a personal saving or investment goal. With this, coupled with greater transparency, investors can decide on individual RECF projects based on key criteria, such as RE asset class, cap rate, levered yield, covenants, fees, etc.
REIT: investors are restricted to buying and selling a single unit trust ownership in the REIT which holds RE portfolio investments that will have a mandated duration profile. The ongoing buying and selling of RE projects by a REIT will mostly be conducted irrespective of the individual investor’s input. This makes REITs more of a one-stop shop.
RECF: investors access greater information on individual RECF projects and Asset Managers (“AM”), given the more substantial amount of information disclosed (investment memorandum, valuation report, financing agreement, partnership agreement, property condition assessment, and other reports). This gives investors much more confidence to decide exactly which RECF project to invest.
REITs: investors are restricted to the information disclosed through announcements and reports stipulated by stock exchange disclosure requirements, however, the depth of information is limited on individual projects. Further, there may be certain news and developments which the REIT is not required to disclose (by regulation), which would not be the case for RECF projects given the more direct communication channel investors are granted.
RECF: investors have a more direct channel of communication with the AM, whether through phone or email, which can provide investors with greater confidence (assuming the AM can deliver a reasonable response)
REITs: investors are confined to communicating with REIT’s investor relations teams, which may only provide a response based on stock exchange disclosure requirements – this can provide a shield for REITs to dodge certain questions or scrutiny.
RECF: investors are presented with cash accounting of financials and are able to view where every single dollar is invested, returned and spent. This gives investors a greater understanding of the sources and uses of the RECF project. Greater transparency builds confidence.
REITs: investors are presented with a set of accounts which will leverage on certain non-cash adjustments (depreciation, changes in fair value) that will require a more technical understanding for investors. Further, since REITs hold a portfolio of RE investments, it will be more difficult to assess how the Investor’s investment dollars are put to use, as compared with RECF investment.
 Management sustainability
RECF: investors can decide to invest in certain AM (the management team) based on their focus in a particular RE asset class and assessing their performance and track record. For example, an investor may decide to invest in a project which the asset manager specializes in logistics, while the other asset manager is more suitable to an office. This means the investors money in a RECF project is being managed by the most suitable team of RE professionals
REITs: investors in a REIT would be confined to a single core team to manage RE investments across all asset classes. This means REITs may not have the most suitable RE professionals managing a particular RE asset class.
We hope you find this article helpful. Please let us know what you think. If you have any request, please contact us at [email protected]. We would love to hear from you.
*A limited number of beta testers will be automatically converted to complimentary premium membership.
How the beta testing works
As a beta tester, we ask you to browse the dashboard with your Mac/PC and follow certain instructions to test tools and functions that screen investments. Your first visit should take less than five minutes, after that you can spend as long as you’d like!
As a beta tester, we gather your feedback to:
Screen for bugs and inconsistencies on our dashboard
Improve the Denzity experience by incorporating your comments and suggestions
Aggregate beta testing data to revamp our prototype towards Denzity 2.0
Afterward, you will be provided with a questionnaire to share your experience.
As Denzity will constantly improve as a product, we invite you to give us more feedback at a later stage.
How to participate
The registration will only take a few minutes. The Denzity team will review your registration and upon approval, we will provide you access as a beta tester on Denzity.
For centuries, Real estate ownership has been a powerful engine for wealth creation and preservation thanks to properties’ ability to hedge inflation and generate steady cash flow. However, commercial property has always been restrictive because of the large amount of capital required to participate. Traditionally, everyday investors would allocate 5 to 15 years’ savings towards a down payment for one apartment unit. Alternatively, a lack of real estate in one’s investment portfolio would mean that they are confined to riskier investments such as cryptocurrencies or the stock market.
Technological advancement and promulgation of regulations encouraging fragmental ownership have made Real Estate Crowdfunding possible. This is the medium by which everyday Investors can overcome the traditional barriers to enter the real estate market. Starting with US$5,000, everyday investors can now diversify their portfolio and lower risk by allocating capital to professional real estate managers and platforms. By leveraging economies of scale, Real Estate Crowdfunding opens up an equal playground for all investors to materialize real estate investment opportunities.
That being said, the time-consuming and complex nature of real estate investment is one of the major reasons investors shy away from participating. This is why Denzity was born – a marketplace built to drive greater participation in Real Estate Crowdfunding and to overcome the traditional barriers to real estate ownership.
Our three major missions:
Denzity lists unique project listings from different platforms around the world and allows investors to easily compare them before committing their capital.
Denzity does not compete with platforms. Instead, we partner with them and amplify their efforts.
Denzity invites real estate professionals to contribute by providing investors with the tools, resources, and insight to make an informed investment decision.
Denzity’s ecosystem creates a gateway to make real estate ownership more accessible for everyone. Our goal is to create a collaborative community for investors, platforms and real estate professionals to form a virtuous cycle of building communication, confidence, and relationship.
As a Real Estate Crowdfunding Platform, you can rely on us to proliferate the benefits of property investments, so you can focus on sourcing and managing attractive real estate projects. We will connect your projects with the right investors. Direct communication channels and transparency between investors and platforms is key to driving confidence in Real Estate Crowdfunding. Denzity firmly believes the following key benefits can be achieved:
Provide investors with a simple, user-friendly dashboard to browse different real estate projects located in various parts of the world.
Encourage investors and platforms to participate in gathering knowledge and expertise.
Help educate investors on a diverse range of topics and thereby building confidence for investors to participate more.
Bring stakeholders from different parts of the world closer together and share the benefits of real estate ownership.
Denzity is proud to announce a partnership with RECAS Group, a fully integrated real estate firm providing asset management, investment management, and advisory services to the real estate market in Mainland China, Hong Kong, Macau, and other countries. https://www.recas-group.com/
RECAS Group (formerly Real Estate Capital Asset Services Limited) was founded in 2004 by Ivan Ko, its current chairman, who has over 25 years experience in real estate development and finance experience. The Denzity team first met Ivan at a PropTech event in Hong Kong and discussed the real estate industry’s future and what kinds of innovation will lead to the greatest impact in elevating the global real estate market.
Ivan identifies that PropTech can bring a positive impact to the real estate industry and RECAS Group believes in Denzity’s mission to serve an identified gap in the real estate crowdfunding market by matching everyday investors with the best possible investment opportunities available around the world.
Ivan has actively participated in PropTech hackathons and events, most recently the Asia PropTech Innovathon (pictured below) as one of the judges and where Denzity was fortunate enough to meet Ivan.
From Ivan’s point of view, innovation and technology services to close gaps in the traditional real estate market, whether unidentified or previously thought impossible. For this reason, PropTech may not receive industry-wide recognition now but is a wave of positive change. From his experience, real estate owners in Hong Kong have generated a decent return by being inefficient in buying and holding a real estate portfolio which has simply experienced tremendous capital appreciation over the recent two decades.
This is why he believes Hong Kong should be at the forefront of PropTech development and tackle key issues like accessibility since Hong Kong is one of the most unaffordable residential markets globally. Ivan recognizes that consistent small improvements in technology and innovation will improve the quality of real estate services provided in the best cost-benefit to corporate users.
To become a leading PropTech hub, Hong Kong provides a strong international environment where access to capital, rule of law (such as IP protection), free flow of information, ease of setting up a business, welcoming attitude to foreign workers and new economic growth companies make Hong Kong a sweet spot for any PropTech firm.
PropTech firms need only bring their innovation to strive in a best practice environment of leading real estate developers and investors. This is a market where “dreams” turn into reality. Ivan supports PropTech firms and Hong Kong as a forward-looking city to become recognized as an industry leader.
As a fully integrated real estate firm, RECAS invites PropTech entrepreneurs from all around the world to build their innovation in Hong Kong. Ivan and his team bring a tremendous amount of experience, connections, and wisdom. As a PropTech firm or investor, you can send Ivan an email here if you would like to seek his advice.
Denzity will keep you up-to-date on upcoming events worth your attention and if you’re not already signed up, make sure to sign up to receive the latest updates!
Here at Denzity, we are passionate about effecting change in an asset class and primary tool for capital appreciation and wealth preservation maintained through generations. Real Estate Crowdfunding (“RECF”) utilizes technology as a medium by which property ownership can be spread and diversified among a wide demographic of investors from different places.
Real estate has traditionally been an asset class that only available to wealthy individuals. Real estate platforms, such as private equity funds, have therefore only been able to seek investment from accredited investors. Accredited investors are individuals with USD $200,000 annual income or USD $1,000,000 net worth.
RECF is a new medium made possible since 2012 with the introduction of Jumpstart Our Business Startups Act (also known as the JOBS Act). The JOBS Act means real estate platforms can access a wider demographic of potential investors. However, there are several key issues which arise as a result.
In this article, we will highlight the technical knowledge investors need before investing.
Real estate investment requires technical knowledge. This is why Platforms hire real estate and investment professionals to perform due diligence and benchmarking before making an investment. As an investor, you will usually be provided with an information package, primarily containing an investment memorandum (“IM”) and limited partnership agreement (“LPA”).
The investor would read the IM, which contains details on the real estate property and its market (geographic and type), along with cash flow projections based on the platforms forecasts. Platforms will explain what capital expenditures are needed to improve the building’s marketability and the tenancy schedule to achieve a certain return to investors — one of the key metrics used by investors to decide on investment opportunities.
As an investor, you would need to understand the terms and conditions of the LPA, a document which details the legal manner by which you participate in the project. An investor who subscribes for shares in an investment fund, the vehicle used to hold the project, would be subject to certain rights and obligations under the LPA. These obligations can present itself in the form of a legal and commercial obligation.
The point is that understanding these documents require specific knowledge predominantly held by investment professionals who are typically employed by investment funds. These investment professionals accumulated their specific knowledge and skillset having worked in the finance (e.g. banker) and/or legal (e.g. lawyer) fields.
For example, a real estate project purchased for USD $10,000,000 obtains a USD $6,000,000 loan from a bank. The bank provides the loan subject to a facility agreement (“FA”). The FA is a legal document which defines the project’s legal obligations, which are primarily to (i) pay interest to the bank, (ii) repay principal ($6,000,000) to the bank, and (iii) maintain certain metrics referred to as covenants, such as a specified loan-to-value (“LTV”).
As an investor, you should understand the FA which highlights one the key risks associated with the project and your investment. In the event, the project is unable to satisfy the covenants (e.g. unable to repay the bank loan principal), the project would be in default and your investment would become at risk.
Therefore, investors without the technical knowledge stand at a disadvantage to investment funds which hire investment professionals. So what’s the good news?
Denzity is backed by a team of real estate and investment professionals here to guide you along the way of searching and filtering RECF investment opportunities, and here to help you understand the key metrics and provide insights.
We hope these articles provide you with insight into the real estate investment process and journey!
If you’re not already signed up with Denzity, make sure to sign up to receive the latest updates!
Asia PropTech holds regular events and hackathons to build awareness and participation in Asia’s PropTech developments. Based in Hong Kong, Asia PropTech was founded by Leo Lo, a surveyor turned serial entrepreneur in high demand as a speaker for his thought leadership at real estate conferences in Asia.
Leo is the founder of PropSeed, a Real Estate Crowdfunding Platform, founder of PropBLK, a company providing real estate blockchain solutions, and co-founder of Fonto Real Estate, a boutique real estate advisory firm in Hong Kong. Leo will soon launch a dedicated PropTech accelerator and we are excited to share its ongoing developments with you.
Asia PropTech provides an ecosystem for real estate startups and incumbents, government, and academia to collaborate on achieving technological improvements to their real estate business model. The ecosystem supports PropTech startups with sound business expertise, acceleration methods, and funding with a goal towards value creation in the real estate industry.
Denzity is pleased to announce our partnership with Asia PropTech and will be sharing details of their upcoming events, new ideas and recent developments to help them build the Asia PropTech community.
Asia PropTech is holding Propteq Asia 2018 on October 30 2018 at Cyberport, Hong Kong’s incubator of startups. Propteq Asia is where the world’s leading real estate innovators will come together and talk about the challenges and opportunities in PropTech.
Real estate investment is an opportunity to generate regular income and achieve capital appreciation in a stable asset held over a 5–15 year period. Real estate investors typically compare investment opportunities start by using one key metrics: Capitalization Rate, aka Cap rate.
In this article, we highlight how you should understand how to compute the cap rate and how to use cap rate when comparing different real estate crowdfunding investment opportunities.
This is part 1 of 4 articles covering the real estate cap rate:
What is the real estate cap rate?
What you need to understand about the real estate cap rate?
How does the real estate cap rate form part of your investment analysis?
How leverage helps you achieve your investment goal in real estate.
Part 1: What is the real estate cap rate?
Cap rate is the rate of return on a real estate investment property based on the income that the property is expected to generate. It is calculated by dividing the property’s net operating income (“NOI”) by the current market value or acquisition price of a property.
Once an investor knows a property’s cap rate in a specific market, the cap rate can be used to compare with other types of real estatecap rates located in different markets around the world to understand which is more suitable to their investment preference. We have made a quick guide for you below:
Let’s use an example: an investor (Bill) wants to achieve a 12% annual return over 5 years by investing in real estate.
Bill decides to purchase an office building for $600,000 that generates $60,000 of net operating income (NOI), which represents a 10% cap rate. This means the property value would need to increase by at least 2% per year to meet Bill’s goal of 12% annual return.
Bill decides to achieve his investment goal by being more dependent on the cash flow (net operating income) generated as rent by the office building’s tenants, rather than a strong capital appreciation.
In this example, Bill is characterised as a defensive, income-based real estate investor seeking real estate investments that require minimal out of pocket expenses (e.g. refurbishments). In case you are wondering: yes, we will cover different investing style and types of investment play in future blog posts.
In Bill’s case, the cap rate is a key metric to begin his initial screen to compare real estate investment opportunities. For example, a shopping mall being sold at an 8% cap rate means that Bill would rely on (i) strong capital appreciation and/or (ii) leverage in order to achieve Bill’s goal of 12% annual return.
Cap rates are an important way to screen investments and narrow down a list of investment opportunities which suit your individual preference. Once you’ve decided on which investment opportunity to pursue, you will need to gain a better understanding of the real estate’s location and market conditions to form your investment analysis.
An important aspect here is timing — something which Denzity wants to clarify with ‘cap rate compression’, explained below.
What will we cover in Part 2?
We have just scratched the surface when it comes to cap rates! There are more metrics you should take into account when making an investment decision.
In our next article, we will discuss how you should understand and compare the cap rates of different types of real estate located in different places around the world to decide on which best suits your investment preference.
We at Denzity are here to help you understand the key metrics and provide insights. We hope these articles provide you with insight into the real estate investment process and journey!
If you’re not already signed up with Denzity, make sure to sign up to receive the latest updates!
Investors can participate in Real Estate Crowdfunding in two main ways: Equity Crowdfunding and Debt Crowdfunding.
Equity Crowdfunding means Investors acquire an ownership interest in a real estate project to receive a proportional share of the project’s rental income and capital appreciation. Equity Investors have the potential to achieve high returns (5–15%, for example) but face a large risk should the real estate project not work out.
Debt Crowdfunding means Investors act as a lender to the equity investor of a real estate project and would receive a fixed interest rate (7–10%, for example) generated from the project’s rental income. Debt Investors are limited to the fixed interest rate but repaid interest and principal from the Project’s rental income and sale price before Equity Investors.
It is important Investors understand where they ‘sit’ in the capital stack of a real estate project and how this can affect their investment and return.
Example of Equity vs. Debt in Real Estate Crowdfunding
A Real Estate Crowdfunding Platform acquires an office building (“Project”) for $1,000,000. The Project generates $80,000 in rent, which equates to an 8% cap rate (explained below). The Platform is given three months to perform the necessary due diligence and raise $1,000,000 from real estate crowdfunding investors to close on the Project.
Note: for simplicity, this example assumes (i) rent is equal to ‘net operating income’ (NOI), (ii) no tax is payable on NOI, dividends and capital gains, and (iii) the Platform does not charge any fees to Investors.
Scenario 1: 100% Equity Crowdfunding, with capital appreciation
100 Equity Investors invest $10,000 each to receive 1% equity in the Project. Equity Investors receive a share of the Project’s $80,000 rent in proportion to their fragmented ownership. For example, 1% equity receives $800 in rent.
After 4 years, the Project is sold for $1,100,000 while still generating $80,000 in rent. Equity Investors receive 100% of the Project’s capital appreciation, which is $11,000 per 1% equity ownership.
How did Scenario 1 perform?
Equity Investors with 1% equity achieved a 13% annual return, calculated as:
Equity invested: $10,000
Rent received: $1,600
Equity sold: $11,000
Investor return: ($11,000 + $1,600) / $10,000–1 = 26%, which is 13% per year over 2 years
Scenario 2: 50% Equity and 50% Debt Crowdfunding, with capital appreciation
50 Equity Investors invest $10,000 each to receive 1% equity in the Project and 50 Debt Investors lend $10,000 each to receive 7% interest per year. Debt Investors receive no equity ownership. Equity Investors receive a share of the Project’s $80,000 rent only after the Debt Investors are paid their 7% interest.
Each Debt Investor receives $700 in interest, while each Equity Investor receives $900, based on 1% equity ownership. The Platform would make sure all Debt Investors are first paid before paying Equity Investors the remainder of the Project’s rent. This would be calculated as:
Project rent: $80,000
Debt interest: $35,000, which is 7% on $500,000 lent by 50 Debt Investors equal to $700 each
Rent to Equity Investors: $45,000, which is paid to 50 equity Investors equal to $900 each
After 2 years, the Project is sold for $1,100,000 while still generating $80,000 in rent. Equity Investors receive 100% of the Project’s capital appreciation after each Debt Investor is repaid their original amount of $10,000. The Platform repays all 50 Debt Investors their $10,000 each before any Equity Investor receives their proportional share from the sale price, which is $12,000 for 1% equity.
How did Scenario 2 perform?
Debt Investors achieved a 7% annual return, while Equity Investors achieved a 14% annual return based on 1% equity, calculated as:
Why would you be a Debt Investor instead of an Equity Investor?
In the above example, the office building was purchased for $1,000,000 and sold 4 years later for $1,100,000 while still generating $80,000 in rent. The office building experienced capital appreciation and was sold at a cap rate of 7.3%, calculated as rental income divided by capital value.
The sale at $1,100,000 represents ‘cap rate compression’ which occurs when capital appreciation increases faster than rental income. In this example, the office building was originally purchased for $1,000,000 generating $80,000 in rental income, a cap rate of 8.0%. After 4 years, the office building was sold for $1,100,000 generating $80,000 in rental income, a cap rate of 7.3% or a compression of 70 basis points.
Equity Investors experience 100% of the capital appreciation, which was $100,000 over 4 years. Debt investor receives no interest in capital appreciation as they are only repaid their original investment.
Scenario 3: 50% Equity and 50% Debt Crowdfunding, capital depreciation
Now let’s say the office building was rented to a single tenant and located in an area outside of the city that expecting new developments such as highways, railways, and a regional airport, but the government decided against these new developments. Two things would likely happen that affects the office building’s value:
(1) The existing tenant moves to a different office building closer to where existing infrastructure (highways, railways, airport) attracts small and large businesses. As a result, the office building would lose 100% since it relies on a single tenant. It would need to begin advertising and sourcing for new tenants. During this period, the office building would not be generating rental income to pay the Debt Investors their interest, which could be due on a monthly basis, the implications and mitigating factors of which we will discuss in a subsequent post.
(2) Prospective tenants would likely request a discount on the recent rental price of $80,000, since they may not be willing to be located in an area outside of the city with limited and undeveloped infrastructure. If prospective tenants end up paying $75,000 in rent per year (lower than $80,000), the Debt Investors would still receive their 7% interest per year of $700 each, however Equity Investors would receive lower rent, which drops to $800 (from $900) for 1% equity.
After 4 years, the office building is sold for $900,000 since prospective buyers don’t think the office building’s area will experience new developments in the future and is sold for a cap rate of 8.3%. The office building is sold for less than it was originally purchased for $1,000,000 at a cap rate of 8% with a single tenant paying $80,000 in rental income.
How does Scenario 3 perform?
Debt Investors achieved a 7% annual return, while Equity Investors achieved a 3% annual return based on 1% equity, calculated as:
In Scenario 3, Equity Investors achieved a lower return than Debt Investors since the office building’s capital value depreciated after 4 years, for the reasons highlighted above. Debt Investors achieved a 7% return in Scenario’s 2 and 3 because their returns are limited, on the upside and downside, to the fixed interest rate of 7%, assuming their principal is repaid.
Equity Investors experienced 100% of the office building’s capital depreciation of $100,000 over 4 years. As a result, Equity Investors achieved a 3% return in Scenario 3, as compared with 14% in Scenario 2, primarily resulting from the office building’s capital depreciation. Equity Investors achieved a positive return since rent received over the 4 years ($3,200) was enough to recover the drop in capital value (-$2,000) — this is referred to as ‘positive carry’.
Investors should decide based on risk vs. return
In conclusion, Investors should decide between Equity vs. Debt Crowdfunding opportunities based on their investment preferences. Debt Crowdfunding is typically a shorter investment horizon while Equity Crowdfunding typically provides greater upside and downside potential for investment returns.
Denzity is built to continuously learn user preferences and interests so that our metasearch algorithm provides you with the most suitable investment opportunities every time users search.
If you’re not already signed up with Denzity, make sure to sign up to receive the latest updates!
What’s up next? Denzity will cover valuation metrics an Investor should consider before making an investment in a Real Estate Crowdfunding project.