A record low savings interest rate and tightened lending standards. By investing in real estate projects, you can avoid stock market fluctuations but still get an 8-12% rate of return. Tessin is a Swedish crowdfunding platform whose members have funded hundreds of successful real estate transactions.
Tessin's CEO, Jonas Björkman, has always been interested in real estate investments, but like many other private savers, he has felt excluded from the market. Traditionally, a large bank account and access to closed networks were required in order to be able to invest in real estate.
Subsequently, the creation of Tessin came to be in order to give private savers the opportunity to invest in property projects, without the limitations of intermediaries or fees. Since the platform’s inception in 2014, Tessin has raised 1.4 billion Swedish kronor (SEK) in capital, which has been distributed to more than a 100 projects.
Increased capital requirements provide good rates of return
The need for alternative sources of funding increased notably in relation to the introduction of the Basel III regulations. These regulations, combined with today's market situation, have meant that the banks' lending to construction projects has tightened from about 80 per cent to around 50 per cent of the project value. This means that today's real estate developers must have more equity than before in order to borrow from a bank. In many cases, the contribution of Tessin's members is crucial for a project's implementation, which means that property developers are prepared to pay a good interest rate on the investment. It’s for this reason that Tessin's projects commonly yield a relatively high range annual return of between 8 to 12 percent.
From rental homes to playgrounds and wind tunnels
Together, Tessin's members have financed housing, industrial buildings, playgrounds, community properties, and wind tunnels. "Our form of financing is not only suitable for small and medium-sized property developers, but has also proven to be a good alternative for larger established companies wishing to accelerate their construction building rates," says Jonas Björkman.
Being able to offer a wide range of property-related investments is a stated goal for the site. Savers must be able to choose their own returns, risk levels, and investment horizon. To be able to invest in projects through Tessin, a minimum investment of between 10,000 and 50,000 SEK is required. All loans that are provided on the platform are secured, often with a mortgage and guarantee.
"We refuse projects that do not meet our requirements. At the same time, we want to be clear that there are no completely risk-free investments that yield good returns," says Jonas Björkman.
Tessin has been enthusiastically well received by the public and the platform currently has 40,000 members who together have invested billions of SEK in the real estate industry. This makes Tessin the largest crowdfunding platform in the Nordic region.
"Over the past year we have seen several decisive milestones, like passing a billion SEK in brokered capital, for instance. In 2019 we’ve focused on our expansion into Finland, and our first Finnish project was launched on the platform this March! We have big goals but given our current pace, the level of ambition feels more than realistic, ” adds Jonas Björkman.