Success factors of real estate crowdfunding projects: Evidence from Spain

Abstract

Real estate crowdfunding is a relatively new alternative financing and investing method. This research aims to identify factors which might increase investors' willingness to participate in real estate crowdfunding campaigns. We analyse 195 lending-based real estate crowdfunding campaigns from four Spanish platforms. Project success is measured by duration, i.e. the time required to reach the funding target. We assess the impact of the funding target, the annual return, the loan duration, several risk-related metrics and the minimum investment amount. We find that the higher the funding target and the minimum investment amount, the longer it takes to reach the target. We document that investors prefer projects where the maturity of the loan is shorter. We also find that construction-type projects reach the funding target faster than other type of fundraising goals. At the same time, we do not find any association between the annual return or risk-related metrics and project success. To assure successful fundraising, real estate crowdfunding platforms should prioritize those real estate projects which are highly popular among investors (i.e. construction-type projects with short maturity). Real estate developers, in turn, should crowdfund projects which are demanded by the crowdinvestors and use their traditional financing methods for the remaining projects.