A guide to your first real estate investment

An e-book by SBP Nordic

Are you interested in investing in real estate but unsure about where to start? It’s important that you choose the option that suits you best, whether it's real estate funds, stocks, crowdfunding or crowdlending. This e-book answers some of the most common questions about real estate investment – hopefully it will provide you with the insights you need to make informed decisions for you and your finances.



    Why does everybody talk about real estate investment?

    Most people have at some point found themselves in a conversation about real estate. If you haven’t bought a place of your own, you almost certainly know someone else who have. Therefore, property investment is generally a subject that many can relate to and understand – at least to some extent. Those who own property generally like to talk about how they finally made a stable investment for the future. At the same time, those who haven’t entered the market yet, usually complains in tones of “I should have bought that apartment a couple of years ago when prices were still low”. Everyone needs a roof over their head and most of us will at some point have to choose between owning or renting. Especially considering the housing shortage that many cities are struggling with.

    Today, we hear lots of talking about the fact that real estate is a good investment – but less about how to practically invest in it. Apart from owning your own home, it has become popular to invest in real estate funds and shares. The individual’s interest in property investment has increased rapidly during the past years, which has created a new market for crowdfunding and crowdlending. This allows you to finance real estate projects of your choice.

    Further in this e-book we review various options for those who are interested in investing in real estate – where to start and how to proceed. All so that you can find the method for real estate investment that suits you and your wallet best.

    What is in fact a “good” real estate project?

    Being able to identify a good property project can be valuable for several reasons. You might be looking for a home to buy, considering which real estate company you are buying shares in or what individual construction project you are going to finance. When defining a “good” real estate project, common sense plays a major role. A good project usually lies in a nice area with good communications. Whether you’re investing in a home for yourself or lending capital to a real estate project – you need to ask yourself if you personally would like to live (or work, if it’s an office building) there. If you can imagine yourself there, others will probably do it as well.

    Make sure that the project already has an approved detailed development plan or building permit, since it’s crucial that it’s been approved by authorities and municipalities. Then you can be more confident that the project will actually get built – so you won’t be caught by surprise finding out that the project suddenly have been shut down for refusal of building permits. Your own personal feelings and attitude are important as well. Are you going to finance a project through crowdlending or crowdfunding? Think about what the investment can do for you personally – or the project being funded for the community in the area. It’s also important that you carefully review the material provided about the project, before you make a decision to invest. (We describe more closely what crowdlending and crowdfunding actually means further down.)

    Are you going to invest in a residential building? If it’s built near the local grocery store, it could increase the store’s chance of survival and be a great advantage. The same goes for school development – more homes may mean more families and more children that attend school. What is important for your hometown or the city you choose to invest in? Is it perhaps the extension of the town center or new student housing for the children who are soon moving away from home? Or would it be a good idea if new, fresh apartments were built in the area, so you have somewhere to move in the future when it’s time to sell the house? Real estate investment can be as personal as you want it to be – your life experiences and future dreams can also matter here.

    What should you think about when investing in real estate? It’s of course important that there is good bank financing and that the real estate company in question also invest their own equity in the project. Financing everything through individual investors is rarely a good idea. A good financial foundation for a real estate project is bank loans, crowdlended equity and own equity on top. Also look closely at the project owner – is there a clear schedule for the project and the ability to finish it in time?

    Is it time-consuming to invest in real estate?

    It depends, with the right tool it doesn’t have to be. Even so, many people avoid investing in real estate just because they find it time-consuming. Finding a good project, reviewing the company and following up on the construction work can definitely take time. It can also be very expensive – most people simply don’t have enough capital to finance a property on their own. Even when it comes to collective investments – for example in the bond market – it often requires millions to participate. Many people are also tired of the fact that real estate funds are taking so much of the expected return in fees.

    But real estate investment is not just for people who have the time to make it their full-time job – or with millions in the bank to invest. It may have been that way before, but during the past years the market has opened up new investment solutions. With the right tools you can participate and finance individual real estate projects without being a millionaire or having to pay any fees. Crowdfunding and crowdlending are two options that allow individuals to invest in real estate. For example, at SBP Nordic the loans marketed on the platform allows up to 200 individual investors per project – and allow everyone to enter from as little as 25-50,000 SEK.

    Do I need to be an expert in real estate?

    No, you don’t have to be an expert to invest in real estate. Not if you have access to good information and material about the project from trusted sources. You can learn to identify good property projects yourself and learn about the market. In addition, it’s only you personally who can assess a project based on your own wallet and personal finance.

    The returns on real estate investments can over time be as much as 10% per annum, when it comes to owning your own residential property for example. However, with individual real estate projects, returns are often several times as high. Through crowdlending, you can therefore get a higher return on your investment during a shorter period of time. The duration of a real estate project funded by crowdlending is usually no longer than 1-2 years. A shorter project is also easier to overlook because it isn’t dependent on events that might occur several years from now, such as cyclical fluctuations.

    Why are real estates in the Nordic countries called “a safe haven”?

    First of all, the Nordic region has a stable currency and a stable political climate in comparison to many other european countries. That is one of the reasons that the Nordic markets, with focus on the Swedish market, has attracted lots of attention from European investors. The price decline on the property market, especially around the major cities, has additionally created new investment opportunities. Making Sweden even more appealing for international investors. Previously, these investors mainly focused on the commercial real estate sector, but after the price fall, we can see a strong increase in interest for residential buildings as well.

    The transaction volume in the Nordic region amounted to 42 billion euros in 2017, the second highest ever. This also means that the transactions in the Nordic region in 2017 accounted for 15% of the entire European real estate market.

    Another advantage for those who want to invest in real estate in the Nordic countries – and one of the reasons for the nickname “safe haven” – is the high transparency. Most of the information in the Nordic countries, especially in Sweden, is public. Open to the public to read and share. Information about for example real estate companies and planned projects is more accessible than in many other parts of Europe.

    But what about the housing shortage in, for example, Sweden? How does it affect the real estate market and future investments? When you invest in real estate projects, you also help to gradually eradicate housing shortages. Together we can solve a societal problem that many countries, Sweden in particular, are struggling with today. Most Swedish municipalities keep saying that they need to build significantly more housing.

    According to the national board of housing, building and planning (Boverket), a total of 600,000 new homes are needed by the year of 2025 – and the current construction isn’t sufficient enough to meet the needs in time. In recent years there has been a lot of focus on exclusive apartments, which has raised the prices in inner cities. From a societal point of view, it’s important that we eventually shift the focus to more affordable living, so that everyone in the long term can afford to buy.

    How do I make real estate a part of my investment portfolio?

    There are several options for those who want to start investing in real estate, and it’s important that you choose the one that suits you best. Basically, real estate is considered being among the most stable assets you can invest in – there is a reason why all major insurance companies have real estate as a part of their investment plan.

    1. Property funds

    You buy a fund that contains about 5-20 shares in different real estate companies. The advantage is that the risk is spread over different projects – you don’t need to put all eggs in the same basket like you do if you buy individual stocks, for example. The disadvantage is that many funds have high fees that consume a lot of the return. You also don’t have the opportunity to get insight into a specific real estate project, in order to decide for yourself whether it is good or not. Neither do you know when or why the fund manager replaced your favorite project.

    2. Shares in real estate companies

    When you buy individual shares in real estate companies, the risk is greater than if you invest in, for example, real estate funds. Here, you also have less insight in what projects are invested in by the company you put your money in. There are also no mortgages or collateral behind the share, nothing that prevents you from losing some or all of the amount you invested.

    3. Crowdfunding

    With crowdfunding, several individuals can enter and invest in a specific real estate project, often through a digital platform. Here you will get insights about the project you are interested in and can decide if it is worth your money or not. You invest by buying shares directly from the real estate company. Then you become a minority owner of the company – without any real guarantee of getting your investment back. In the event of bankruptcy, you as a shareholder are always the lowest priority, as you often take the same risk as the owners of the company. In most cases, no interest is paid, but there are exceptions as preferred shares.

    4. Crowdlending

    Crowdlending is similar to crowdfunding. The difference is that you invest by lending your capital to finance individual property projects. You invest a small amount – around 25-50 000 SEK and up – often together with up to 200 other lenders. Since crowdlending often is managed through a digital platform, it’s also free of charge and no administration is required because everything is automated.

    Your loan is regulated by a binding loan agreement that specifies the interest, security or mortgage of the loan, and the term of the loan. The real estate company is required to repay your loan including interest within the specified time period. Because of this, the security with crowdlending is often significantly higher than for example crowdfunding or shares. On our platform, we only offer crowdlending for that reason.

    At last but not least – real estate is fun!

    In conclusion, we think it’s important to highlight that real estate should be fun. Investing in real estate projects through crowdlending is different in comparison to buying shares or funds. You don’t only have the opportunity to spread the risk between different projects, but can also take part in the process yourself. As an investor, you get a better view of the municipalities, buildings, companies and people behind. Instead of purchasing a part of a solid fund, you can be involved – for example invited to meet the property owners and sometimes even visit the project. Also, you get an insight into one of the world’s oldest industries.

    At SBP Nordic, our business idea is to make a hard-to-reach market available – we want it to be easier for you to invest in real estate projects that you believe in. Therefore, we also offer seminars, webinars and educational material for those who want to learn more. Our goal is to provide you with the knowledge you need to make smart real estate investments on your own and take control over your finances. The opportunity to invest in real estate should not be behind locked doors – but instead accessible to everyone.


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