Equity crowdfunding

Crowdinvesting - Crowdinvesting (crowd financing) is a form of digital financing in which private investors provide capital for real estate projects via specialized online platforms. Unlike crowdfunding, where supporters receive products or non-monetary rewards, crowdinvesting aims to generate a financial return. In Germany, real estate crowdinvesting is regulated by the German Investment Act (VermAnlG) and has developed into an established segment since 2015.

Regulation and Investor Protection

The VermAnlG regulates crowdinvesting offerings in Germany:

• Exemption up to €6 million: Real estate crowdinvesting is exempt from the prospectus requirement if the issue volume does not exceed €6 million and the investor is informed of the risks (Investment Information Sheet - VIB)
• Individual investment limits: Retail investors may invest a maximum of €1,000 per project without a means test; up to €10,000 with a self-declaration, and up to €25,000 with proof of sufficient assets
• Right of withdrawal: Investors have a 14-day right of withdrawal after subscription
• Disclosure Requirements: The issuer must provide an VIB containing information on risks, costs, and terms

Platforms and Market Overview

Well-known real estate crowdinvesting platforms in Germany include Exporo, Bergfürst, Zinsbaustein, and Engel & Völkers Digital Invest. These platforms handle the preliminary screening of projects, contract processing, and reporting to investors. The quality of project due diligence varies considerably-an independent assessment of the project by the investor remains essential despite the platform’s review.

Crowdinvesting vs. Direct Real Estate Investment

A key difference between crowdinvesting and the direct purchase of a property lies in property rights: In crowd investing, investors do not acquire ownership of the property, but merely a contractual claim against the project developer. This has far-reaching consequences: In the event of the developer’s insolvency, the investor is not entitled to a security interest in the property. At the same time, crowd investors do not benefit from an increase in the property’s value beyond the agreed interest rate.

For investors who wish to participate in a property’s appreciation, direct real estate purchase or equity crowd investing is a suitable option, in which investors share in the project company’s profits and losses-with higher risk but also higher upside potential. In practice, however, subordinated loans predominate, as they are easier for project developers to structure.

Crowdinvesting vs. Direct Real Estate Investment - Key Differences

Feature	Crowdinvesting (Subordinated Loan)	Equity Crowdinvesting	Direct Real Estate Purchase
Ownership rights	None - only a contractual claim	Stake in the project company	Full ownership (land registry)
Return structure	Fixed interest rate (4-8% p.a.)	Variable profit sharing	Rent + appreciation
Risk of loss in case of insolvency	Subordinated → often total loss	Subordinated → often total loss	Secured owner (land charge)
Term	12-36 months fixed	24-60 months fixed	Unlimited (investor’s decision)
Minimum investment	€100-500	€500-5,000	€20,000-50,000 equity
Administrative costs	None (platform)	Minimal	High (administration, taxes)
Appreciation	No share	Yes (proportional)	Entirely with the owner

Practical Tip for Owners in Nuremberg and Franconia

We recommend that investors in the Nuremberg metropolitan region pay particular attention to the location and experience of the project developer when considering crowdinvesting projects. Projects in Nuremberg or the metropolitan region have the advantage that you are personally familiar with the location and can monitor construction progress. Ensure the developer has at least 10-15% equity (as shown in the financing overview in the VIB), a valid building permit, and a proven track record of completed projects. Diversify your investment across at least five different projects and, if possible, different platforms to reduce individual risk.

Frequently Asked Questions

What happens if the project developer becomes insolvent?

In the event of the developer’s insolvency, subordinated loans from crowd investors are repaid only after all other creditors (bank loans, suppliers, employees, tax authorities). In practice, this often means a total loss of the invested capital, as there are often no remaining assets to satisfy subordinated creditors if a project fails. Some platforms now offer senior-secured investment products that provide a higher level of protection-though with correspondingly lower returns (2-4% instead of 5-8%). The market turbulence of 2022-2023 has shown that rising construction and financing costs can push even well-planned projects into financial trouble-a risk that no interest rate can fully compensate for.

How does crowd investing differ from a real estate fund?

A regulated real estate fund (open-ended or closed-end AIF under the KAGB) invests in a diversified real estate portfolio and is professionally managed by an asset management company. Investors hold ownership shares in the fund’s assets, which are secured by real estate. Crowd investing finances a single project via a subordinated loan-it offers higher potential returns with significantly higher default risk, lower diversification, and less regulatory protection. For security-oriented investors, a regulated real estate fund is clearly preferable; crowd investing is suitable as a small addition for yield-oriented investors who can bear the risk of total loss.

Can I terminate my crowd investing early?

Most crowd investing contracts provide for a fixed term without a standard right of termination-typically 12 to 36 months. Early exit is only possible if the platform offers a secondary market where shares can be sold to other investors. Such secondary market options are still rare in real estate crowd investing, not always available, and involve a discount on the nominal value. Plan to treat the invested capital as unavailable until the end of the term. Anyone who cannot rule out a need for liquidity should generally avoid crowd investments-illiquidity is a structural feature of this investment form that cannot be eliminated by choosing a particular platform.

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