How to Invest in European Real Estate
European real estate might slide soon, so I'm sure readers of this site are wondering how to get into real estate in Europe.
We know the Brexit vote has made the markets jittery - when investors are jittery, they are less likely to buy real estate too. In fact, multiple large commercial real estate funds have stopped redemptions. So, we may see a period of declining real estate prices in London and other great European cities.
So, if you want to take advantage of some swings in the stock market, check out How to Take Advantage of the Brexit. In this article I'll discuss real estate.
Different ways to invest in the European and British real estate.
There are 3 primary ways to invest in real estate:
- Buying real estate
- Buying shares in a real estate fund or ETF
- Crowdfunding debt or equity
In this article, I'm going to completely skip over #1. The fundamentals of investing are still there, you just need to adapt them to your location.
Investing in European Real Estate with a Fund or ETF
The simplest and easiest way to take advantage of the situation in Europe right now is to buy into an ETF or fund.
ETFs are correlated with the broader market, but the fundamentals are completely different. Movements in these prices may not reflect actual changes in fundamentals, and may reflect just a broad fear of the overall situation.
I'm not currently an investor in Europe or Great Britain, but all this news about the Brexit has me seriously looking. Here is what I've been able to find so far:
*Disclosure: I'm not recommending any stocks, funds, or companies. I am merely updating the readers to my research and what I am personally considering on doing to take advantage of the recent market volatility. I may or may not invest in the future in anything I write here. I am also not compensated in any way by any vendor on this page. I am providing links as a courtesy to the reader.*
British Real Estate - iShares UK Property UCITS ETF
This UK property ETF (IUKP) seems like a well performing little gem. 2016 has been a rough year for it and it's down from 645 to 505 basically overnight (22% drop). Prior to that you can see it has had a very strong performance overall.
I think there is some rational drop in the price because I do think London and British real estate will see some price declines as foreign investors hold off on buying until there is more certainty in the market. I also think that there is a broad irrational and knee-jerk reaction.
Now, of course there is always room to go lower, but I'm willing to bet that this is a major overreaction to the Brexit vote... Especially as the rest of the British stocks are already starting to edge back up.
European Real Estate - iShares Europe Developed Real Estate ETF
This European real estate ETF (IFEU) isn't having as great of returns as the British real estate ETF is. While the British ETF has nearly doubled since 2012, the European one is up only 50%.
You can see a similar slump in price after the Brexit, but I'm not as sold on the European market as a whole.
I think there could be some volatility to play here, but Europe is full of so many financial, political, and economic problems, I'm not sure if I want to invest there.
Crowdfunding Real Estate in Europe
Europe, and especially Great Britain, has a nascent crowdfunding industry.
Now mind the fact that each country has it's own sets of regulations and all investors are expected to follow those regulations, laws, and tax requirements for investing in those countries.
Here is a list of crowdfunding sites you may find helpful for you if you want to get into European real estate and try to make money after the Brexit. They are in no particular order, just the order I found them in.
Great Britain Crowd Funding
Crowd Property - This company focuses solely on mortgage backed investments and you can invest as little as £500. There is no equity investments here. According to their website, you can earn up to 10% return.
If you are looking for a safer play in Britain, especially a currency play, this may a good place to look.
Property Crowd - I'm not sure which company came first. As similar as these two companies names are, they are different with how they approach business. Property Crowd focuses on equity investments, targeting high-yield city centers.
You own the property but they manage it and there is a rent and equity share, along with legal fees.
Property Moose - This company appears to be relatively small in the game, as they have only around £5,000,000 as of the time this was written. I really like the concept though.
You can invest as little as £10 at a time, and you get to pick and choose which property to invest in.
Each property is owned by an individual LLC. When you invest in a property, you take an ownership of the LLC in proportion to the amount you put in it. Property Moose takes a fixed 15% profit share, plus a fund-raise fee of 5%.
Property Seed - With Property See, you invest in a new development. The buildings aren't made yet when you make the investment, but you can see their estimates, floor plans, etc. It appears to me that you will actually purchase an entire unit from the developer.
Property Partner - This company seems to be a bit more of what one might think is 'typical'. Basically, you pick the properties you want to invest in and then you receive rents.
I do like the fact that you can sell your ownership at any time (assuming you can find a buyer) or you can hold it to completion and take the appreciation for yourself.
The House Crowd - This crowdfunding site is different because you can pick equity or debt investments, short or long term. They also have peer-to-peer lending.
This site seems to be a mixed bag of what many of the other sites are offering.
Others - There are 20-30 sites in the UK right now, many of which are still being developed. If I missed some please let me know in the comments section!
I was able to find these sites linked through various English sources, but most of them don't have English versions. So, I'll provide links to them for the people who can read those languages, but I can't provide commentary for the ones I can't read. Sorry about that!
- Co-Owning - This company appears to have a Sweden and a Florida branch. You can invest in small companies and franchises that are trying to start up.
- Swiss-Crowd - This is slightly different and is based on an "interest option" but they won't tell you what that is until you sign up.
If I've missed any platforms, please let me know!