Real Estate Crowdfunding Attracts Investors to Mexico

By Thelma Gust
Jul. 31, 2019

Investment in real estate has proven to be an attractive asset for significant returns on investment. Given this scenario, the emergence of investment instruments has not been long in coming. Along with the growth of the real estate sector and the development of technological tools, new ways of investing are coming to the market.

Real estate crowdfunding, a real estate collective funding model, is gaining strength in Mexico. With only six crowdfunding platforms in the country (M2Crowd, Briq.mx, PM2, Expansive, 100 Ladrillos and Inverspot), this strategy has managed to attract the attention of those who wish to invest in real estate developments.

Simón Dalgleish, operations director of M2Crowd, shared that this model allows small savers to enter a market that previously required large amounts, as well as having little risk and good return opportunities.

“Buying a house, office or some real estate is not easy, because of the amount of money required to invest; therefore, we, as a collective funding industry, are really allowing it. That is, we are creating all the infrastructure and the legal part.”

With the crowdfunding model, a person can buy a large part or small fractions of a property, without needing to acquire the entire unit, thus obtaining a percentage based on the investment made, which, in most cases, starts at $5,000 pesos, depending on the real estate development.

Dalgleish pointed out that investment returns are above 12 and 15 percent, which has attracted the attention of clients, compared to other investment instruments.

According to a study conducted by M2Crowd, six out of 10 Mexicans would like to invest in real estate through collective funding. And Jalisco ranks number three among the entities with the greatest demand for this model.

The places showing the greatest interest in crowdfunding to buy a home are Mexico City (22 percent) and the states of Mexico (18 percent), Jalisco (10 percent), Nuevo León (7 percent), Puebla (6 percent) and Querétaro (5 percent).

He also said that the most seen attractions when investing in real estate through the crowdfunding model are profitability (44 percent), security and low investment risk (21 percent), attractive returns when buying in presale (21 percent) and being a tangible good (14 percent).

Dalgleish noted that this investment model has been widely accepted by investors of all kinds, from those who want to start with a small amount, because it is what they have, to those who have a lot of capital but seek to diversify their investments.

“If they have half a million pesos, they know they can invest it in 100 different projects; so, we are also having a certain level of success with them.”

Real Estate Crowdfunding Attracts Investors to Mexico, Guadalajara Real Estate Guide

However, he explained that, being a relatively new investment instrument in our country, (unlike nations such as the United States, where there are more than 100 collective funding companies) the lack of knowledge in Mexico about the operation and benefits of this system generates some consumer doubt.

In the survey conducted by the company, 53 percent of Mexicans believe that you need a lot of money to start out in this investment model, 19 percent think there is a lot of paperwork, 17 percent think it is difficult to manage and 11 percent consider it risky.

“Once people start to understand it, they feel more comfortable. Perhaps another important factor is that we have alternate channels of communication. Although it is true that we don’t have branches, we do have an office, and it is open for a visit. In addition, we have chat and email. If people see that they get a quick and concrete response, that gives them confidence in the quality of the service.”

He said that the growth and development of collective funding in Mexico is an upward trend, which goes hand in hand with the topic of giving security and confidence to the investor who has found in real estate an opportunity to deposit his capital.

He emphasized that Mexico was the eighth country in the world to promote the Ley para Regular Instituciones de Tecnolgía Finaciera (Law to Regulate Financial Technology Institutions), known as the Fintech Law, which will contain subjects such as the minimum capital authorized platforms must have, information on its shareholders and administrators, documentation for the authorization request and the limits on the receipt and delivery of cash in its operation, as well as accounting rules.